No wonder CSR is upbeat on the outlook for the property and home construction sectors – the rebound engineered by the record low interest rates from the Reserve Bank have stimulated demand for the company’s key products, enabling it to emerge well placed from the weak trading conditions of the two to three previous years.
The company’s CEO, Rob Sindel told yesterday’s AGM in Sydney that strong growth in building approvals for detached and multi-residential housing in a buoyant property market would help the company considerably in the coming year.
He said the growth in housing starts was "very encouraging news for CSR, after several years of relatively weak demand".
"We have a favourable macro environment for our businesses and a strategy that is investing in our people, our operations and our customers," Mr Sindel said.
The building products arm will also benefit from recent acquisitions, while property earnings are set to improve in line with previous guidance, he said.
"For the year ending March 2014, we began to see the early stages of a sustained market recovery in housing, with second half revenues in Building Products on average 9% higher, than the corresponding half last year. We expect to see further year on year growth in volumes," he said.
"While some of the margin improvement we’ve achieved is a consequence of an increase in volumes; the biggest contributor has been the work we’ve done on reducing our cost base across Building Products and particularly in Viridian."
In the year to March this year the company reported a sharp improvement in earnings as the early stages of the home building boom emerged.
CSR said net profit after tax, (and before significant items) jumped, 143% to $72 million and earnings per share up 145% to 14.2 cents per share.
CSR YTD – CSR upbeat on housing growth
Looking to the coming year, Mr Sindel said; "building approvals for both detached and multi-residential housing continue to grow strongly with detached housing up around 15% for the twelve months to May, compared to the previous year and multi-res up 23%.
"This translates into a run rate of 180,000 housing starts which is approaching record levels. This is very encouraging news for CSR, after several years of relatively weak demand.
"Within the data, multi-residential construction represents 44% of total housing approvals of which 25% are in high rise buildings. The concentration of multi- residential homes, and the nature of this type of construction, means it will take longer for this activity to convert to building product sales. This will take some of the lumpiness out of demand for our products and mean the pipeline should remain stronger for longer.
"Looking beyond underlying market activity, our Building Products businesses will also benefit from expansion into new markets through recent acquisitions and the product development opportunities which should see earnings improve again this year.
"Viridian remains on track to exit the financial year with a breakeven EBIT run rate. We know we have more to do, particularly in terms of growing the revenues of this business but we are increasingly confident that we will return the business to profitability in subsequent years.
"In Aluminium, we continue to lock-in returns when attractive opportunities arise and we have increased our hedging position in the last few months with 72% of net exposure hedged for the current financial year. This is at an average price of A$2,136 per tonne (before premiums) as of 30 June 2014.
"Property earnings will also improve in accordance with previous guidance.
"So the outlook is positive for CSR. We have a favourable macro environment for our businesses and a strategy that is investing in our people, our operations and our customers to ensure we build for the future," he told the AGM.
The market liked what Mr Sindel told the meeting (although there were no actual figures given for earnings guidance).
The shares rose 3.1% to $3.66, within 20 cents of its 52 week (and three year) high of $3.86.
