CSR bucks building weakness for strong year

Company News

by Glenn Dyer

A small lift in final dividend to reward shareholders in building materials (and property) group, CSR (ASX:CSR) after it revealed a 17% rise in full year profit for the year to March 31.

The company said net after tax profit of $225 million was up from the $193 million reported for 2021-22 while statutory earnings of $219 million were down from the $271 million of the year before which was boosted by the impact of an $86 million in carry forward tax losses.

Stripping out that one-off, statutory earnings were up $31 million or just over 16% in 2022-23, as building products had another solid year, despite weakness across the entire building and construction sector, especially housing.

Earnings for the property business rose and helped offset a slide in the contribution from aluminium which is going to deepen this financial year before improving in 2025.

Trading revenue for the 12 months was up 13% at $2.6 billion and produced a 13% rise in EBITDA for the year of $330 million.

The final dividend of 20 cents per share (fully franked) was up just over 10% from the 18 cents a year earlier. The total for the year of 36.5 cents a share was up from 2021-22’s 31.5 cents a share.

On top of the higher payout, CSR said that since last July, it had purchased $36 million shares of the current $100 million on-market share buyback.

CSR said it saw a 20% rise in earnings before interest and tax (EBIT) in its building products business to $273 million, “reflecting good end market execution, disciplined price and cost management. Return on funds employed increased to 31% from 27%.”

The property business reported an EBIT of $72 million, up from $47 million. Major transactions during the year included the sale of the site at Warner, in southern Queensland and the next tranche at Horsley Park in Sydney.

The $25 million lift from property helped offset most of the slide in the aluminium business where EBIT of $8 million was down from $40 million, a year earlier “as higher aluminium pricing was offset by increased raw material costs including coke & pitch which reached historic highs during the year.”

CEO Julie Coates said in Wednesday’s statement that the company’s businesses “have performed very well in what was a busy year.”

“In Building Products, our teams delivered another great result by ensuring we optimised our factory operations and distribution channels to deliver for our customers, ensured pricing discipline across the business and continued to focus on cost management.

“All of the Building Products businesses increased revenue with good execution into end markets and strong performances from Gyprock and Bradford as well as Hebel, which is continuing to increase market share with its faster build times and large installer base.

“Property’s earnings increased to $72 million following completion of six transactions during the year. This was the highest result in Property over the last 15 years and highlights the strength and depth of CSR’s Property team to deliver complex transactions with long lead times, as well as the significant value of our property assets which are currently valued on an “as is” basis of $1.5 billion.

Looking to 2023-24, Ms Coates said CSR had “made a strong start to the year with the pipeline of detached housing projects under construction at historically high levels.”

“CSR’s focused execution into end markets and pricing discipline to manage inflationary cost pressures, continues to support revenues. CSR is closely monitoring the factors influencing market dynamics and will manage the business accordingly.

“Activity in the apartment market is improving as more projects have commenced this year, while non-residential activity remains strong, supported by a large pipeline of approvals.

Incremental investments in manufacturing performance, plant consolidation, supply chain and customer solutions have improved manufacturing productivity, the variability of the cost base and responsiveness to customer demand. CSR’s strategy is focused on providing a platform for growth and resilience to deliver improved performance through the cycle.

In Property, the 2023-24 result will include $44 million in contracted earnings for the next tranche at Horsley Park, NSW with an additional $58 million in contracted earnings in 2024.25. Work continues on major projects at Darra in Southeast Queensland and Schofields and Badgerys Creek in NSW.

She said the aluminium is expected to return to profit in 2024-25 “and increasing in the following years due to higher hedged pricing, based on current cost assumptions.”

But “while cost volatility and unpredictability in energy and raw materials makes forecasting challenging, at this early stage in the (2023-24) year, the best estimate is a loss in the range of $5 million to $15 million.”

CSR shares fell 2.5% to $5.33.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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