ASX-listed CSR talks down role in NZ leaky schools suit
ASX-listed CSR talks down role in NZ Education Ministry's leaky buildings claim
By Paul McBeth
April 18 (BusinessDesk) - CSR, the ASX-listed building products maker, is talking down its role in New Zealand's leaky buildings claim by the Ministry of Education after being named as one of a number of parties in the suit.
The New Zealand government ministry, which oversees education policy and spending, yesterday lodged a claim in the High Court against cladding manufacturers that supplied materials used in school buildings affected by weather-tightness failure, acting Secretary Peter Hughes said in a statement.
The ministry has embarked on remediation on 800 buildings across more than 300 schools, with an estimated cost of some $1.5 billion.
Australian building products makers James Hardie Industries and CSR outed themselves yesterday in separate statements to the ASX as companies whose New Zealand subsidiaries are named in the action, which CSR says includes several building product manufacturers and suppliers.
"Based on the low level of market share for the product, CSR believes that any potential financial impact related to this action would not be material to the financial results of the company," it said. "CSR understands that a number of other parties including architects, designers and builders are also named in related lawsuits."
Legal action has been the preferred route for owners of leaky buildings, who have the possibility of getting all of their money back rather than having to wear half the costs if they accept the government's assistance package.
Leaky buildings were cited as one of the reasons behind Mainzeal Property and Construction falling over earlier this year, and they've been the subject of a raft of civil proceedings, including a Supreme Court judgment last year which opened up the way for commercial property owners to sue councils for weather-tightness failures.
CSR Building Products (NZ), the subsidiary facing action, made a profit of $4.5 million on sales of $60.9 million in the 12 months ended March 31, 2012, according to its latest financial statements lodged with the Companies Office.
The unit took an $11,000 provision against product liability on its warranty programme, without signalling any contingent liabilities.
Shares in CSR gained 0.8 percent to A$1.915 on the ASX yesterday.
James Hardie said it's working with its legal advisers to work out a response, and is not yet able to assess how much of the claim relates to its subsidiaries.
“The New Zealand Ministry of Education is claiming weather tightness defects in relation to several thousand New Zealand school buildings and is seeking repair costs and unspecified and unquantified damages in relation to the alleged defects,” James Hardie said.
“At this stage James Hardie is not able to assess what proportion of the claim relates to the companies or comment about the validity and/or any potential financial impact of the claim,” it said.
James Hardie's shares fell 1.8 percent to A$9.59 yesterday.
Earlier this year, the company increased its charge for a New Zealand product liability by US$7.5 million to US$13.2 million in the 2013 financial year. James Hardie has been and continues to be joined in leaky building claims relating to residential and a small number of non-residential buildings built between 1998 and 2004.
James Hardie NZ Holdings, the local holding company, flagged potential claims by customers from recognised sales as a contingent liability in its 2012 annual report filed to the Companies Office.
“The extent of James Hardie NZ Holding’s liability is currently uncertain, however, management have recognised provisions for their best estimate of future liabilities of these claims,” the report said.
“It is expected that the matters to which the current provision relates could potential settle or go to trial before 1 April 2013,” it said.
As at March 31, 2012, the New Zealand holding company took a $20.9 million provision in its current liabilities, and a further $10.3 million provision in its non-current liabilities.