CSR Limited

Team Veye | 19 May 2020 ASX - CSR
CSR Limited
Call Buy

CSR Limited (ASX: CSR) (CSR) is engaged in the manufacture and supply of building products in Australia and New Zealand. The Company operates through building products, property and aluminum segments. Its building products include lightweight systems, insulation, inclose facades, bricks, and roofing. Its Property business unit is engaged in the sale of former operating sites by advancing the sites through various stages of the development cycle. In addition, this business is also involved in a small number of large-scale developments in New South Wales, Queensland and Victoria. The Aluminium business unit relates to its interest in Gove Aluminium Finance Limited, which in turn holds an interest in the Tomago aluminum smelter (Profile source: Reuters)


From the Company Reports

CSR announces full year net profit after tax of $125.3 million

CSR Limited (ASX: CSR) on 12 May 2020 announced its Financial results for the year ended 31 March 2020 (YEM20).

(Graphic Source – Company Reports)

  • CSR has reported a net profit after tax (NPAT) of $125.3 million for the full year ended 31 March 2020 (YEM20), up from $78.0 million in the prior year which included impairment charges from the Viridian Glass business (sold on 31 January 2019). 
  • NPAT from continuing operations (before significant items) of $134.8 million, down from $181.7 million in the prior year. 
  • Building Products revenue of $1.6 billion was down 6% reflecting continued weakness in residential building activity which was down 21% on average. 
  • Building Products EBIT of $170.5 million, down from $206.5 million in the prior year. 
  • No material Property transactions were recorded during YEM20. 
  • Aluminium EBIT of $59.6 million up 63% as input costs have stabilised and with the second half earnings benefitting from the lower Australian dollar. Significant increase to forward hedge position for YEM21-23. 
  • COVID-19 had minimal impact on the YEM20 result.


Strong balance sheet 

  • Strong balance sheet with net cash of $95 million.
  • To strengthen liquidity position further, an additional $200 million in facilities was secured in May 2020. 
  • Share buyback paused. Since March 2019, $69 million purchased for the $100 million on-market share buy-back.
  • Given the uncertain economic environment, no final dividend will be paid for YEM20. Total dividends for the year of 14cps (down from 26cps in YEM19), comprising 10cps interim dividend and 4cps special dividend (both franked at 50%), reflecting deferred settlements on Property transactions from previous years.



(Graphic Source – Company Reports)

COVID-19 response 

  • Acted quickly to respond to crisis with health and safety of employees, contractors, customers and suppliers the first and overriding priority. 
  • All CSR sites in Australia have remained open with no supply interruptions to our customers. New Zealand sites resumed operations in late April. Worked closely with stakeholders to support building sites remaining open. 
  • Prudent approach to cost management: working hours reduced throughout the organisation where appropriate and non-essential expenditure ceased or deferred. 
  • CSR CEO, CFO and senior executives have forfeited their YEM20 short-term incentive bonus. 
  • Cash preservation focus across business with current investments moderated to safety and business critical projects. 
  • Extensive scenario planning completed to maximise productivity and align production with changes in market activity


Current market environment 

  • No significant drop in activity during the first six weeks of YEM21, with Building Products revenue down 3% compared to the previous corresponding period. However, CSR anticipates there will be an impact on activity in key markets in YEM21, but the timing and extent are uncertain. 
  • No earnings guidance for YEM21 to be provided for CSR Group due to uncertainty from COVID-19.


CSR Limited announces half year net profit after tax of $68.8 million

CSR Limited (CSR) on 1 November 2019 reported statutory net profit after tax of $68.8 million for the half year ended 30 September 2019, up from $26.8 million in the prior comparable period which included impairment charges from the Viridian Glass business (sold on 31 January 2019). Net profit after tax (before significant items) of $71.6 million, was down from $89.6 million in the prior comparable period.

 (Graphic Source – Company Reports)

Building Products EBIT of $95.9 million was down 18% as the slowdown in residential construction activity impacted performance in the half. This decline in activity has seen housing commencements across the industry down on average 19%.

Despite the broader market slowdown, CSR’s largest businesses of Gyprock and Bradford delivered steady volumes and earnings as they benefitted from a diversified revenue base across residential and commercial sectors. However, Hebel and AFS earnings were lower as they have significant exposure to the high density market which was down 38% during the period. The higher fixed cost position in PGH impacted earnings in the first half but fixed costs have been reduced following the July 2019 closure of the Darra brick plant in Queensland.

In Aluminium, EBIT increased by 10% to $25.4 million as input costs stabilised. While no Property earnings were recorded during the period, significant progress was made on key development projects, which will secure strong Property earnings in future years.

The CSR Group delivered EBIT from continuing operations of $113.1 million (before significant items), 16% lower than the prior comparable period

CSR finished the period with a strong net cash position of $141.6 million. The board declared an interim dividend of 10.0 cents per share along with a special dividend of 4.0 cents per share (both franked to 50%). The special dividend takes into consideration the Company’s strong cash flow and financial position whilst delivering available franking credits to shareholders. The previously announced $100 million share buyback is ongoing with $47 million of shares purchased to date.

(Chart source: TradingView)

Sale of 20-hectare industrial site at Horsley Park for approximately $140 million

CSR also confirmed on 1 November 2019 the sale of the second tranche of surplus land at Horsley Park, NSW for total sale proceeds of approximately $140 million. The sale of the 20-hectare site is expected to generate Property EBIT of approximately $90 million. These earnings will be split into two 10-hectare stages which are expected to be recorded in the financial years 31 March 2021 and 2023 (YEM21 and YEM23).

CSR Limited (CSR)
Stock Overview
Sector Materials
Risk Low to Medium
Market Cap $1.72 billion
Daily average Volume 2,454,934
EPS (FY) $0.254
Yearly Dividend Yield  6.48%
Target Price (s) T1 and T2 T1 $4.0 T2 $5.0
Stop Loss $3.25
Recommendation Buy
52 weeks High $3.16
52 weeks Low $2.75
Directors Ms Julie Ann Coates
Non-executive Directors Ms Christine Holman
Mr Michael Ihlein

Veye’s Take

CSR delivered a solid result in its Building Products business. It reported a net profit after tax of $125.3 million for the full year ended 31 March 2020, up from $78.0 million in the prior year which included impairment charges from the Viridian Glass business. In Aluminium, EBIT was up strongly as input costs have stabilised with the second half earnings benefitting from the significant decline in Australian dollar. As of 31 March 2020, CSR had net cash of $95 million and a strong liquidity position which ensured that it is well prepared for the year ahead. A key milestone was the completion of the $75 million new Hebel factory which was a long time in the making. CSR first began production of Hebel almost 30 years ago and today remains the only manufacturer of autoclaved aerated concrete (AAC) in Australia and New Zealand. CSR’s short term assets ($1.1B) exceed its short term liabilities ($480.9M) and also its long term liabilities ($798.1M). CSR has high quality earnings. Its earnings have grown by 0.2% per year over the past 5 years. CSR is a good value based on its PE Ratio (14X). CSR has a satisfactory (28,4%) debt to equity ratio. Its debt is well covered by operating cash flow (76.9%). CSR’s interest payments on its debt are well covered by EBIT (22.7X). Although it may retrace a little bit from here, the stock is ready for a crossover on long term charts. On the shorter t/f the stock has been making higher high and higher low since the market sell-off in March. Veye recommends a "Buy" on “CSR Limited” at the current price of $3.73


Veye Pty Ltd (ABN 58 623 120 865) authorised representative (AR No. 001261006) of Vested Equities Pty Ltd which holds an Australian Financial Services License (AFSL No. 478987). Veye is authorised to share only generic financial views through its website, reports and newsletters without taking into consideration your personal financial needs or investment objectives. Although Veye takes the utmost care to ensure the accuracy of the content and that the information is gathered and processed from reliable resources, it is recommended you seek professional advice from your financial advisor or stockbroker before acting on any of our recommendations. Veye Pty Ltd advises it’s users to pursue investing as a long-term goal. Stocks are subject to real time changes therefore all the information we share represents our views at the date of publishing and we request our readers not to interpret our reports as direct recommendations. Past performance is no indication of potential future performance. The securities and financial products we study and share information on in Veye Reports may have a product disclosure statement or other offer document associated with them. You should obtain a copy of these documents before making any decision about acquiring the security or product. You can refer to our Terms & Conditions and Financial Services Guide for more information. Veye Pty Ltd confirms that the employees and/or associates of Veye Pty Ltd do not hold positions in any of the financial products covered on the website on the date of publishing this report (as mentioned on the website www.veye.com.au).