Building products maker CSR will close manufacturing lines in Victoria and NSW and lay off 110 workers as it restructures its glass business to cope with challenging business conditions.
CSR says the decision was prompted by worsening conditions in the residential and commercial construction sectors, together with record rises in the Australian dollar, which have created a sharp deterioration in business confidence and activity.
The company now expects its Viridian Glass unit to post a pre-tax loss of $6 million to $8 million in the six months to September 30.
Under the restructure, which is expected to deliver around $10 million in annual savings, Viridian will invest in a new laminating line at Dandenong and close the current lines at Dandenong and Clayton.
The company is also likely to source more goods from overseas, saying it would stop making “uneconomical products” at Dandenong and Ingleburn and find an alternative source.
“This regrettably will result in around 110 positions becoming redundant in Sydney and Melbourne,” CSR spokesman Martin Cole said.
“We are discussing these restructuring plans with our employees and, as always, we will ensure that our employees are treated fairly and equitably.”
Shares in CSR fell sharply at the open and were down 11 cents, or 4.25 per cent, at $2.48 by 1421 AEST.
Australian manufacturing activity contracted further in August, down 0.1 points, the Australian Performance of Manufacturing Index showed on Thursday.
Mr Cole said poor business and consumer confidence had resulted in less demand for CSR products, for use in home building and the commercial market.
In particular, there was less demand for construction products for use in shopping centres, warehouses and factories as businesses cut back amid a general lack of confidence, Mr Cole said.
“What we’d like to see is a return of confidence into the market, in both residential and commercial construction,” Mr Cole said.
The housing sector is expected to stay weak for the rest of the year after worse than expected July home building approvals on Tuesday showed a recovery is not in sight.
Home building approvals rose one per cent in July, the first rise in four months, but below economists’ forecasts of a two per cent rise.
CSR said the restructure was expected to cost $22 million, including $12 million in capital and $10 million in one-off restructuring costs – including redundancies – and would be completed this financial year.
CSR on Thursday also said it expected earnings, before interest and tax, of $90 to $100 million for the six months to September 2011.
The company forecast net profit after tax, excluding significant items, and earnings per share to be 10 per cent higher than the prior corresponding period.
“CSR’s Aluminium business has also been affected by the recent lower US dollar aluminium price, combined with the consistently high Australian dollar,” the company said.
As a result EBIT for Gove Aluminium Finance, 70 per cent owned by CSR, is expected to be in the range of $42 million to $45 million for the first half of this financial year, assuming no material changes to currency and aluminium prices.
CSR said its other building products businesses continued to perform to expectations.
Australian Workers’ Union Victorian secretary Cesar Melhem said the situation Viridian found itself in highlighted the need for special consideration for the manufacturing sector.
