James Hardie has warned its full year earnings are likely to fall short of expectations as the US housing market recovery proves less promising than anticipated.
The building products maker expects to achieve a net operating profit of between $US205 million and $US235 million in the year to March 2015, up from the previous year's $US197 million.
But that is below the range of $US226 million to $US261 million forecast by analysts.
The profit warning weighed on James Hardie's shares, which were down more than seven per cent at $12.99 at 1500 AEST.
Chief executive Louis Gries said the company had prepared for a stronger recovery in the US housing market, pouring extra cash into increasing production capacity, but has been disappointed.
"Our problem isn't that the market is not good enough, the problem is that we planned for the market to be a little better than it was," he said.
"Most people thought the market would be up 15 to 18 per cent this year and it's looking more like six to eight per cent."
Mr Gries said net sales from the Australian business were expected to improve, in line with expected growth in the detached housing market, and expected growth in the repair and renovation market.
OptionsXpress market analyst Ben Le Brun said the slower than expected US housing recovery had disappointed investors, who had held very high hopes for the company.
"There's been a very large premium applied to James Hardie's share price on the belief that the housing recovery story is going to continue in the US and that it's yet to hit full gear in Australia," Mr Le Brun said.
"There had been some very, very rosy assumptions for James Hardie moving forward so even a little blip on the radar can see their shares punished quite heavily."
James Hardie's profit in the three months to June 30 dropped 80 per cent from a year earlier, chiefly due to the impact of foreign exchange movements on the value of its asbestos-related liabilities.
Gross profit, which excludes asbestos liabilities, rose 11 per cent to $US140 million.
Mr Gries said he believed the second quarter would be better than the first.
"There are some things in that first quarter that dampen that first quarter result that aren't going to repeat in the next three quarters," he said.
JAMES HARDIE'S YEAR OFF TO A DISAPPOINTING START
* First quarter net profit of $28.9m, down 80 pct from $142.2m in 2013/14
* Gross profit of $140.2m, up 11 pct from $126.3m
* Sales of $416.8m, up 12 pct from $372.2m
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