Asbestos claims rising but James Hardie doubles profit Costly to settle: Asbestos-related claims are rising for James Hardie, particularly in relation to mesothelioma. Photo: Sylvia Liber James Hardie says it is seeing an increase in the number of asbestos claims relating to mesothelioma, the deadly cancer caused by prolonged exposure to the substance. The construction firm, which revealed it had doubled its first-half profit on Thursday, said the number of asbestos claims relating to the cancer had risen above the company's expectations. In half-yearly statements released to the stock exchange on Thursday, Hardie said the average cost of asbestos claims for the six months to September was higher than the previous year due to an increase in mesothelioma claims, which were more costly to settle. "We have seen some concerning trends in mesothelioma claims, which we have highlighted previously," chief financial officer Russell Chenu said. We've now got a better handle on the 'what' and the 'how', but what we still don't understand is the 'why'. There's still a lot of work going on in that space, but there is a definite trend in an increase in mesothelioma claims that the fund is experiencing. James Hardie's payments for asbestos claims are tied to its cashflow. It pays up to 35 per cent of its annual net operating cash flow to an asbestos fund. The company said the number of mesothelioma claims could be higher than its predictions due to the way it calculates a peak year of claims. It forecast mesothelioma claims to peak in 2010-11, but said that, had it forecast a peak to occur later - for example, in 2015-16 - the estimates could change significantly. "Mesothelioma is the most expensive of the asbestos disease types in terms of compensation," Mr Chenu said. The fund is seeing an increase in the inflow of claims, and almost all of the increase in claims appears to be mesothelioma disease, rather than the other types of disease. That's increasing the amount of payments relative to both last year and relative to an actuarial assessment that was done at March 2013. Mr Chenu said he could not say more on the topic because it was a matter for the fund and "as far as I'm aware, we don't fully understand the cause of the increase in claims as of yet." James Hardie shares soared 14 per cent on Thursday morning after the company revealed it had doubled its operating profit in the first half of the financial year. The company, which reports in US dollars, said its operating profit for the six months to September 30 was $US108.3 million ($116.4 million), up from $US56.3 million a year earlier. The profit figure excludes asbestos, regulatory and liability adjustments, it said. Without stripping these out, its profit was higher at $US194.1 million. Chief executive Louis Gries said the second quarter had benefited from an increase in sales in its US business, which reflected an improvement in the housing market relative to last year. "Last year, we invested significantly in organisational capability in expectation of market growth in the US," he said. This year we are benefiting from that investment, as evidenced by improved earnings before interest and tax margins. The company's results benefited from the recent fall in the Australian dollar, which reduced its liability for asbestos claims in US dollar terms.