Half year Presentation - CSR

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Half year Presentation - CSR

RESULTS PRESENTATIONHALF YEAR ENDED 30 SEPTEMBER 20085 November 2008Insert picturesPresentation agendaIntroduction and overviewJerry Maycock, Managing DirectorDivisional results – Building Products, Sugar,Aluminium and update on Capital ProjectsJerry MaycockProperty and Capital ManagementShane Gannon, CFOStrategic overview and outlookJerry MaycockIntro Building Products Sugar Aluminium Property Capital Outlook2


INTRODUCTIONsteady result in difficult market conditionsJERRY MAYCOCKEarnings increase in difficult market conditionsIntro Building Products Sugar Aluminium Property Capital OutlookGroup EBIT increased by 12 per cent to $177.4m• In difficult market conditions CSR increased group EBIT by 12 per cent• Stronger result from Sugar reflects higher raw sugar price and continuing improvedreturns from Refining and Ethanol – earnings weighted to second half of year• Significant operational improvement programmes across Building Products portfolio tomaintain competitive position in deteriorating residential housing market• Aluminium earnings slightly ahead through higher realised price after hedging• Solid first half contribution from PropertyCSR continues to build medium term position• Continue to manage through challenging building cycle, operational improvementsprovide recurring benefits – Building Products well positioned for upturn in cycle• Value adding capital upgrade program is now significantly advanced with severalmajor projects at or near completion• Positive longer term fundamentals remain for sugar, aluminium• CSR well positioned for medium term growth4


BUILDING PRODUCTSmanaging through the cycle to position for growthBuilding Products revenue summaryIntro Building Products Sugar Aluminium Property Capital OutlookTrading Revenue A$m20082007% ∆• Price increasesimplemented acrossportfolioLightweight Systems239.7213.7+12.2• Reasonableplasterboard volumes inQ1 commercial markets& insulation to allsegmentsPerformance Systems160.4142.2+12.8• Easter fell in first halflast yearBricks and Roofing248.2166.0104.8*159.0n/a+4.4• Abnormal energy -related cost increasesincurred in first half• Accelerated operationalimprovement programsin response to weakermarkets*3 months of Pilkington only8


Residential commencements lower than previous forecastsIntro Building Products Sugar Aluminium Property Capital OutlookDwelling Commencements ('000)160155150145140Source BIS ShrapnelAustralia YEM09 Dwelling CommencementsForecasts5% decline2007 Forecast 2008 Forecast• Residential market represents ~ 70% of sales in BuildingProducts• Continued weak residential market activity affects marketvolume• Dwelling commencements have fallen further than forecastfrom previous year• Latest BIS Shrapnel forecast commencements for YEM09 –147,000 vs previous forecast of 155,000 and YEM 08 actual of156,000DwellingCommencements ('000)252015Source: InfometricsNew Zealand YEM09 Forecast Comparisons21% decline2007 Forecast 2008 Forecast200190180170160150140130• New Zealand – considerable decline in forecastcommencements and YEM 08 actual of 25,600Dwelling Commencement Comparison - Australia120110100Jun-93Dec-93Jun-94Dec-94Jun-95Dec-95Jun-96Dec-96Jun-97Dec-97Jun-98Dec-98Jun-99Dec-99Jun-00Dec-00Jun-01Dec-01Jun-02Dec-02Jun-03Dec-03Jun-04Dec-04Jun-05Dec-05Jun-06Dec-06Jun-07Dec-07Jun-08Dec-08Commencements ('000)Jun-09Dec-09Source BIS ShrapnelMay07 Forecas t Oct08 Forecast Actual9Underlying demand in Australia continues to accumulateIntro Building Products Sugar Aluminium Property Capital OutlookNumber of commencements6000050000400003000020000100000Jun-93Dec-93Jun-94Dec-94Jun-95Dec-95Dwelling Commencements - State (MAT)Jun-96Dec-96Jun-97Dec-97Jun-98Dec-98Jun-99Dec-99Jun-00Dec-00Jun-01Dec-01Jun-02Dec-02Jun-03Dec-03Jun-04Dec-04Jun-05Dec-05Jun-06Dec-06Jun-07Dec-07Jun-08• Total forecast commencementsin YEM 09 of 147,000 (BISShrapnel) vs underlying demandof 180,000 - underlying demandat record levels• Housing demand drivers:• Affordability• declining interest ratesSource: ABSNSW VIC QLD SA WA TAS ACT NTDwelling Commencements vs Underlying Demand• government stimuluspackage220Forecast• Demographic TrendsDwellings ('000)2001801601401201001996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010• immigration levels remainhigh• strong population growth• move to medium density• Land availability• land releaseSource: BIS Shrapnel, CSR Analysis10Dwelling CommencementsUnderlying Demand


Viridian – synergies achieved ahead of targetIntro Building Products Sugar Aluminium Property Capital OutlookA$mTrading RevenueEBITDAEBIT* Three months PilkingtonSept2008248.239.425.1Coating Plant at Dandenong to support newCVD coater to produce low e glassSept2007104.8*18.8*12.7*• Weaker markets and rising input costshave affected returns• Sharp unbudgeted increases in energyrelated key inputs (e.g. energy, PVB)• Price increases and freight recoverycharges implemented• Additional cost out and price increasesexpected to recover substantial portion ofnegative volume and input cost impact• Dandenong shut down in first half willskew earnings to 2nd half• On track to meet original synergy targetof $33m by YEM 10 – YEM09 synergieswill exceed $22 million• Positive market for energy efficient glass- Viridian sales of energy efficient glassup over 50% on prior period• Further encouraging regulatory signalson energy efficient glass11Managing through cycle for cyclical upturnIntro Building Products Sugar Aluminium Property Capital Outlook12Operational and revenue improvement initiatives have also beenaccelerated across the rest of the Building Products portfolio:Gyprock• Reduction in overheads• Reduction in factory operating costs• New product releasesCemintel• Factory headcount reductionBricks & Roofing• Realisation of the full year benefits from a further reductionin overheads• New product releasesBradford• Improved labour utilisation• Reduced waste• Leverage Asia sourcing in construction of new plantBuilding Products organisation• Combined structure to drive efficiency and productivity


SUGARhigher realised price and continued growth inrefining and renewablesSugar earnings up on higher realised price andimproved earnings in Ethanol and RefiningIntro Building Products Sugar Aluminium Property Capital OutlookA$m20082007%∆• Higher averagerealised priceimproves SugarearningsTrading RevenueEBITEBIT marginEBIT by Business710.927.83.9%642.022.43.5%+10.7+24.1• Fertiliser sales andfuel ethanol salesdrive improvedethanol earnings• Refining continues togrow as margins andservice propositionsimproveRaw Sugar MillingRefining8.117.95.716.6+42.1+7.8• Raw sugar earnings,ethanol weightedtowards second halfof yearEthanol4.51.7+164.7Other(2.7)(1.6)14


Continuing to build a stable earnings base in SugarIntro Building Products Sugar Aluminium Property Capital Outlook15• CSR continues to build morestable earnings base inSugar business• Refining – margins continueto improve towards importparity• Ethanol – despite wet startto season, good demandexperienced across allmarkets (fuel, agriculturalservices and industrial)• Challenges of wetweather/reduced crop andcollapse of clarifier atPioneer off-set by increasedraw sugar price• Pioneer incident to extendseason in Burdekin byapprox 3-4 weeks comparedto “average” season504030201002002 2003 2004 2005 2006 2007 2008*Yarraville Refinery(upgrade)Days of crushing lost to wet weatherHerbert Mills (4-4.5mt)Burdekin Mills (7.5-8.5mt)Plane Creek Mill (1.2-1.4mt)* First HalfLonger term fundamentals support sugar priceGood prices in A$ termsA$ per tonne600550500450400350300250200150Sep-01Mar-02Sep- Mar-02 03A$ per tonneUSc per poundSep- Mar-03 04Sep- Mar-04 05Sep- Mar-05 06Sep- Mar-06 07Intro Building Products Sugar Aluminium Property Capital OutlookSep- Mar- Sep-07 08 0822201816141210864USc per poundA$ per tonne• Longer term trend for sugar price ispositive, supported by:– Continued rising costs of production in Brazil– Indian production moving towards deficit– Increasing demand for Brazilian fuel ethanolwhich tightens sugar supply• A$/Brazilian Real cross rate remains steady• CSR mills remain competitive with Brazil600550500450400350300A$ per tonneUSc per pound22201816141210USc per pound250200150Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-0886416


ALUMINIUMearnings slightly ahead through higher realisedpriceAluminium earnings slightly aheadIntro Building Products Sugar Aluminium Property Capital OutlookA$m20082007%∆Sales (‘000 tonnes)90,76493,137(2.5)• Revenue downslightly due toplanned recovery ofinventory levelsAve realised price per tonneTrading RevenueEBITEBIT MarginLME/US$ tonne3,065278.270.425.3%2,9133,033282.565.923.3%2,702+1.1(1.5)+6.8• EBIT slightly aheadin first half mainlydue to higher realisedprice• Around 80% of netaluminium exposurehedged at A$3,037per tonne for secondhalfUS$/A$ average rate0.9160.8418LME/A$ tonne3,1793,217


UPDATE ON CAPITAL PROJECTSCapital projects to strengthen market positionCapital ProjectIntro Building Products Sugar Aluminium Property Capital OutlookDescriptionStatusViridian Dandenongplant upgradeViridian Downstreamprocessing operationsYarraville Sugar refinerySarina Ethanol DistilleryBradford glasswoolinsulation plant, BNEUpgrade of factory to increase capacity and install CVD coater toproduce energy efficient (low e) glass.Initial Cost estimate $120m (net of Vic Govt grant of $20m)Install fully automatic double glazed glass unit production capabilityand Australia–wide integrated software solutionInitial Cost estimate $40-50m in each of YEM09 & YEM10Upgrade of refinery to improve operational efficiencyInitial Cost estimate $56mUpgrade to produce 60ml of fuel grade ethanolInitial cost estimate $18mConstruct glasswool manufacturing insulation plantInitial cost estimate $50mGlass plant successfully commissioned in October2008. CVD coater to be commissioned in March2009Expected Final cost of $132 m due to asbestosremoval and IR costsCommenced upgrade at Clayton (VIC) – finalised byMarch 2009Expected Final Cost $38m YEM09, YEM10 underreview80 per cent complete -scheduled for completion byJuly 2009Expected final cost $56mEquipment manufacturing commenced – scheduledfor completion July 09Expected final cost $18mAlmost complete – target completion date Dec 08.Scope change to allow for additional product rangeExpected final cost $55mBradford rockwool Line 2GuangzhouGyprock factory upgrade,Yarraville20Relocate rockwool plant, finalise consolidation on Guangzhou siteInitial cost estimate $8mupgrade/ expansion of plasterboard factory/distribution hubInitial cost estimate $140mOn track for commissioning in Dec 2008Expected Final Cost $8mStage 1 Gypsum handling shed commissioned inOctober 2008. Higher costs due largely to underestimateof gypsum handling. Higher expected costinflation over the 3 year duration. Total project duefor completion mid/late 2010.Expected Final cost $168m


PROPERTYsolid development pipelineSHANE GANNONProperty – solid development pipeline earningsweighted to second halfIntro Building Products Sugar Aluminium Property Capital OutlookA$m20082007• Half year EBIT maincontributor - land sales fromDarraEBIT12.67.6• Capital investment attributed(mainly) to earthworks and siteremediationCapital Investment7.25.2• Major transactions innegotiation and/or nearcompletion:• Industrial property, DarraBrisbane – contractsexchanged 26 lots,settlement subject to siteconstruction expected early2009• Site disposal, Welshpool,WA – marketing programcommenced22• Continue to advance a mix ofindustrial and residentialprojects in Queensland,Victoria and NSW


CAPITAL MANAGEMENTStrong focus on cash flow and capital managementimprovementsCapital management – balance sheetIntro Building Products Sugar Aluminium Property Capital OutlookA$mSept2008Sept2007• Net debt slightly higher thantarget primarily due to timingof key receiptsNet debt (A$m)Gearing (net debt / net debt + equity)1,34244.5%1,08642.4%• Key Funding ratios i.e.leverage ratio and interestcover well within bankcovenantsInterest cover (times)Leverage ratio (times)Shares on issue (million)5.22.41,021.37.82.1926.8• Refinancing of Medium TermNote due to be refinanced inMarch 09 now complete• DRP to remain in operationfor interim dividend• Average maturity of net debt2.8 years24


Capital management – operationsIntro Building Products Sugar Aluminium Property Capital OutlookA$mEBITDASignificant ItemsTax PaidSept2008256(7)(33)Sept2007229(7)(34)• Working capital affected bydelay of to after balance datekey receipts. Specifically:aluminium shipment $38m,sugar advance payments• Significant items - primarilyViridian integration costsWorking Capital Change(109)(21)• Effective tax rate 26.4%OtherCash Flow from Operations(34)73(20)147• Interim dividend 6 cents pershare, fully franked, payable12 December 2008• Credit management remainskey focus – No majoradjustments (to date) indebtors bad debt provision25Capital management – investingIntro Building Products Sugar Aluminium Property Capital OutlookA$mSept2008Sept2007• Total capital expenditure$229 million representing:Purchase of property plant andequipment(229.3)(140.9)• operating (stay inbusiness) $135m• development $94mProceeds of sale of property plantand equipmentPurchase of controlled entitiesand businessesNet Cash used in investing121.9(11.6)(119.0)25.1(712.7)(828.5)• Major spend of developmentexpenditure was in BuildingProducts - $84m• Majority of operating capitalexpenditure allocated toBuilding Products ($70m)and Sugar ($48m)• Minimal M&A activity duringperiod, ~ $10m• Operating capital program torevert to levels consistentwith depreciation charge fromYEM10 onwards26


Debt maturityIntro Building Products Sugar Aluminium Property Capital OutlookFunding and maturity (A$millions)Additional bank facilities inplace to retire MTNswhen due.YEM Maturity Profile2003221053701751692303502H YEM09 1H YEM10 2H YEM10 1H YEM11 2H YEM11 1H YEM12 2H YEM12 1H YEM1327• Total existing debt facilities• Less MTN• Remaining bank facilities• Net Debt at 30 September$1,921 million$200 million$1,721 million$1,342 millionSTRATEGIC OUTLOOKJERRY MAYCOCK


CSR well positioned for growthIntro Building Products Sugar Aluminium Property Capital Outlook• Completion of most of the capital reinvestment programs in YEM09starts to liberate cash flow for debt amortisation• Building Products development projects add to substantial operationalleverage from cyclical upturn in the residential housing cycle, andgrowing demand for energy efficiency in the built environment• Sugar to benefit from reinvestment in mills, positive raw sugar pricefundamentals and a growing proportion of refining and ethanolearnings• Aluminium continues to provide steady cash flows from Tomago, withexcellent position on global cost curve• Property continues to liberate value and generate cash flow• CSR has good growth potential, and may be able to generateadditional shareholder value by restructuring its asset portfolio undermore favourable market conditions29Outlook YEM 09Intro Building Products Sugar Aluminium Property Capital Outlook• Building Products– Too soon to see meaningful positive impact of stimulus package on residentialleading indicators. Commercial market softening– EBIT expected to be similar to last year• Sugar– Refining and renewables to continue earnings growth– Based on current hedge book, fx rates and forward curve, realised sugar priceimprovement expected to outweigh effect of Pioneer incident and wet weather.Assuming reasonable finish to season, total Sugar EBIT expected to be higher thanlast year• Aluminium– Carbon material costs likely to have peaked, but benefits won’t be seen this year.Tomago competitive position on cost curve and lower A$ supports earnings– EBIT expected to be slightly lower than last year• Property– EBIT expected to be in the sustainable range of $35-40m, subject as usual to timingof transactions• GROUP LEVEL– Group EBIT expected to be in line with last year– NPAT and EPS to reflect provision adjustments and more shares on issue30


APPENDIXForward Pricing update – SugarIntro Building Products Sugar Aluminium Property Capital OutlookRealised raw sugar price A$ per tonne IPS$A per tonne IPS50040089% hedged@ ~ A$31540% hedged@ A$40749% hedged@ A$36019% hedged@ A$4333002001000YEM04 YEM05 YEM06 YEM07 YEM08 YEM09 YEM10 YEM11 YEM12as at 31 October 200832• Further hedging to lock in attractive exchange rates and prices on marketrallies (includes fixed price contract)


Hedging update – Aluminium300250Aluminium Hedge Book US$ millionsAluminiumCurrencyIntro Building Products Sugar Aluminium Property Capital OutlookAluminium price - LME A$per tonne45004000200150100123111173165132100A$ per tonne350030002500200050150010000HYEM09 YEM10 Beyond500031/10/03 31/10/04 31/10/05 31/10/06 31/10/07 31/10/080.7510.7240.715Average currency rate in US centsUS$2,280US$2,254US$2,657Average hedged aluminium price US$ per tonneA$3,037A$3,116A$3,716Average hedged aluminium price A$ per tonne80%57%N/A% of net aluminium exposure hedged 11. CSR hedges net aluminium exposure which takes into account the natural hedge involved in alumina purchases. Netaluminium exposure equates to around three quarters of metal production. Figures as at 31 October 2008.33RESULTS PRESENTATIONHALF YEAR ENDED 30 SEPTEMBER 20085 November 2008Insert pictures

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