Nov 1 2007
James Hardie today announced plans to suspend production at its Blandon, Pennsylvania, plant in North America in response to the current US housing market conditions.
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 Blandon manufacturing plant has an annual production capacity of 200 million square feet, but has been running at reduced operating levels since the business reset. Production has been suspended at this plant because it is the least cost-efficient of the company’s ten manufacturing plants in the United States, which have a total annual production capacity of 3.4 billion square feet.
The Blandon plant 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.
Since acquiring the Blandon plant, James Hardie has expanded its production capacity on the east coast of the United States and can now meet the needs of its customers in the region from other manufacturing facilities. Customers in the region will see no adverse change to service levels.
Mr Gries said: “Our Blandon plant has improved its efficiency levels in recent years and today’s decision is extremely difficult because it affects approximately eighty of our employees. However, it is no reflection on their achievements and dedication. Although the plant’s cost position is good from an industry perspective, it is disadvantaged relative to the other James Hardie plants servicing the Northeast due to its smaller scale, somewhat less reliable design and the zero effluent requirement of the current permit for this site.”
In accordance with US Generally Accepted Accounting Principles, the company expects to book impairment and related charges of approximately US$30-35 million connected with the suspension of operations at the Blandon facility in its third quarter financial results. The exact amount of the impairment charge and associated costs will be announced in conjunction with the company’s second quarter financial results for fiscal 2008, scheduled for release on Monday 19 November 2007.