Restructure sends Hardie to record high

Building products group James Hardie Industries sees better earnings ahead from international growth

By CNN's Geoff Hiscock, Asia business editor

SYDNEY, Australia (CNN) -- Shares in Australian building products group James Hardie Industries closed at a record high Tuesday after it said it would set up a new parent company in the Netherlands.

It said the restructuring would lift the group's after-tax profit by about $16 million.a year.

James Hardie shares closed 6.5 percent higher at A$6.18, after hitting A$6.24 during the day.

The company said the restructure involves setting up a new parent company, James Hardie Industries NV in the Netherlands, but with its primary listing on the Australian Stock Exchange (ASX).

It also plans a secondary listing of American Depositary Receipts on the New York Stock Exchange.

Restructure to generate higher returns

The company, which announced in May a net loss of about $102 million for the year to March 2001, said the restructure would generate higher returns from its international expansion than would be possible under the existing structure.

The group moved its operational headquarters to the United States in 1998. Tuesday's announcement is designed to make the most of international growth in its fiber cement business, particularly in the U.S.

"The new structure will allow James Hardie to maintain a global tax rate of 25-30 percent over the long term, compared to a rate of 40-50 percent that would arise under the current structure," the company said in a statement to the ASX.

James Hardie chief executive Peter Macdonald said about 85 percent of its income was earned in the U.S., but 90 percent of its shareholders were based in Australia.

High taxes on income returning to Australia

This meant high rates of foreign tax were imposed on foreign income when it was repatriated to Australia to pay dividends to shareholders.

"Under the current structure, this problem will increase as international demand for our products grows," Macdonald said.

The new structure would resolve this problem.

Macdonald said the company estimated the global market potential for products using its fiber cement technology was 10 to 15 times greater than at present.

In May, Macdonald said a fall in earnings from the company's U.S.-based gypsum business cut into its performance in the 2000-01 year.

Loss in 2000-01

Operating profit fell 39 percent to about $47 million. Abnormal and extraordinary losses pushed the net result into the red for a loss of $102 million.

While the gypsum business was down because of the decline in U.S. wallboard prices, sales in the U.S. fiber cement business grew 39 percent to about $340 million.