James Hardie reveals asbestos claims rising more than forecast

Building products maker James Hardie has confirmed asbestos-related claims are continuing to grow at a faster-than-expected rate.

Releasing its 2015 first-half results, James Hardie reported asbestos related claims were 5 per cent higher than for the corresponding six months last year, while the second quarter claims were 12 per cent higher year-on-year.

The claims were also well ahead on actuarial estimates, up 19 per cent on what was expected for the quarter and 10 per cent on the half.

The figures come two months after the Asbestos Injuries Compensation Fund (AICF) announced that it was facing a $184 million shortfall in funding by 2017 and was proposing to move to an instalment scheme to help cover the gap.

That plan drew heavy criticism from the Asbestos Diseases Foundation which described it as "morally bankrupt" as "victims don't die by instalments, they need lump sum payments."

Since its formation in 2007, AICF has settled almost 4,000 claims and paid out almost $800 million to asbestos victims.

James Hardie's last payment to the fund was $US113 million in July this year, which represented 35 per cent of the company's free cash flow.

The first-half results show average size of settlements was 6 per cent lower compared to the same period last year.

In a statement to the ASX James Hardie noted: "The decrease in average claim settlement for the half-year is largely attributable to a lower number of large mesothelioma claims being settled compared to the prior corresponding half-year."

"We caution that there are a number of large pending claims which might materially increase the average settlement size."

AICF's actuarial advice is that the net present value of its future claims over the next 30 years is $1.87 billion dollars.

The estimate includes a projected rise in mesothelioma claims which grew 20 per cent in 2013.

James Hardie reported a first-half net profit of $US156.1 million, a 20 per cent fall on the corresponding period last year.

However, in a note to clients, CLSA analysts noted the second quarter core net profit of $US65.5 million was well ahead of more bearish market predictions.

CLSA said it "continues to be concerned that asbestos claims were 19 per cent above actuarial assessments and the higher mesothelioma claims trend is continuing."

"While the operating environment in both US and Australia has improved compared to the prior corresponding quarter, the recovery of the US housing market remains below our expectations at the beginning of the year," said James Hardie chief executive Louis Gries.

"When we look at the US housing market, and the broader US economy as a whole, we see continued uncertainty around the recovery in the short-term, however, our view remains unchanged on the medium and longer-term outlook."

The company maintained guidance for a full-year profit of between $US205 and 235 million.

James Hardie shares closed 4 per cent higher on the day at $12.52.