Shares in CSR have fallen sharply after earnings in the building products supplier’s aluminium division took a fall.
CSR’s net profit before significant items rose 11 per cent to $183.8 million in the year to March 31, just shy of the top end of its $154 million to $184 million forecast.
After significant items, net profit was up 25 per cent to $177.9 million.
The lift in net profit was driven by a significant increase in earnings from the group’s building products division which delivered record earnings before interest and tax (EBIT) of $202.8 million, up 21 per cent.
However, the company’s aluminium division had a 11 per cent fall in EBIT to $93.1 million.
CSR shares had dropped 11.6 per cent, or 60 cents, to $4.57 shortly before the close of trade.
CMC Markets chief market strategist Michael McCarthy said the company’s shares had risen about 50 per cent since September, and disappointment with its financial results triggered a sell-off.
“The company has highlighted the opportunity it took when aluminium prices rose last year to lock in its 2018 production,” he said.
“But profitability in the aluminium division did not increase despite a better than 30 per cent rise in the aluminium price.
“CSR has aggressively hedged its aluminium production and not only did they get no upside in aluminium last year, its indicating they are locked in and they won’t participate in further aluminium increases.”
He said analysts will likely downgrade their earnings outlook for CSR, not expecting the strong performance in its other divisions to continue.
The company behind Gyprock plasterboard, Bradford insulation and Viridian glass said aluminium pricing had improved significantly in the past six months.
“Overall earnings for the CSR Group will be bolstered by higher property profits and a significant increase in hedging in aluminium reducing future earnings volatility,” managing director Rob Sindel said.