CSR faces weak housing market, raises takeover odds

    Construction products company CSR Ltd fears the soft housing market and low aluminium prices will be a drag on its first half earnings.

    CSR managing director Rob Sindel told the company's annual general meeting that earnings will be weighted to the second half of the year, which ends on March 31, 2013.

    An expected fall in the number of new house starts to around 135,000 for the current year, compared to about 148,000 in the year to March 31, 2012, had affected demand for CSR's building products, which include the Bradford, Monier and Gyprock brands, and its Viridian glass products.

    Chairman Jeremy Sutcliffe said the core Australian residential and commercial construction markets were under extreme pressure, despite strong underlying demand for housing.

    "And, while we see reasons for optimism in the medium term when sentiment improves, both sectors are likely to remain challenging in the short term," he told shareholders.

    Mr Sutcliffe said the biggest impact on CSR's share price, which has fallen 56 per cent in the past 12 months to 123.5 cents, had been falling Australian dollar aluminium prices.

    The company said analyst forecasts for earnings before interest and tax in the aluminium division ranged from $73 million to a $3 million loss, with the consensus median at $45 million.

    However an improvement of $200 in the current Australian dollar spot price for aluminium would be needed to reach the consensus figure.

    Mr Sutcliffe added that the company could be a takeover target "if the price was right", according to The Australian.

    The weakened share price, staggered housing market and falling aluminium prices and a struggling glass business have created a perfect storm for the company.

    Mr Sutcliffe in particular said he was "not wedded" to the aluminium business and may consider selling it.

    "In the same way that CSR could be sold, so could the aluminium business, if the price was right," he said, according to The Australian. He added that no approaches have been made to the company.

    Mr Sutcliffe criticised the Federal Government's carbon tax as damaging to Australian manufacturing.

    "At a minimum, the price of $23 per tonne introduced on 1 July should be urgently revisited to reflect the challenges our economy faces," he said.

    CSR also expects full-year EBIT for its property division to be "at the low end" of a $15 million to $25 million range.

    CSR posted a $76.3 million profit for the year to March 31, 2012, down 85 per cent from $503.4 million the previous year.

    The previous year's result included earnings from CSR's sugar business, and was also boosted by proceeds from its $1.843 billion sale in December 2010.

    Excluding the impacts of the sale, CSR's profit was an improvement from a $78 million loss in the previous corresponding period.

Source Business Spectator