Shares in CSR were solid off yesterday after investors went off the interim result and strong hints of profit pressures in the next year.
CSR, a leading building products company raised first-half profit by 3.7% to $118.7 million.
But the shares fell more than 6% at one stage as investors realised the company would be hit by higher energy costs in the second half of the year and on into 2018-19.
The shares ended down 5.4% at $4.48.
Managing director Rob Sindel said in yesterday’s statement that earnings in CSR’s core building products business rose 5% thanks to the “relatively stable” conditions in Australia’s detached housing market .
"The detached housing market in Australia, which accounts for almost 50 per cent of CSR’s Building Products’ revenue, remains stable, underpinned by record low interest rates and steady population growth," Mr Sindel said.
However, Mr Sidnel said the high-rise apartment market has now slowed, although the company maintains a steady multi-residential pipeline that can support ongoing business activity.
CSR’s aluminium business lifted earnings 27% as the world price of the metal hit a five-year high.
However, the company said a new power supply contract, effective from this month, will increase the power costs of aluminium production by $250 a tonne.
The new power supply contracts, effective from Wednesday, will increase the costs of aluminium production by $250 per tonne, a hit of between $150 million and $250 a year for Tomago.
"Aluminium smelting is an incredibly energy intensive process which is why there is particular angst around ensuring reliability and affordability in energy," Mr Sindel said.
CSR said it expects its full year profit before significant items will be within the current range of analysts’ forecasts of $187 million to $223 million.
CSR directors declared an interim dividend of 13.5 cents per share, franked at 50%, up four per cent on the previous half year unfranked dividend.
