CSR profit rises by almost half, boosted by home builders

admin | 杭州桑拿
4 Dec 2018

CSR’s managing director Rob Sindel. Photo: Brendan Esposito CSR’s managing director Rob Sindel. Photo: Brendan Esposito

CSR’s managing director Rob Sindel. Photo: Brendan Esposito

CSR’s managing director Rob Sindel. Photo: Brendan Esposito

CSR managing director Rob Sindel said the building products supplier is set to capitalise on years of underbuilding as he handed down a 48 per cent rise in half-year profit to $68.4 million.

Mr Sindel has said that after years of failing to build enough new homes in NSW, the state is now catching up. He pointed to Stockland’s quarterly update last month where the property firm said it had its strongest first quarter for land sales in four years.

“We don’t want to overtalk it, but if you go through a few years of underbuilding you will get a few years of good construction,” Mr Sindel said.

Buoyed by resurgent housing construction and stronger earnings in its aluminium and property businesses, CSR on Wednesday reported a 15 per cent rise in revenue to $1 billion for the six months ended September 30.

Earnings before interest and tax rose 86 per cent to $114.1 million. The strong result helped push CSR into a net cash position of $5.7 million.

Given its pristine balance sheet, Credit Suisse analyst Andrew Peros estimates CSR has up to $350 million of firepower to spend on acquisitions.

Mr Sindel said there are lots of opportunities to deploy capital in pursuit of growth. Acquisitions in the range of $20 million to $100 million will be part of the strategy, as well as innovation and product development.

In the year to June, Australian housing commencements rose to 181,000, the highest annual result since 1994.

However, the trend suffered a reversal in September as building approvals for the month fell 11 per cent on the same period last year, the sharpest decline since June 2013.

“Despite the most recent decline, building approvals have improved for 21 of the past 24 months. Allowing for lags, this suggests materials demand should continue to gather pace,” CIMB analyst Andrew Scott told clients.

Strong house price rises in Sydney and Melbourne have added to the need for more new homes, but also raised the possibility that the Reserve Bank could use macro-prudential restrictions to take the heat out of the market.

But Mr Sindel is not concerned.

“The overheating, if there is any, is in the established market. The pricing for new houses in western Sydney is very competitive and you can get a lot of value for money,” he said.

“I don’t think there is any short-term risk. If it [prices] keeps going up 10 or 15 per cent they [the Reserve Bank] might be forced to act, but often prices jump and then stabilise for a few years.”

He also downplayed any impact regulatory restrictions could have on demand for CSR products. “The new build detached market has not got the same drivers as superannuation investors buying up apartments,” he said.

Alongside other energy intensive manufacturers, CSR faces a big increase in gas costs when massive new LNG export terminals on the east coast come online. CSR’s annual gas costs are expected to rise from about $30 million to about $55 million in 2017-18.

After the Senate passed the first part of the federal government’s direct action climate policy last week, the $2.55 billion emissions reduction fund, CSR rival Brickworks said it has a line of projects to cut emissions and reduce its dependency on gas.

Mr Sindel said he is also looking for ways to tap into the fund. “As soon as I saw that direct action looked like passing, I sent out our energy teams to see where our opportunities are. I think the scheme could work well,” he said.

“If you look at something like a drier or a plasterboard factory you can always improve the efficiency, but the payback [to recover project costs] might be six or seven years. Direct action allows you to bid for abatement that could reduce the payback period to four or five years.”

CSR’s troubled Viridian glass division showed signs it is starting to stem its losses. Viridian reported EBIT of $500,000, up from a $10.6 million loss.

“It was a good outcome for glass to break even ahead of expectations, despite a number of attempts to turn the business around,” Mr Peros said.

Earnings in the aluminium business rose 71 per cent to $41.4 million, primarily due to the strong premiums being paid for physical aluminium.

Mr Sindel said the company is continuing its discussion with the Australian Competition and Consumer Commission about its proposed east coast brick joint venture with Boral.

Last month the regulator raised a red flag over the deal in its statement of issues. Mr Sindel would not comment on CSR’s course of action if the merger is blocked, but he said returns in the brick business are unacceptable.

CSR declared an interim dividend of 8.5¢ per share, up 70 per cent. CSR shares rose 10¢ to $3.60 on Wednesday.

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