CSR shares soared, then eased yesterday after the company released solid half year figures which belied the weakening outlook for home building activity as building approvals and house prices lose ground.
In fact the company is confident of doing much better than the market thinks and upgraded its profit outlook for the 2015-16 financial year which ends next March 31.
“CSR expects that group net profit after tax (pre significant items) for YEM16 will be higher than the previous financial year and will be towards the upper end of the current range of analysts’ forecasts of $128 million to $162 million (pre significant items)," the company said in yesterday’s interim profit statement and outlook.
CSR said there was no sign the home building boom is slowing down after reporting a 32% jump in underlying interim profit to $92.4 million for the September half year.
The company said that surge came from a jump in earnings from both its building products and aluminium divisions.
Interim dividend was lifted 35% to 11.5 cents a share.
The shares jumped nearly 15% to a day’s high of $3.33, then eased to finish the day on $3.03, up 4.1%, which wasn’t bad given the way the wider market sagged in afternoon trading, from being more than 75 points higher in early trading to just 3.1 points higher by the close in the late afternoon.
CSR 1Y – CSR profit up 32%
CSR said that revenue for the six months ended 30 September rose 14% to $1.14 billion, thanks mostly to the Australian housing boom and improvements in the aluminium business from the weaker Australian dollar.
During the half-year work started on 102,600 new homes nationally, up 12% on the same period last year.
CSR said that the sustained growth in new home construction has resulted in supply constraints, leading to an extended pipeline of building over the medium term.
“Residential construction approvals continue to grow in both detached and multi-residential sectors with some states reaching record levels,” said CSR Managing Director Rob Sindel said in yesterday’s statement.
“Given recent building approvals and financing data, as well as feedback from our major customers, we anticipate robust demand for our key products will continue over the medium term, bolstered by improving activity in the alterations and additions market.
"CSR has also benefited from investment in new product development and targeted acquisitions while our efforts to improve operational efficiency over recent years has driven margin improvement across all businesses," Mr Sindel said.
Summarising its outlook for the year ending the 2016 financial year, ending next March 31, CSR said:
- Building Products will deliver year-on-year earnings growth. Given current construction data and longer lead times from approval to construction, CSR said it expects demand for its building products to remain at current levels for the medium term.
- Viridian’s glass products are expected to improve its earnings arising from stronger construction activity, market share gains and pricing initiatives.
- Aluminium sales volumes are expected to be around 3% higher than last year while approximately 70% of the net aluminium exposure for the second half of the 2016 year is hedged at an average price of A$2,391 per tonne (excluding ingot premiums).
- Property earnings in the second half of 2016 to be largely derived from settlements at the Chirnside Park, in Melbourne, residential development. As a result, Property’s EBIT is expected to be between $20 to $25 million.
