James Hardie Industries (JHX) joined a string of high-profile companies afflicted by the US housing crisis, after it said it plans to suspend production at its US plant in response to the current US housing market conditions.
Shares in the building materials company fell by as much as 27 cents, or 4% to close at $6.47. More than 6.8 million shares had changed hands, double its daily average.
The factory was acquired in December 2001 when James Hardie purchased the operating assets of its former US competitor, Cemplank Inc., to meet growing demand for fibre cement in key regions in which it did not have local manufacturing capacity.
James Hardie's CEO, Louis Gries, said: "Although we have continued to partly offset the impact of the US housing downturn by concentrating on market penetration against alternative materials, the further deterioration in market conditions led to today's decision.
"We successfully reset the US business in late 2006-early 2007 in anticipation of reduced demand and, consistent with this reset, we continue to focus on cost efficiencies and balancing our production with market demand," said Mr Gries.
The company said production has been suspended at this plant because it is the least cost-efficient of the company's ten manufacturing plants in the US, which have a total annual production capacity of 3.4 billion square feet.
In its FY07 Annual Report, Mr Gries commented on the difficult market conditions:
"Our market development efforts have become more difficult in a declining market as builders have been resetting their business models and have been intensely focussed on cutting costs.
"Since our products are generally more expensive than those that we compete against, this does not play to our advantage. The challenge we currently face is to refine our segmentation model to reflect current conditions.
"In this market we need to continue to work on delivering cost-efficiencies to builders currently using James Hardie® products.
"We also need to reach builders who are using vinyl siding, and who might be receptive to making a product decision that involves a cost increase that is offset by a significantly greater value increase they can market to home buyers."
