CSR Limited earnings per share up 16%

CSRLimited today announced that operating profit after tax (PAT) for the yearended 31 March 2002 (YEM02) was A$553 million, up 9.4% on the previous year,before significant items*.

Earningsper share (EPS)before significant itemsrose 16.3% to 58.5cents.After significant items, PAT wasdown 12.9% and EPS was down 7.4%.

Directorsdeclared an increased final dividend of 13 cents, up 8%.Franking was increased to 70%, from 40%previously.The dividend is payable on4 July.

Other highlights


YEM02 result


Sales revenue

A$6,985 m



A$926 m



A$1,379 m


Net operating cash flow

A$1,195 m


Net operating cash flow/share



Free cash flow **

A$846 m


Return on funds employed (ROFE)


+0.9 pp

Return on equity (ROE)


+1.0 pp

Shareholdervalue added was again positive and up on the previous year.

The resultwas lifted by another strong performance from the US subsidiary, RinkerMaterials Corporation (Rinker) – with EBIT up 8% in US$ – and Sugar (EBIT upA$58 million), together with an improved result from Construction Materials,and a weaker A$ currency.Thesepositive factors offset reduced earnings due to the sale of the Gove aluminainterest (GAL) – which contributed A$67 million EBIT in YEM01 -and a decline in profit from Building Materials,due to the fall in Australian housing activity in the first half.

As previously announced, YEM02 PATincluded a one-off tax refund benefit of A$41 million, following a FederalCourt decision on the tax treatment of a settlement with insurers.Likewise, a one-off A$27 million gain fromsugar terminal shares had benefited YEM01 PAT.

Financial position

Net debt was A$1,738 million, down 17.2%from A$2,100 million last year.Gearing(net debt / net debt plus equity) improved from 34.0% to 29.7%. Interest coverwas 8.5 times, up from 6.8 times.


“This is a very satisfactory result given the economic uncertainty in the US and theslowdown in Australia,” said CEO & Managing Director Peter Kirby. “Overall,it has been a year of consolidation following Rinker’s A$1.3 billion inacquisitions in YEM01.Rinker continuedto grow in US heavy building materials, but more cautiously, due to someunpredictability about the economic outlook.

“We are particularly pleased about the strong growth in both earnings per share -which has risen an average of 22% p.a. compound over the past five years – andreturn on equity.Lifting ROE has beena key objective.”

* Significant items were previouslydescribed as abnormals.In YEM01, CSRrecorded an abnormal profit of A$129 million following the sale of its Govealumina interest (GAL).

** EBITDA after deducting tax and netinterest paid, operating capital and change in working capital

“Rinker(United States) again performed well,” said Mr Kirby.“The Florida operations continued to deliver an exceptionalresult.The turnaround in the Nevadabusiness – following the July 2001 acquisition of the Hanson operations in LasVegas – is ahead of expectations, and offers significant growth potential.Overall, the acquisitions are performing to target.

“ConstructionMaterials (Australia, Asia) improved with steady sales, despite a furtherdecline in engineering and commercial construction in Australia, and lowerconcrete and pipe prices.Along withother major companies in this industry, the business is delivering below itscost of capital.It needs to improvesignificantly.Our prices increasedfrom 1 April 2002 and the business is preparing for the coming upturn inactivity.Further customer serviceinitiatives are underway.

“Building Materials (Australia, NewZealand & Asia) had a year of two very different halves - apost-GST slump for housing in the firsthalf, followed by a strong pick up in approvals in the second half, althoughactivity levels have lagged behind.TheHousing Industry Association attributes the lag, which is mainly in NSW (45% ofBuilding Materials’ sales revenue), to factors including the HIH insurancecollapse and council delays.

“Our Asianbusinesses (particularly Tianjin Readymix quarry and concrete in China),performed much better, delivering a combined EBIT of A$9 million, versus a A$3million loss last year,” said Mr Kirby.

Business Performance

Rinker EBIT was up 16% to A$598 million(up 8% in US$ to US$306 million).Rinker EBITDA was up 18% to A$898 million (up 10% in US$).Sales rose 15% to A$4,116 million (up 7% inUS$).Margins increased:EBIT/sales to 14.5% from 14.4% andEBITDA/sales to 21.8% from 21.2%.US$ROFE was 16.1% from 15.0%.Comparable$US sales (adjusted for YEM02 acquisitions and divestments) rose 3% and EBITrose 7%.

Product prices were up 1-5% and profit rose in all Rinker’s majorbusinesses:

Quarries S.E. (Florida, Georgia, Tennessee, Kentucky) EBIT up 26%,volumes up 15%

Florida Materials (concrete & block) EBIT up 21%, concrete volumesup 4%, block 10%

Cement EBIT up 8%, volumes up 11%

Hydro Conduit pipe business EBIT up11%, volumes up 13%.

The small Polypipe and Prestress businesses, both heavily exposed tothe significant decline in commercial activity during the year, recordedlosses.Gypsum Supply profit fell US$8million as US wallboard market volumes and prices fell, and the previous supplyshortage eased.

ConstructionMaterials EBITrose 11% to A$57 million on steady sales.Second half EBIT was up strongly over last year.ROFE was 7.8%, from 6.8%.

BuildingMaterials secondhalf EBIT was also up strongly (27%) over the first half, but the total YEM02 resultof A$109 million was down 19% on the previous year, which had included theGST-induced housing boom. Sales fell 6%. ROFE was 17.8%, down from 22.4%.

Sugar EBIT rose 347% to A$74 million, onmuch improved raw sugar prices.Thecane crop was up slightly at 11.6 million tonnes, but was stilldisappointing.Distilleries EBIT rose23%, due to higher margins and strong export sales. Refining EBIT recoveredstrongly in the second half (up 56% over the first half) but fell 12% for theyear.

Aluminium EBIT was A$110 million, down 48%on the previous result, which included A$67 million in GAL earnings. Hedginginsulated the business from fluctuating prices and currency.


For thepast four years the CSR group strategy has been to grow internationally inheavy building materials, whilst concurrently working to separate the non heavybuilding materials assets in a way that has delivered value for ourshareholders.Good progress has beenmade:

22 divestments, totaling A$1.5 billion

24 acquisitions, totaling A$1.8 billion - integrated successfully and earning toplan

Around three quarters of group EBIT now comes from heavy building materials, and

Total return to shareholders has risen an average 30% p.a. compound for the pastthree years.

“Despite this improvement, substantial value is still to be realised,” said Mr Kirby.“After a year of consolidation in YEM02 we are now vigorously pursuing ourtandem strategy of growth and restructuring, in order to unlock this value forour existing shareholders.

"Weare currently evaluating a number of options to progress the restructure of thegroup.The recently announced Federaldemerger legislation is expected to facilitate this and options to be evaluatedwill include the creation of two separate Australian listed companies.As always, the driver of any restructuringwill be delivering value for our shareholders.

“Withregard to growth, the group has substantial financial flexibility and Rinker isactively investigating further acquisitions in the US, including a number ofsignificant step out opportunities.Weremain positive about the heavy building materials sector and opportunities forvalue-creating growth in the US. We also continue to look at opportunities in Asiaand Europe.”

Outlook for YEM03

The US economy appears to be recovering, and predictions are for a gradual upturn,helped by the US$51 billion stimulus package and the ongoing TEA-21road-funding program.Housing andcommercial construction are expected to decline during this year, with commercialexpected to recover from 2004.Infrastructure spending remains strong.Overall, US construction activity is currently forecast to be down about2%.

Asia isslowly improving and in Australia, we are seeing gradual progress towards asignificant engineering construction upturn from 2004.Commercial activity is expected to improvefrom this year.ConstructionMaterials is 70% exposed to these two sectors. Our prices are alsoimproving.

BuildingMaterials isalmost 75% exposed to housing, which remains strong.Starts are forecast to fall in the latter half of the year asinterest rates increase. We expect a similar level of activity to YEM02.

Sugar prices have fallen on expectationsof a large Brazilian crop, although the current drought there may impactlater.The Australian crop should alsobe larger, but lower prices will severely impact profitability.Initiatives to reduce earnings volatilityand improve returns are underway.

Aluminium profit should be similar to lastyear, due to hedging.

“Thegroup’s expectation is for another solid result this year.Achieving an improvement in last year’snormalised earnings – that is, excluding the A$41 million one-off tax refundbenefit – will be challenging.We willbe aiming to offset the impact of a higher A$, low sugar prices, and theexpected slowdown in US construction, with the improvement in ConstructionMaterials, ongoing operational improvement and contributions from any acquisitions.

“Our priorities will be to develop furtherinternational growth opportunities, to pursue ongoing restructuring, and tocontinue lifting the business performance, as we strive to deliver additionalvalue for our shareholders.”