CSR today released a trading update for the year ended 31 March 2009.
Second financial quarter results across CSR Building Products division reflect patchy residential construction demand, with recent Queensland and New Zealand sales in particular being markedly lower than expectations. While this week’s Federal Government announcement of a tripling of the first home owners grant for new homes is a welcome stimulus to new housing construction in Australia, it is likely to be beyond the end of CSR’s current financial year before any significant positive impact is felt in building products demand. Consequently, while it is particularly difficult in the present volatile markets to predict earnings, CSR believes, on balance, that earnings before interest and tax (EBIT) of its Building Products division are likely to be lower than previously expected.
CSR continues to closely manage its businesses through this volatile market, accelerating a number of cost efficiency and business improvement initiatives across its portfolio which will ensure that CSR is even better positioned when market conditions return to normal.
The recent decrease in the AUD/USD exchange rate will assist CSR’s Sugar and Aluminium businesses, although the positive impact is more likely to be realised from next financial year, given the hedging position in both businesses. The Property division continues to perform to expectations. The divisional earnings outlook for these three businesses remains generally unchanged from previous guidance provided at the Annual General Meeting in July.
In July, CSR indicated that group EBIT before significant items for the year ended 31 March 2009 were expected to be in the range of 5-10 per cent higher than the previous year, noting the uncertain market conditions.
Given the comments above on Building Products earnings, and assuming reasonable weather conditions for the remainder of the sugar milling season, CSR now expects group EBIT before significant items to be in line with last year.
In terms of significant items, CSR’s asbestos provision will also be affected by the recent decrease in the AUD/USD exchange rate. While the Board is yet to consider and determine the final amount of the provision, the movement in the exchange rate, together with the routine re-estimate of future liabilities, is expected to result in an increase in the provision by approximately AUD50 million as at 30 September 2008.
CSR will provide additional information at the half year results on 5 November.