Half year net profit (after significant items) up 4% to $118.7 million
CSR Limited (CSR) reported a 32% increase in net profit after tax (before significant items) to $136.6 million for the half year ended 30 September 2017. After significant items, net profit after tax was $118.7 million, up 4%.
Building Products delivered strong gains, with earnings before interest and tax (EBIT) up 5% on the previous half year to a record $120.3 million. Higher prices and volumes were supported by the solid market for residential housing on the east coast of Australia. Aluminium was also higher with EBIT up 27% to $50.1 million due to higher realised prices.
The lift in half year net profit after tax was also driven by increased Property earnings following the settlement of two transactions which delivered $46.5 million in EBIT, up from $15.3 million.
Cash generation also improved with cash flow from operations increasing 28% on the previous half year to $115.6 million. This has enabled the company to declare an interim dividend of 13.5 cents per share, franked at 50%, 4% higher than the previous half year unfranked dividend.
“CSR’s Building Products business has continued its track record of growth in earnings which improved for the fifth consecutive year,” said CSR Managing Director Rob Sindel.
“This strong performance follows our strategy to capitalise on the strength in the residential construction market following investment in our operations and bolt-on acquisitions over the last few years.
“The detached housing market in Australia, which accounts for almost 50% of CSR’s Building Products’ revenue, remains stable, underpinned by record low interest rates and steady population growth. Whilst the high-rise apartment market, which represents only 12% of revenue, has slowed during the last year, the pipeline of projects underway will continue to support demand for CSR’s products.
“Our Building Products businesses performed well, with higher volumes and pricing in Gyprock, Bradford, PGH and Hebel contributing to the record result. Improved operational efficiencies across our businesses delivered an EBIT margin of 14%.
“Viridian earnings of $2.2 million were down from $6.0 million in the previous half year due to operational issues and lower volumes. A number of restructuring initiatives are progressing to improve earnings which may include further asset sales, following on from the recent sale of our glass processing businesses in Cairns, Darwin and Perth.
“In Aluminium, prices continued to improve over the last six months as US$ prices reached five year highs. As prices increased, we have hedged a significant portion of our earnings over the next four years. This will reduce future earnings’ volatility in Aluminium ahead of the significant increase in electricity prices beginning this month.
“CSR ended the half year to 30 September 2017 with net cash of $0.5 million, giving us significant capacity to invest in additional growth options and property projects to improve shareholder returns,” Mr Sindel added.
Looking at the outlook for the year ending 31 March 2018 (YEM18), CSR confirmed:
- Building Products – Earnings will be supported by solid demand from the east coast detached housing market and multi-residential projects currently under construction.
- Viridian – Further work is underway over the next six months to drive operational efficiencies and deliver growth from higher-margin products in the residential and commercial market. Due to the extended time required to implement these initiatives, it is expected the full benefit will not be realised until the year ending 31 March 2019.
- Aluminium – Currently 80% of the net aluminium exposure for YEM18 is hedged at an average price of A$2,373 per tonne (excluding ingot premiums) as of 31 October 2017. However, earnings will be offset by higher raw material and power costs. The Tomago smelter’s new power supply contract takes effect from November 2017. As previously advised, power costs will increase by approximately A$250 per tonne of production.
- Property – Earnings in the second half will be largely derived from Stage 5 settlements at Chirnside Park, VIC. This will increase the expected Property EBIT for the full year to around $55 million, subject to the timing of transactions.
CSR expects that group net profit after tax (before significant items) for YEM18 will be within the current range of analysts’ forecasts of $187 million to $223 million (before significant items).
CSR Limited Investor Relations
Tel: +61 2 9235 8053
1 November 2017