CSR Building Products (NZ), a unit of the ASX-listed building products maker, faces a bill of up to $NZ9.5 million after cutting a deal with the government to settle looming legal action over the nation's leaky schools.

The New Zealand unit of CSR took a $NZ9.5m provision to meet product liability claims in the 2014 financial year, having not made a similar provision in 2013, according to financial statements lodged with the Companies Office.

CSR declined to say how much of the provision related to a confidential settlement with the Ministry of Education in January to head off legal action.

CSR supplied cladding sheets and cladding systems which were purchased and installed in school buildings.

“The provision is based on estimates made from historical warranty data associated with similar products and services,” CSR said in a note.

“The company expects to settle the majority of the liability over the next year.”

The ministry filed court proceedings last year as it embarked on a remediation programme on 800 buildings across more than 300 schools, with an estimated cost of some $NZ1.5 billion.

Settlements and legal action are being pursued with several major suppliers of building materials.

When CSR was named as a party in the suit last year, it talked down its role saying its low level of market share of the product meant “any potential financial impact related to this action would not be material to the financial results of the company”.

CSR was the second firm to cut a deal with the ministry after Australian building products maker James Hardie settled in December, which the government department said dealt with more than 40 product liability claims.

Before the settlement, James Hardie said it faced potential costs of up to $US47.6m related to a slew of leaky building claims, including a provision of $US15.2m for the ministry’s suit.

The company now anticipates a provision of a net $US10.3m to cover its weather-tightness claims as at June 30, according to James Hardie’s first-quarter earnings statement.

The education ministry is still pursuing legal action against Carter Holt Harvey after the New Zealand-owned building products maker failed in a bid to have the case quashed.


By Paul McBeth