Despite the ongoing downturn in the east coast residential housing market, CSR increased earnings from its building products division by 75 per cent to $147.6 million.
As previously indicated in the market, the fall in raw sugar prices coupled with an unprecedented delay in the milling season due to unseasonable wet weather, resulted in earnings by the sugar division falling by 45 per cent to $71.7 million.
Net profit after tax (before significant items) was $192.8 million, reflecting lower EBIT and higher finance costs. Net profit after tax (after significant items) was $177.4 million, down 35 per cent.
Managing Director, Mr Jerry Maycock, said external factors had weighed heavily on the Sugar milling result which impacted overall earnings, however he was pleased with the company’s progress.
“This is a period of consolidation as we invest across the business to improve efficiencies and take advantage of opportunities to sustain our market position and generate further growth,” he said.
Despite the ongoing weakness in the residential housing market, particularly in NSW, earnings from CSR’s existing businesses were up 16 per cent to $98.3 million. Growth in CSR’s Building Products division was assisted by the acquisitions of Pilkington and DMS Glass last year and the restructuring of Bricks and Roofing divisions. Including the earnings from the glass business, EBIT increased 75 per cent to $147.6 million.
“In a tough market, we managed to increase our like for like earnings which is a credible result,” said Mr Maycock.
“The integration of our glass operations is progressing well and meeting our expectations. The glass business adds significant earnings momentum to the group and also broadens our product portfolio.
“We launched Viridian as the new brand for the glass business this year and have integrated a new management structure. We also commenced the $120 million upgrade of our Dandenong facility to increase and improve cost competitiveness. We are seeing encouraging demand signals for energy efficient glass and we are well positioned to capture the market growth.”
As highlighted to the market last year, Raw Sugar earnings were impacted by a number of external factors. These included the $54 per tonne drop in average raw sugar prices, the higher Australian dollar and increased costs due to unprecedented wet weather which caused a significant delay in the milling season.
A three year program is underway in the raw sugar mills to upgrade critical equipment, improve cost position and increase sugar recovery.
The Refined Sugar business performed strongly with earnings up 30 per cent to $41.1 million while CSR’s ethanol business continued to grow with earnings increasing by 22 per cent.
“We are confident that the capital works program in Sugar will enable CSR to maintain its competitive position in the global raw sugar market. The program is starting to deliver some reliability and unit cost improvements which we expect to continue.
“Through our refining, ethanol and renewable electricity business we are creating a more stable earnings platform which offsets raw sugar price and underpins our overall sugar business,” said Mr Maycock.
Aluminium and Property
The result for aluminium was down marginally with EBIT falling by 4 percent to $136.7 million due to lower production, the higher Australian dollar and increased operating costs.
Some costs of carbon based inputs for aluminium have increased substantially over the year which has impacted the overall return from Aluminium.
The Aluminium business continues to provide CSR steady cash-flow for capital programs and other projects.
CSR’s Property division reported EBIT of $45.4 million (2007: $69.7 million) returning to a more sustainable level, following the previous two years which benefited from large one-off transactions. The business has a solid development pipeline with a number of transactions currently under negotiation.
“CSR made good progress this year in strengthening all our key businesses and adding a substantial earnings stream through the glass acquisition,” said Mr Maycock.
“This financial year will see a conclusion to much of the current investment program which we expect to deliver significant medium term earnings growth.
“We expect like for like results of Building Products and Sugar to be ahead of last year and also see the full year earnings impact from the glass business. Aluminium should be in line with the previous year. Property’s result, which can be affected by the timing of transactions, is expected to be in the sustainable range of $35-$40 million.”
The company will provide a further update at the Annual General Meeting in July.
Martin Cole – CSR Investor Relations Tel. (02) 9235 8053; 0403 332 977