Results for the half year ended 30 September 2004

CSR half year net profit increases 29% to $129 million

CSR today announced a 29% increase in net profit before significant items to $129million for the half year ended 30 September 2004. CSR’s Sugar and Property operations improved strongly whileBuilding Products and Aluminium were in line with the previous half year. Earnings per share before significant itemswere up 32% to 14.0 cents compared with 10.6 cents last year.

CSR’s total net profit after taxwas $207 million which includes significant items relating to settlements paidto CSR following resolution of some longstanding litigation issues and theone-off tax benefit of $48 million as a result of entry during the year intotax consolidation.

Trading revenue increased by 8%to $1,199 million mainly due to higher Sugar revenue. Earnings before interest, tax and significant items (EBIT)were up 21% to $200 million. Profitability improved with the EBIT margin (EBIT/trading revenue)increasing from 14.9% to 16.7%. Returnon funds employed lifted to 20.5% - the highest level in five years.

The interim dividend has beenincreased to 6 cents per share with 100% franking compared to the previousinterim dividend of 5 cents per share franked at 70%.

Financial results summary

Half year ended 30 September
[$ million unless stated]



% change

Trading revenue




Earnings before interest, tax, depreciation and amortisation – EBITDA




Earnings before interest and tax – EBIT




Net profit before significant items




Significant items


Net profit after significant items






Earnings per share before significant items [cents]




Earnings per share after significant items [cents]






Net operating cash flow




Funds employed




Key measures




EBITDA/trading revenue [%]




EBIT/trading revenue [%]




Return on funds employed [%] 1







As at

30 Sep 

31 Mar 2004


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




1. Past 12 months EBIT divided by funds employed as at30 September. Return on funds employedof 20.5% as of 30 September 2004 is the highest level in five years based onpro forma financials for 2000-2002 as per demerger explanatory booklet dated 7February 2003.


“Improved returns from our Sugar and Propertyoperations contributed to CSR’s stronger first half result,” said ManagingDirector and CEO Alec Brennan. “We arealso starting to see some benefit from growth and business improvementinitiatives undertaken over the past 12 months.”

“Following the strong profit result we have increasedour interim dividend from 5 to 6 cents per share and franking has been liftedto 100%.”

“CSR’s balance sheet is very strong although gearing is expected torise to about 20% at the end of the year as funds are allocated to previouslyannounced growth initiatives. As was the case at this time last year, we areyet to purchase any shares under the buyback announced in May, however theboard will keep capital management options under review and support anyinitiative that clearly adds value for shareholders,” Mr Brennan said.

Review of significantitems

During the last six months, CSRhas made good progress in resolving a number of longstanding disputes which arerecognised as significant items in the half year net profit of $207million. CSR received a $41 millionsettlement from Lloyd’s Underwriters of litigation commenced by the CSR groupagainst a number insurers in 1995. Thissettlement resulted in CSR writing off $36 million of legal costs accrued sincethe litigation first commenced. Litigation with the remaining insurers is scheduled for final hearing in2005. CSR also received $22 millionfrom Alcan Northern Territory Alumina Limited in settlement of a dispute thatarose following sale of CSR’s interest in the bauxite and alumina joint ventureat the Gove Peninsula in the Northern Territory in January 2001.

In addition, CSR’s entry intothe tax consolidation system provided a one-off tax benefit of $48million. In total, these significantitems contributed $78 million to net profit after tax.

Review of results by segment

Earningsbefore interest, tax and significant items (EBIT) by segment

Half year ended 30 September

[$ million unless stated]


% total segment EBIT


% total segment EBIT

% change HYES04 vs HYES03

Building Products











Raw sugar 1

Refined sugar and ethanol












Business segment total







Corporate costs 2






Restructure and provisions 3






Total EBIT






1. Assumes a pool price for HYES04 and HYES03 of A$250per tonne.

2. Underlying corporate costs were reduced by $2.5million in the HYES04 period offset by higher accruals for incentive payments.

3. Includes product liability andsuperannuation top-up payments. HYES03costs were offset by the write back of some provisions.

Building Products – Trading revenue of $490million was up 6% with price and/or volume increases achieved in mostproducts. EBIT of $59 million wasin line with last year as additional costs were incurred to commission theNanning glasswool plant in China, undertake one-off maintenance and develop newmarketing initiatives to benefit future years.

Aluminium – Trading revenue from aluminium sales, includinghedging was up 8% to $240 million. EBITof $73 million was in line with last year. Average A$ aluminium prices after hedging were down 1% on the priorperiod with higher spot prices partially offsetting lower results from hedging.

Sugar – EBIT of $76 million was up from $49 million theprevious year. The sugarcane crop wasahead of last year due to productivity initiatives and improved weather. The result was boosted by the acquisition ofthe additional 25% stake in the sugar refining joint ventures and payment ofthe first tranche of the sustainability grant which is part of the AustralianGovernment sugar reform program announced earlier this year.

Property–PropertyEBIT improved to $18 million following the handover of land for a majorresidential development in Woodcroft, Sydney.

Implementationof growth projects continues

Building Products – CSR continues togrow its insulation business in China and has further enhanced its position asthe largest insulation producer in Asia with the 6,000 tonne expansion of itsglasswool insulation plant in Nanning, southern China, completed in August. The Nanning plant has unique designcapabilities to supply a high-margin specified pipe insulation product.

The4,000 tonne expansion of the Dongguan rockwool factory in China will becompleted by the end of November increasing the annual capacity of the plant to24,000 tonnes. This additional rockwoolcapacity is targeted for exports and value-added markets within China.

Sugar – The 63 megawattrenewable electricity plant under construction at the Pioneer raw sugar mill inthe Burdekin region, North Queensland remains on schedule to be completed byJune 2005. This will expand CSR’scommercial generation of renewable electricity – fuelled by sugarcanewaste fibre produced in the milling process.

Adetailed review of the original project plan was recently completed. This review has identified changes to thescope of the project which will significantly increase the total projectcosts. Increases in the cost of labourand materials, which have impacted many capital projects in Australia over thepast 12 months, will also add to the cost of the project.

Thecombined impact of the scope changes and cost escalations has increased thetotal capital cost to $140 million, up from the original estimate of $100million announced in September 2003.

Revenue increases from moreefficient steam turbines and improved pricing for renewable energy creditsshould lift EBITDA by about 10% and the project will generate returns wellabove its cost of capital despite increased capital costs.

The renewable energy plant was originally approved onthe basis of operating for about eight months each year primarily during thesugar crushing season. Plans are beingdeveloped to extend the operation year-round to further improve returns andsteps will be taken during the next 12 months to implement these plans.

Investingin the sugar industry to build a sustainable future

CSR has made a substantialinvestment in developing a leadership program in the sugar industry andassisting sugarcane growers to increase farm productivity, in collaborationwith the Canegrowers organisation and the Bureau of Sugar ExperimentStations. Launched two years ago, thisprogram now has an established track record of improving crop yields. CSR recently purchased a large sugarcane farm in theBurdekin region to assist in demonstrating farming best practice. In May 2004, CSR received the Sugar IndustryInnovator of the Year Award in recognition of its leadership developmentprogram.

CSR continues to invest inresearch to diversify the industry’s revenue sources away from the world rawsugar market to other activities such as ethanol and renewable energygeneration. CSR is also participatingin regional planning programs which are developing further initiatives toensure the sugar industry will be sustainable for future years.

Financial review

CSR's financial position remains strong with net debtof $142 million equating to a low gearing of 9.7% (net debt/net debt + equity).Funds will be used in the second half of the year for previously announcedcapital commitments and debt levels are expected to double by March 2005.Despite this increase in debt, anticipated gearing of approximately 20% will bebelow the target range of 25–30% andthere is scope for further growth or capital management initiatives.

In May 2003, CSR announced a sharebuyback of up to 5% of its shares. Approximately 3% of CSR’s shares were repurchased under the May 2003buyback program including 3.6 million shares acquired during the half yearended 30 September 2004. The sharebuyback program was extended by an additional 5% in May 2004, however, to dateno shares have been purchased under the extended program.

Interim dividend increased from 5 to 6 cents pershare with 100% franking

The directors have increased theinterim dividend to 6 cents per share with 100% franking compared to theprevious interim dividend of 5 cents per share franked at 70%. The interim dividend is payable on 3December 2004.

Outlookfor the full year to March 2005

Thecommercial environment for CSR is subject to a number of influences, includingmovements in currency exchange rates, interest rates, commodity prices andlevels of building activity.

BuildingProducts – While the demand for new residential housing hasbeen relatively stable for the first half of the year, the recent slowdown inapprovals is already being felt with orders for building products. Indicationsare that the number of new dwellings this year will fall by at least 5%. Thisshould be partly offset by continued growth in the alterations and additionsmarket and in the commercial building sector. Despite the softening market conditions, we are working to maintainprofitability at the level achieved last year.

Aluminium – The outlook for the fullyear has improved with higher aluminium prices and a more favourable A$/US$exchange rate than forecast earlier in the year. We now expect EBIT to be around 5% lower than the previousyear. Most analysts are predictingcontinuing satisfactory prices for aluminium over the next twelve months.

Sugar – The surge in raw sugarprices during the last six months has improved the forecast sugar price to the$250 per tonne level. This is asignificant improvement from the $229 per tonne price achieved last year. The outlook for this year’s sugarcane crophas improved due to better weather and continued improvement from sugarindustry productivity initiatives. Ethanol operations will continue to be impacted by higher raw materialcosts while demand for refined sugar should improve with increased food andbeverage production during the summer months.

Theresult will be further assisted by the full year benefit of the additional 25%stake in refining. The combined impactof these factors should result in an EBIT contribution from Sugar more thantwice the level achieved last year.

Property– Contribution for the full year is expected to bebetween $25-$30 million, although timing is difficult to predict precisely, dueto the need to finalise regulatory approvals and commercial negotiations.

Overall – Given the impact of allof the above factors, the company now expects to achieve an EBIT resultapproximately 20% higher than last year.

CSR remains focused on its keyobjectives of: enhancing performancethrough aggressive control of costs; improving productivity, safety andenvironmental standards; optimising capital management; andseeking out and developing new growth opportunities.