CSR conceded its takeover of Viridian may have been a dud after the struggling glass division dragged down first half earnings at the building products maker.
Viridian Glass posted a $6.9 million first half loss as the company as a whole reported a 21 per cent drop in earnings before interest and tax (EBIT) to $92.8 million.
However, CSR posted a net profit from continuing operations (after significant items) of $34.9 million for the six months to September 30, up 13 per cent from the previous corresponding period.
The company’s shares were up five cents at $2.41 on Wednesday.
Chief executive Rob Sindel blamed weak residential and commercial construction sectors for the weaker earnings. Mr Sindel expressed frustration with Viridian, which was bought for a much-criticised price of $690 million in 2007.
When asked if it was a poor purchase and whether extraneous factors were to blame – Mr Sindel, who was not chief executive when it was bought – said “probably a bit of both”.
The company recently laid off 110 Viridian workers.
“It hasn’t lived up to expectations,” he told reporters in a teleconference.
“We’re still very committed to the business, we know what a good opportunity it is, it’s just that it’s trade exposed, has high fixed costs, competes against a high Australian dollar and industry profitability is down – but it will bounce back.”
Cash spent restructuring Viridian comprised a large part of $15.7 million in significant items deducted from CSR’s net profit of $50.6 million.
EBIT for the building products division fell 10 per cent to $49.2 million but Mr Sindel sounded an optimistic note that it would turn around soon, with another interest rate cut predicted.
He pointed to property group Stockland recently saying residential lot sales in NSW and Queensland had improved, while the Commonwealth Bank had said there had been a lift in loan applications by first home owners.
CSR has reduced its housing starts forecast from 150,000 to 145,000 for the year to March, next year.
The aluminium division EBIT was down 22 per cent to $43 million on price falls.
With the operating divisions mostly posting falls in earnings, profit growth can be attributed to lower finance and interest costs. This was boosted by the sale of its sugar business last year.
There was also an increased contribution from the property division.
The company expects a full year profit at the lower end of market forecasts of $82 million to $100 million.
Mr Sindel said he would speak to the federal government about excluding CSR’s insulation business from the carbon tax passed this week because it “saves energy”.
The company declared a fully franked interim dividend of six cents per share.
