The break-up of CSR moved closer yesterday with the company revealing that it is now on track to happen as it moved to raise $375 million from shareholders in its second capital raising in a year.
The company raised around $482 million 10 months ago in an institutional and retail offer that was designed to cut debt and help recapitalise the group as the world economy was crunched and demand for sugar, building products and aluminium fell.
CSR also yesterday revealed a 22% rise in interim earnings before interest and tax to $216 million, before extraordinary losses and write-downs pushed the company to a net loss of $155.6 million for the six months to September 30.
Interim dividend has been cut to 2.5 cents a share from 6 cents paid in the first half of last year.
Like the new capital raising, the write-downs were linked to the impending split and consisted of a $250 million impairment of the Viridian glass making business.
It was the second write-down this year: in May it cut $280 million from the value of the glass business.
CSR said in the statement it will sell seven new shares for every 40 already held at $1.66 each, 16% less than the last traded price.
The plan to spin off its sugar and renewable energy business from the building products, aluminum and property units was first raised earlier in the year and one stage seemed to stall.
But the company said yesterday it’s in the final stages of due diligence, with the split likely to occur in or around March next year.
The company must be confident it will happen because it announced more board and management structure details for the two companies, plus dividend policies for both as well.
The funds from the share sale will be used to reduce pro forma net debt by approximately $365 million.
“The demerger aims to unlock additional value for CSR shareholders over time through the creation of two separate, more focused, listed companies, each with market leading positions, exciting growth opportunities and attractive investment profile,” Chairman Ian Blackburn said in the statement.
UBS will manage and underwrite the sale. RBS Equity Capital Markets (Australia) Ltd. will also underwrite the offer.
As part of the split, CSR said it had agreed to buy the 25% stake in the joint venture Sugar Refining businesses it doesn’t already own from Mackay Sugar.
Mackay Sugar will get an 8.77% stake in the demerged CSR sugar and renewable energy unit.
CSR reaffirmed its guidance of a slightly improved full year earnings performance than the previous year’s $320.1 million (that’s before one off items).
Excluding the write-down, earnings before significant items rose 35% to $96.6 million.
The sugar business benefited from increased crushing volumes, an earlier start to the crush and the surge in world sugar prices to their highest levels for more than 20 years (28 years on one or two occasions in the past couple of months).
The fall in residential and commercial construction markets in Australia and New Zealand since last year impacted the earnings of the building products division.
"However, leading indicators suggest that conditions will improve in the second half,’’ CSR said in a separate profit announcement.
The first home buyers’ home building boom will help construction improve.
Mr Blackburne said the split would see two companies:
- Sugar and Renewable Energy: a leading sugar and renewable energy company in Australia and New Zealand, with market-leading positions in raw sugar milling, sugar refining, and the production of sugar-based ethanol and cogeneration of renewable energy.
- CSR: one of Australasia’s leading building products companies, with an attractive investment in a globally cost competitive aluminium business.
"The Sugar and Renewable Energy business will be launched with a refreshed corporate identity, whilst retaining the iconic CSR brand in Australia and Chelsea brand in New Zealand for retail sugar products.
“The demerger aims to unlock additional value for CSR shareholders over time through the creation of two separate, more focused, listed companies, each with market leading positions, exciting growth opportunities and attractive investment profiles,” said CSR Chairman Ian Blackburne said in the statement.
“The demerger will provide greater choice for different types of investors. We expect both companies will be well regarded in their particular industries and prove attractive to shareholders.”
CSR also announced further details on the Board composition of the demerged businesses.
As previously advised, Richard Lee will be Chairman of the Sugar and Renewable Energy business after the demerger. Joining Richard on the Board will be John Story and Nicholas Burton Taylor as non-executive directors with an additional non-executive director to be appointed in due course. Ian Glasson has been appointed CEO and Managing Director and will be appointed to the Board.
As previously advised, Ian Blackburne will continue as chairman of CSR Ltd. Kathleen Conlon, Ray Horsburgh and Jeremy Sutcliffe will also continue as non-executive directors of CSR Ltd, together with Shane Gannon (CFO) who was recently appointed to the Board as an executive director. Rob Sindel will be appointed Managing Director and to the Board on demerger.
The demerger is proposed to be effected by way of a scheme of a
