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UPDATE 1-James Hardie flags higher earnings on improved U.S. housing outlook

By Nikhil Nainan and Shriya Ramakrishnan

* Expects better earnings than a year earlier

* Posts 13% jump in quarterly adjusted net operating profit

* Australia's housing market contracting

* Interest rate cuts may help U.S. and Australia housing markets (Recasts throughout, adds U.S., Australia market details, analyst comment)

By Nikhil Nainan and Shriya Ramakrishnan

Aug 9 (Reuters) - James Hardie Industries, the world's biggest fibre cement maker, expects better earnings for fiscal 2020 citing an improved outlook for the U.S. housing market, but added that Australia's property sector will likely shrink.

The Dublin-based company said adjusted net operating profit is expected to come in between $325 million and $365 million for the year ended March 31, 2020, compared with $300.5 million reported a year earlier. It was roughly in line with a $342.3 million average forecast from analysts, according to data from Refinitiv.

The company said it expects "modest growth" this year for the U.S. housing market that has struggled with lower supply and high prices as sluggish wage growth crimps demand.

James Hardies' Australia-listed shares leapt 15% to A$21.89, their highest since September last year. The broader market was 0.2% firmer.

Home-buyers in the United States stand to benefit from the recent rate cut by the Federal Reserve that was intended to help shore up the world's largest economy from the risks posed by the U.S.-led trade war against China amid weakening global growth.

Despite low-unemployment, wage growth has been anemic and spending soft. Many market participants are predicting this may not be the last rate cut by the U.S. central bank.

"It's basically a U.S. story," said Mathan Somasundaram, a market strategist at stockbroker Blue Ocean Equities in Sydney.

He added that borrowing costs have dropped 120 basis points in the last nine months, and that has substantially improved the housing outlook.

The company, whose U.S. cement sales account for a majority of its earnings, said adjusted net operating profit rose 13% to $90.2 million for the quarter ended June 30.

James Hardie, also listed in the United States but based in Dublin, said earnings before interest and taxes (EBIT) margin - a measure of a company's profitability - for its North American fibre cement segment would be at the upper end of its 20% to 25% range for fiscal 2020.

Margins would be helped by controlling input costs, better pricing and modest growth in the U.S. housing market.


Australia's housing market has been under immense strain, with housing prices having fallen every month since late 2017. But encouraging signs in June from Sydney and Melbourne, and stronger interest from Chinese buyers, a key base, have spurred hopes the market could be turning a corner.

James Hardie, however, said Australia's housing market is contracting and the company's addressable market will "experience high single digit percent contraction in fiscal year 2020 compared to fiscal year 2019."

But added that its net sales would grow above the market.

Back-to-back rate cuts in June and July by Australia's central bank may also boost consumer sentiment as the easing filters through, and will likely also get a lift from recently passed tax cuts.

(Reporting by Nikhil Kurian Nainan and Shriya Ramakrishnan in Bengaluru, Additional reporting by Byron Kaye in Sydney; Editing by Stephen Coates and Jacqueline Wong)