CSR announces a 16.7% increase in net profit for the year ended 31 March 2006

Higher profits were assisted by increased commodity pricesfor the sugar and aluminium operations, improved property returns and costsavings, which more than offset a slowdown in the residential constructionmarket.

Earnings per share before significant items were up 17.1%to 27.4 cents compared to 23.4 cents last year.

CSR’s total net profit after tax including significant items was $305.0 million which includes a partial settlement of longstandinglitigation with insurers.

Trading revenue rose 21.1% to $2,866.9 million due to higher sugar and aluminium prices and the inclusion of $270.9 million inrevenue from refined sugar subsidiaries following full consolidation from 1October 2004.

Return on shareholders’ funds (net profit beforesignificant items/shareholders’ funds) increased to 21.8%afrom 18.9%.

The final dividend to be paid on 5 July 2006 will be 9cents a share bringing the total dividend for the year to 15 cents, fullyfranked – an increase of 25%.

Financial results summary – excluding significant items

Full year ended 31 March
[$ million unless stated]



% change

Trading revenue




Earnings before interest and tax – EBIT




Net profit before significant items







Earnings per share before significant items [cents]




Return on shareholders’ funds [%]

(net profit before significant items/shareholders’ funds)

21.8 a






As at 31 March



Gearing – net debt / net debt + equity [%]

30.5 a


Note: Results for the year ended 31 March 2006 arereported under Australian equivalents to international financial reportingstandards (A-IFRS). The comparativeresults for the previous year are restated to comply with A-IFRS requirements.

(a) Restatedto exclude fair value adjustments for hedges from equity.

“CSR’sdiversified operations have delivered another strong result with improvedcommodity prices and higher property returns offsetting the significantslowdown in the housing market,” said Managing Director and CEO Alec Brennan.

“We have increased our total dividend by 25% to 15cents per share following the company’s improved performance this year whilethe recent surge in aluminium and sugar prices has provided an opportunity forthe company to hedge a portion of future earnings to establish a higher levelof sustainable returns over the next few years.”

“Major expansions of twobuilding products factories initiated last yearcombined with an ongoingcost reduction program will ensure we are well placed to improve performance inBuilding Products as the housing market recovers.”

“We see continuing opportunities to grow whileimproving the long-term operations of our businesses,” Mr Brennan said.

Reviewof results by segment

Earnings before interest and tax (EBIT) by segment –excluding significant items

Year ended 31 March

[$ million unless stated]





% change

Building Products






Less one-off plant closure costs






Building Products (after one-off costs)
























Business segment total






Corporate costs






Restructure and provisions a






Total EBIT






a Includes product liability, superannuation top-up paymentsand certain rationalisation costs.

Building Products Trading revenueof $974.2 million rose by 4.5%, helped by contributions from new productsbut revenue fell in some of the Australian businesses with the sharp downturnin residential building in New South Wales and Queensland. EBIT was down 8.9%to $101.5 million excluding $20.6 million of one-off costs associated withclosing two manufacturing plants. Including the one-off costs, EBIT was $80.9 million. Production from theclosed plants will be transferred to more efficient operations, resulting inongoing savings over future years.

Aluminium Trading revenue rose 10.5% to$523.5 million with higher aluminium prices and progressively increasedvolumes following the upgrade at Tomago smelter. EBIT increased 10.0% to$156.1 million with record sales tonnage.

Sugar Trading revenue increasedstrongly by 42.4% to $1,367.8 million. EBIT was $123.7 million, up26.5%. The world sugar price has risen significantly during the year resultingin a price to CSR of $316 a tonne, significantly above $255 a tonne theprevious year. Productivity improvements and good growing conditions lifted the2005 sugarcane crop 2.7% to a record 15.4 million tonnes.

Property EBIT grew strongly to$75.6 million, up from $27.1 million. Two major sales of industrially zoned land at CSR’s Erskine Parksite significantly contributed to the increase.

Value creating growth

In the last year, CSR investedover $219 million on a rangeof value creating growth initiatives in areas allied to its existingbusinesses.

Building Products Two majorexpansions to increase capacity of efficient, low cost manufacturing operationsare underway in PGH™ bricks in Brisbane and Bradford™ insulation in Sydney.These investments will ensure that CSR is well placed to meet the market asresidential construction recovers over the next few years.

Sugar CSR completed commissioning of amajor renewable electricity generating plant at Pioneer Mill in the BurdekinRiver region of North Queensland. A$15 million plant expansion to produce fuel ethanol at Sarinadistillery, Queensland is under construction. When operating in mid 2006, thedistillery will have yearly capacity to process up to 32 million litres offuel ethanol. In March 2006, CSR announced a major new contract to supplyethanol to BP for the Queensland fuel market.

Property CSR’s property activities havegrown considerably in the past three years with a number of major projectscurrently under development, including the 100 hectare industrial site atErskine Park in western Sydney, a 75 residential lot development of a formerquarry at Ferntree Gully in Melbourne’s DandenongRanges and a residential project in Brisbane which has potential for 400 homesites.

Financial Review

Cash from operating activities of $317.1 milliondemonstrates the strong cash flows generated by the company but was slightlybelow $320.7 million the previous year, which benefited from cash receivedfollowing the settlement with insurers announced in September 2004. Cash flowat 31 March 2006 did not fully reflect the benefit of higher raw sugar prices asfinal payments for sugar sold for last year will not be received until June2006.

Net cash flow plus additional borrowings of$291.7 million were used to fund interest of $34.0 million, dividendsof $144.9 million, a capital return of $182.1 million and a share buybackof $12.3 million.

CSR’s gearing (net debt/netdebt + equity) is 30.5% (restated to exclude fair value adjustments for hedgesfrom equity) up from 17.7%. Net debt rose from $270.1 to $558.5 millionfollowing the capital return payment in August 2005. CSR’s strong balance sheetand cash flow underpins the company’s flexibility for growth.

Significant items

In April 2006, CSR Limitedreached a settlement of litigation with a group of 48 Australian, UnitedKingdom and European insurers. Under the terms of this settlement each of thesettling insurers is obliged to pay its share of a settlement totallingapproximately $103.3 million on or before 10 June 2006. CSR incurred legalcosts of approximately $10.3 million in relation to this litigation.

CSR's provision forproduct liability is determined using reports provided by independent expertsin each of the United States and Australia. CSR has included within the provision an appropriate prudential margin. CSR has increased its product liabilityprovision by $54.0 million to $365.8 million to take account of theuncertainties surrounding asbestos litigation in each of the United States andAustralia, recent claims experience and the release of certain insurancepolicies which CSR believes provided coverage for asbestos-related claims. Thisincrease has been treated as a significant item in the year ended 31 March2006.

Outlook for the year ahead

Commenting on the outlook for the year ending 31 March 2007,Mr Brennan noted that the commercial environment in which CSR operates issubject to a range of influences, including movements in currency exchangerates, interest rates, commodity prices and levels of building activity inAustralia, New Zealand and Asia.

BuildingProducts “We expect the slowdown in Australian housingconstruction to continue through the first half of this year with a possiblerecovery early in 2007. Growth in thecommercial building sector should partly offset the slowdown in the residentialbuilding market segment. With thisoutlook, even with efficiency gains and cost reductions, EBIT is likely to fallshort of last year, excluding the one-off plant closure costs.”

Aluminium “Continued worldeconomic growth should result in US$ aluminium prices remaining at good levels.However, we will not fully benefit from higher prices this year because of theimpact of hedging at lower levels completed in previous years. We expect lowerA$ returns will reduce EBIT by around 15%. An active hedging program continues,with a substantial portion of net aluminium exposure hedged for the financialyear ending 31 March 2008 and beyond, locking in an attractive level ofreturns.”

Sugar “While growing conditions have been reasonable, we expectthis season’s sugarcane crop to be a little below last season’s record. However, if the current rainy conditionscontinue, this may impact the quantity of raw sugar produced. Although the raw sugar price is likely toremain volatile, the strong price rise over recent months together with thepricing already completed for this year should ensure that the price to CSRwill be in excess of $400 per tonne. Accordingly, we expect a significantimprovement in Sugar EBIT.”

Property “Returns are likely to be lower than last year. Development of the Ferntree Gully site is well advanced for sales ofresidential lots to begin mid 2006.”

Overall “At this early stage in the year, if sugar prices remain at or nearcurrent levels, we expect to achieve an overall EBIT result for the grouparound 10% above last year, excluding the significant items,” Mr Brennan said.