Restructure of Viridian glass business and trading update

CSR announced on 1 September, 2011 a restructure of its Viridian glass business and an update on first-half trading conditions.

The restructure follows a review of Viridian in the context of the current business environment and particularly in the context of the recent sharp deterioration in business confidence and activity. Viridian has a higher proportion of its earnings derived from the commercial construction sector and is also the most trade exposed and highest fixed cost business within CSR’s Building Products portfolio.

The further deterioration in commercial construction (down ~20%)1 and residential construction (down ~15%)2 this financial period, together with the record appreciation in the Australian dollar, continue to impact the performance of Viridian, which is now expected to generate a loss before interest and tax (pre-significant items), in the range of $6-8 million for the six months to 30 September 2011.

In response to these challenges, Viridian will restructure its float glass and bulk laminate manufacturing operations, a process which will be completed over the remainder of this financial year.

Under the restructure, Viridian will rationalise its laminating operations in Melbourne, by investing in a new laminating line at Dandenong and closing the current lines in Dandenong and Clayton. Viridian will also cease production of uneconomical products at Dandenong and Ingleburn and alternatively source these products.

This restructure is estimated to cost $22 million, including approximately $12 million in capital and $10 million in other one-off restructuring costs (including redundancies). It is estimated this restructure will deliver around $10 million in ongoing annualised savings.

CSR's Aluminium business has also been affected by the recent lower US$ aluminium price combined with the consistently high Australian dollar. As a result, earnings before interest and tax (EBIT) for Gove Aluminium Finance (70% CSR), is expected to be in the range of $42-45 million for the first half of this financial year, assuming no material changes to currency and aluminium prices.

In its Property division, subject to final approvals, CSR expects to complete the sale of its residential project at Brendale on or around the end of the first half of the financial year.

CSR’s other Building Products businesses continue to perform to expectations. Based on current estimates, including the successful completion of the Brendale transaction by the end of the half year, CSR’s group EBIT (pre significant items) is expected to be in the range of $90-100 million for the six months to 30 September 2011.

CSR anticipates net profit after tax (pre significant items) and earnings per share for the first half will be around 10 per cent above the previous corresponding period (Sept 2010: $44.4m), reflecting the company’s improved balance sheet and lower net interest costs.

CSR will release its half year results in November 2011, at which time it expects to be able to provide further information about full-year earnings.

600450 Restructure of Viridian glass business and trading update glassonweb.com

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