Sliming conglomerate, CSR has reported a return to profit for the half year profit before significant items, but is now worried by the downturn in the Australian housing market.
Net profit after tax from continuing operations for the six months to September was $18.4 million, compared with a $233 million loss a year earlier, the company told the ASX yesterday.
The 2009 result included one-off charges of about $252 million, mostly from asset write-downs on the value of its glass business.
The company’s recent restructuring has left it very exposed to the vagaries of the Australian home building and development markets, and the pressures of the rampant Australian dollar, plus rising local energy costs.
The slump in housing now worrying CSR was very evident yesterday in the 6.6% plunge in monthly building approvals in September to a 15 month low.
It was also the sixth monthly fall in approvals, according to the ABS.
As CSR is in the process of selling off its sugar business to a Singapore company, leaving it with mostly building products, property and aluminium, the company should be having second thoughts about that sale, especially with sugar maintaining near record highs for the second time this year as doubts continue about world output.
In fact sugar prices hit a 30 year high on Tuesday, with raw sugar futures in New York soaring 135% from a low of 13 cents in May.
On Tuesday New York March sugar rose to a peak of 30.64 USc a pound, surpassing the level reached in February and rising to their highest point since 1980, when prices jumped to nearly 45c.
But the wet weather in Queensland has cut returns from CSR’s sugar business.
CSR shares fell 3c to $1.785 after the release of the interim result, but they recovered during the day to end up a cent at $1.81.
In July, CSR announced a $1.5 billion deal to sell its sugar arm to Singapore’s Wilmar International, with the deal expected to complete before the end of the year.
It said it expects the deal to complete later this month, and it would update the market on capital management after this.
The company declared an interim dividend of 3c a share, up from 2.5c last year.
Earnings before interest and tax (EBIT) from CSR’s building products business rose 19% to $57.7 million, the company said, with glass business Viridian contributing $3 million, compared to a loss of $5.6 million in the previous corresponding period.
"The underlying increase in earnings from the Building Products business reflected improved conditions in residential construction markets together with the ongoing benefits from the cost reduction and efficiency improvements which have been implemented over the past 18 months," CSR said.
"New Zealand residential construction activity has increased modestly, however markets remain subdued."
Property EBIT was $14.7 million, up from a $1 million loss in the prior year. Earnings from CSR’s sugar business fell 42% to $66.7 million in the first half of the 2010 financial year.
"A rain affected crushing season means that earnings in the Sucrogen business were lower for the first half compared to the previous corresponding period," the company said.
CSR is selling the sugar operations to Wilmar International Ltd. to focus on building products operations, which include supplying insulation, bricks, plasterboard and roof tiles.
The company, which also has interests in property, said today it would reveal what it will do with the money from selling the sugar unit once the sale is complete.
Earnings from continuing operations in its building products business should be “slightly higher” for the 12 months ending March 31 compared with a year earlier, the company said.
