10 May 2017
CSR announces 11%1 rise in full-year net profit (before significant items)2, to $183.8 million
Full-year net profit (after significant items) up 25% to $177.9 million
CSR Limited (CSR) reported an 11% increase in net profit after tax (before significant items) to $183.8 million for the year ended 31 March 2017. After significant items, net profit after tax was $177.9 million, up 25%.
CSR has continued its track record of growth in earnings which improved for the fourth consecutive year resulting in full year earnings reaching a five year high.
The lift in net profit was driven by a significant increase in earnings from Building Products, which delivered a record EBIT of $202.8 million, up 21%.
The growth in earnings led to a 5% increase in operating cash flow to $264.8 million and an 11% increase in the full-year dividend to 26.0 cents per share with franking resuming on the final dividend to be paid on 4 July 2017 at 50%.
“The successful execution of our strategy has helped us capitalise on the strength of the construction markets in Australia,” said CSR Managing Director Rob Sindel. “This has led to strong growth in our Building Products’ earnings, which have more than doubled over the past five years.”
“Today CSR has a more balanced and resilient business driven by improved performance in its core operations while investing in new products and market segments. While residential construction markets appear to have peaked from recent record levels of activity, construction currently underway will support demand for CSR’s products in the year ahead,” Mr Sindel said.
All businesses in Building Products grew earnings, supported by the robust market for residential housing on the east coast of Australia.
Gyprock delivered another strong result, with investment in three new Gyprock Trade Centres helping to maintain its market-leading brand position. Bradford continued to grow its alliances with major builders, supplying a suite of insulation and energy efficiency services for new housing.
Hebel autoclaved aerated concrete and AFS permanent formwork walling solutions also grew, as these businesses offer unique solutions for builders in the multi-residential market, where the pipeline of activity remains strong.
Viridian’s revenues grew 5% on an adjusted basis3 with EBIT of $7.0 million, down $1.1 million compared to the previous year. While good progress is being made to grow revenue and earnings in many parts of the business, these improvements were offset by disappointing performances in Western Australia and New Zealand.
Aluminium EBIT of $93.1 million was driven by increased production and improved operational performance at the Tomago smelter which partly offset the lower realised aluminium price experienced during the year.
Property delivered EBIT of $15.0 million. The timing of additional sales from Stage 4 of Chirnside Park expected in the second half of the year were delayed due to significant wet weather in the Melbourne region. These sales were completed in May 2017 and will be recorded in the year ending 31 March 2018.
“CSR ended the year to 31 March 2017 with net debt of $11.4 million, giving us significant capacity to invest in additional growth options and property projects as well as capital management options to improve shareholder returns,” Mr Sindel added.
Looking at the outlook for the year ending 31 March 2018 (YEM18), CSR confirmed:
- Building Products – Earnings will be supported by reasonably steady demand from detached housing and high-rise construction on the east coast.
- Viridian – Following a number of restructuring initiatives to reduce costs in certain regions combined with a growing position in higher-margin commercial projects, Viridian’s earnings are expected to improve.
- Aluminium – Pricing has improved significantly in the past six months, which has provided an opportunity for Gove Aluminium Finance (70% CSR) to lock in returns with 81% of the net aluminium exposure for YEM18 hedged at an average price of A$2,373 per tonne (excluding ingot premiums).
As previously highlighted, the Tomago smelter’s new power supply contract with Macquarie Generation takes effect from November 2017. Based on this contract, power costs will increase by approximately A$250 per tonne of production.
- Property – Two transactions were recorded in the first six weeks of YEM18. These were the previously announced sale of the Monier roofing site at Rosehill, NSW, and completion of Stage 4 at Chirnside Park, VIC. As a result, Property EBIT in YEM18 will substantially exceed long-term targets with $48 million locked in from already completed projects.
“In summary, CSR continues its strategy to invest in customer service and digital solutions while growing its position in lightweight building and façade systems,” Mr Sindel said. “By strengthening our core businesses and investing in new market segments, we are more resilient to changes in the building cycle. Overall earnings for the CSR Group will be bolstered by higher Property profits and a significant increase in hedging in Aluminium reducing future earnings volatility.”
1 All comparisons are to the year ended 31 March 2016 (YEM16) unless otherwise stated.
2 EBIT and net profit are before significant items. They are non-IFRS measures used internally by management to assess the performance of the business and have been extracted or derived from CSR’s financial statements for the year ended 31 March 2017 (YEM17).
3 Excludes nine months of revenue (1 July 2016 to 31 March 2017) from the NZ Viridian Glass Limited Partnership (VGLP) following CSR’s acquisition of the remaining 42% stake on 30 June 2016.
CSR Limited Investor Relations
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10 May 2017