After a challenging year, building products manufacturer CSR is pinning its hopes for a rebound in earnings upon a restructure of its glass business and a recovery in housing construction activity in Australia.
Whilst not giving specific financial guidance, CSR Managing Director Rob Sindel told the company’s annual meeting on Thursday CSR had significant leverage to an anticipated modest recovery in housing construction as well as any increase in aluminium prices and that it expected results in its property division to return to normal.
“We are confident we are seeing the start of a sustained recovery in housing construction, particularly in the states with strong population and job growth” Sindel says.
Hit by massive write-downs in its Viridian Glass business, as well as weak overall building conditions, CSR was forced to report a net loss after tax (after significant items) of $146.9 million in the twelve months to March.
As well as the high Australian dollar and the construction market downturn, the company says the Viridian business has been impacted by structural factors including a shift toward multi-residential living (leading to higher levels of importation of finished windows) and significant levels of excess capacity.
Earlier this year, it announced a restructure of the business, which included aligning capacity to the ‘realities’ of the market, refocusing on industry segments where the company had a competitive advantage and freezing new investment until earnings had stabilised – measures Sindel says will drive improvement in this business over the next twelve months.
Pointing to an upturn in building approvals, new home sales and housing finance, meanwhile, Sindel says the company will also benefit from a modest recovery in residential building starts, especially in New South Wales and Western Australia, as the combined effect of low interest rates, first home owner grants in some states and strong population growth underpin a return to more respectable levels of demand.
The decline in the dollar will also help by making the company more cost competitive.
Chairman Jeremy Sutcliffe compared the past year to Clint Eastwood’s movie ‘The Good, the Bad and the Ugly’, with the latter referring to the carnage in the glass business.
He said despite challenging conditions, the company’s return to shareholders had outperformed others in the building products industry.