Results for the half year ended 30 September 2005

CSR Limited (CSR) today announced a net profit after taxof $114.6 million for the half year ended 30 September 2005, down 14.9% on theprior period. As already advised, CSR’sprofit for this half year has been affected by unseasonable wet weather in Augustwhich has shifted a significant portion of sugar milling earnings from thefirst half into the second half of the financial year ending 31 March2006.

Building Products’ results were in line with last year, asoperational performance improvements reduced the impact of a significantslowdown in the residential building market. Aluminium profits were down as a result of lower hedged metalprices, however this was more than offset by a strongimprovement in Property profits.

Earnings per share before significant items were 12.6cents, compared with 14.7 cents last year.

Total revenue rose 8.5% to $1,393.0 million dueprincipally to the inclusion of $245.1 million of trading revenue fromrefined sugar. Full consolidation of therefined sugar businesses commenced from 1 October 2004 and therefore thisadditional revenue was not included in the previous half year.

There were no significant items during the half year ended30 September 2005, compared to a profit of $96.5 million from significant itemsin the same period last year.

Financialresults summary

Half year ended 30 September
[$ million unless stated]



% change

Total revenue




Earnings before interest, tax, depreciation and amortisation




Earnings before interest and tax – EBIT




Net profit before significant items







Earnings per share before significant items [cents]







Key measures




Return on shareholders’ funds [%]







As at

30 Sep 2005

31 Mar 2005

Gearing – net debt / net debt + equity [%]



Note: Results for the half year ended 30September 2005 are reported under Australian equivalents to internationalreporting standards (“A-IFRS”). Thecomparative results for the previous half year are restated to comply withA-IFRS requirements.


“CSR’s results for the half year have been significantlyimpacted by the delays in sugar milling returns as a result of wet weather,”said CSR Managing Director and CEO Alec Brennan.

“This is a timing issue and we expect CSR’s full yearresult to be about 10% ahead of last year.

“CSR’s diversified operations have mitigated the impact ofthe lower sugar milling returns. Theresult for Building Products is particularly pleasing given the 9% decline inhousing approvals during 2005 and reflects the real progress being made in ouroperational improvement programmes.

“Aluminium is performing within expectations and Propertywill benefit from growing demand for industrial land at CSR’s site at Erskine Park in Western Sydney.

“In the last six months, CSR has returned $249 million toshareholders by way of dividends, a share buyback and a capital return. We also utilised the company’s strong balancesheet to pursue over $100 million in growth initiatives.

“We see continuing opportunities to grow while improvingthe long-term operations of our businesses,” Mr Brennan said.


CSR’s net debt and gearingincreased during the half year following completion of the $182 million capitalreturn announced in May 2005. Gearing(measured as net debt/net debt + equity) is 32.9%, up from 17.7% with net debtrising to $573.1 million.

CSR continues to pay a significantproportion of sustainable profit as dividends, subject to available frankingcredits. The interim dividend to be paid on 9 December will be 6 cents a share,fully franked.

Reviewof results by segment

Earnings before interest and tax (EBIT) by segment

Half year ended 30 September

[$ million unless stated]





% change

Building Products
























Business segment total






Corporate costs






Restructure and provisions 1






Total EBIT






1.Includesproduct liability and superannuation.

Building Products Trading revenue of $496.3 million rose by 1.3%, primarily due togrowth in Asia and new products. Revenue in the Australian businesses fell dueto the sharp slowdown in residential building construction in New South Walesand Queensland. Operational improvement initiatives drove a significantreduction in costs, resulting in a steady EBIT result of $60.6 million onsignificantly weaker volumes.

Aluminium Trading revenue from aluminium sales, including hedging, fell 2.5% to$234.0 million. EBIT of $65.0 million was 10.8% down due to theimpact of a higher A$/US$ exchange rate and increased aluminium productioncosts.

Sugar Trading revenue rose from $468.1 million to $632.5 million whichincludes $245.1 million of additional trading revenue from the sugar refiningbusinesses. EBIT was $43.6 million,down from $79.4 million due to the shift in sugar milling earnings to thesecond half of the year.

The world sugar price has risen over 40% in recent monthsand, with around 75% of the raw sugar crop priced, an average price in excessof $280 per tonne is forecast to be paid this year, compared to $255 per tonnelast year. Following the strong increasein the sugar price, hedging is now in place for approximately 28% of CSR’s netexposure for the 2006 season (financial year ending 31 March 2007). CSR is also hedging returns in future years.

Property EBITimproved from $17.0 million to $30.9 million which includes profitfrom the August 2005 sale of the garden products joint venture, Envirogreen Pty Limited (50% CSR) and a final receiptarising from an adjustment to the July 1996 agreement regarding sale of CSR’sformer Pyrmont site in Sydney.

Significantgrowth projects underway

Building Products Progress continues on the expansionof CSR’s low cost PGH™ brick plantat Oxley, south of Brisbane. The $34million project, due for completion in July 2006, is proceeding on time and onbudget and will increase the capacity at Oxley by 35 million bricks a year. When completed, higher cost brick capacity atthe company’s Strathpine, Queensland site will be mothballed, but will remainavailable for additional production if there is sufficient demand in theQueensland housing market in the future.

A $28 million expansion project to increase glasswool insulation capacity by about 50% to 28,000 tonnesa year at the Bradford Insulation™factory at Ingleburn, Sydney is targeted for completion in April 2006. This project will provide additional capacityto meet growing demand driven by improved housing energy efficiency standards.

CSR is also expanding its product and serviceofferings by investing in businesses aligned to existing operations, such as Top Cat Safety Rail. Acquired in May 2005, this business suppliesedge protection equipment required during roof installations for theresidential and commercial markets.

The Paroc Panel™ noncombustible wall and ceiling panel system is increasing sales to the commercialbuilding market, with distribution networks established throughout Australiaand in New Zealand and Asia. To meetgrowing demand, CSR is proceeding with construction of a ParocPanel™ manufacturing facility in southern China. The $20 million project is targeted forcompletion in January 2007.

Sugar The new 63 megawatt renewable electricity plant at Pioneer raw sugarmill, North Queensland commenced operations in August. Construction delays andsignificant rainfall postponed completion of the project, originally targetedfor June 2005. Fuelled by sugarcanewaste fibre, the project will increase CSR’s total renewable energy productionby almost 80% to 620,000 megawatt hours per year, which is enough electricityto supply the requirements of 100,000 households.

The total capital cost of the project has increased from $140million to approximately $150-$170 million, subject to the resolution ofcontractor claims. Plans are beingdeveloped to extend the operations of the plant to boost returns.

CSRsupports efforts by the Australian and Queensland Governments, major oilcompanies and automobile manufacturers to promote the use of biofuels in the Australian market. One of the two largest ethanol producers inthe country, CSR is currently supplying over 130 petrol stations with fuelgrade ethanol. Detailed engineering workis nearing completion for a capital project to expand fuel ethanol productionat CSR’s Sarina, Queensland distillery with final approval of the projectexpected in the near future.

Property CSR is in the final stages of site preparation and road constructionon the Erskine Park, Sydney, former quarry site. The sale of 17 hectares of land at Erskine Park to BlueScope SteelLimited was announced in July 2004 and the transaction is expected to becompleted by March 2006.

CSRhas today entered into a conditional agreement with AustralandProperty Group for the sale of 16.7 hectares of land at ErskinePark. CSR expects to receive a netreturn of approximately $23 million after development costs from the sale ofthis property, to be realised this financial year.

CSR has now secured sale or lease transactions for 40.3 hectaresof the 100 hectare Erskine Park site. Discussions continue with local and statedevelopment authorities to generate further value for the remaining 60 hectaresof land at Erskine Park capable of development.

Outlookfor the year ahead

Commenting on the outlook for the year ending 31 March2006, Mr Brennan noted that the commercial environment for CSR is subject to anumber of influences, including movements in currency exchange rates, interestrates, commodity prices and levels of building activity.

Building Products “Theresidential construction market is slower than we anticipated earlier thisyear, particularly in New South Wales and Queensland. This should be partly offset by demandfrom the commercial building sector. Thetotal number of new dwellings is now expected to fall by around 8% thisyear. Based on this revisedestimate, we are still working towards a Building Products’ result broadly inline with last year, supported by continuing operational improvementinitiatives.

Aluminium “Lower A$ returnswill reduce Aluminium EBIT by between 5% to 10%. The near-term outlook for US$prices is favourable but will remain sensitive to the rate of aluminium productiongrowth in China. The strong A$ willdepress the aluminium price when expressed in A$, however earnings willcontinue to be supported by our current hedging position.

Sugar “Due to the unseasonable wet weatherin August, sugar harvesting will need to extend to mid-December when thereis risk of the traditional wet season weather restricting the size of the finalcrop. However, at this stage, we areforecasting Sugar EBIT to be at least 10% ahead of last year.

Property “Results are expected to be around $75 million following completion of several propertytransactions including further sale and lease of industrial land at the Erskine Park site in Western Sydney.

“As a result of these factors,CSR now expects to achieve an overall EBIT result about 10% higher than lastyear, excluding significant items,” Mr Brennan said.