The building and constriction boom remained alive for CSR Limited in the year to March 31, but the impact is fading as approvals soften and demand for new residences start to slow.
The company reported a 13% increase in net profit after tax (before significant items) to $166 million for 2015-16 – the best result since the divestment of the company’s sugar division in 2010.
After significant items (including transaction costs to complete the PGH Bricks joint venture with Boral), net profit after tax was $142.3 million, up 13%.
Earnings before interest and tax (EBIT before significant items) of $276.8 million rose 18%. The result included the consolidated earnings of the PGH Bricks JV (60% owned by CSR) which began operations on 1 May 2015.
Full year dividend was lifted 18% to 23.5 cents a share (up from 20 cents a share in 2014-15) with the payment of a 12 cents a share final (11.5 cents previously). CSR shares rose 5.5% to $3.65 at the close yesterday.
That small increase in the final tells us more about the growing caution at CSR regarding the strength of the building boom than any comment the company made yesterday.
“Our Building Products business has performed strongly, delivering a record EBIT of $169.1 million, up 40% (including the consolidated earnings of the PGH Bricks JV),” CSR Managing Director Rob Sindel said in a statement yesterday.
“Supported by solid underlying activity, Building Products earnings have grown consistently over the past few years as we strengthened existing businesses and diversified into new product categories and market segments.
“The PGH Bricks joint venture is exceeding expectations and Gyprock has delivered an excellent result, supported by product development, an improved customer experience and operational efficiencies. Viridian’s performance continues to steadily improve.
“We have strengthened our position in the multi-residential market by investing in building systems, including AFS and Hebel, where we are improving the building process.
“Our other businesses are also performing well. Aluminium delivered EBIT of $104.1 million with operational improvements driving increased production while Property delivered a good EBIT result of $23.3 million following continuing demand for residential and industrial sites in Melbourne and Sydney.
Looking at the outlook for the current 2016-17 year, CSR said it saw residential construction markets continue to experience record levels of activity which will support demand for CSR’sbuilding products in the coming 12 months.
“The pipeline of residential construction activity continues to rise as total commencements for the 12 months to December 2015 were 221,000 compared to 192,000 dwellings completed over the same period."
"The Viridian glass business is expected to deliver further earnings improvement as it focuses on revenue growth from high performance glass and increasing its share in the commercial market.
"Gove Aluminium Finance (GAF) – in which CSR has a 70% stake – has 51% of its aluminium sales (net of alumina) hedged at an average price of $A2,338 per tonne (before premiums) as of 5 May 2016. “Ingot premiums, which are paid to producers above the London Metal Exchange aluminium price, have stabilised at around the US$110-$115 per tonne level,” CSR said.
The company’s property business will see a number of developments underpin earnings over the next five to 10 years.
