The CSR Limited (ASX: CSR) share price is the worst performing stock in the S&P/ASX 200 (Index:^AXJO) (ASX: XJO) index this morning after the building materials supplier released its half-year result.
CSR's share price tumbled 7% to $3.34 this morning and is just 2 cents shy of last week's two-and-a-half year low.
In contrast, the S&P/ASX 200 (Index:^AXJO) (ASX: XJO) index is down 0.2% with the Corporate Travel Management Ltd (ASX: CTD) share price and Pact Group Holdings Ltd (ASX: PGH) share price recording big losses that are just behind CSR.
The market was expecting a weak result from CSR given the challenging residential property market but the 31% dive in net profit to $94 million for the six months ended September 30 was worse than expected.
The main drivers for the poor result was a sharp drop in earnings from its property and aluminium divisions.
Property suffered a 91% plunge in earnings before interest and tax (EBIT) to $4.3 million and aluminium posted a 54% dive in EBIT to $23 million.
Management blamed timing issues for the underperformance of the property business and rising power and alumina costs for declining profits at its aluminium business.
A cut in the interim dividend to 13 cents a share from 13.5 cents isn't helping either although management is putting on a brave face and is reassuring investors that its full-year underlying net profit will be within the current range of analysts' forecasts of $180 million to $205 million.
The embattled property division will also post a much stronger second half result with FY19 EBIT tipped to rise to between $35 million and $40 million.
The aluminium business should record a slightly better second half too with full-year EBIT expected to hit $45 million.
CSR's building products and Viridian glass business is the only division that posted an increase in earnings with EBIT rising 1% to $123.6 million.
Management said the slowdown in multi-dwelling construction along the east coast is offset by the growth in other construction work.
I suspect the outlook won't save CSR from consensus downgrades, and while the stock looks on FY19 earnings, analysts are forecasting a further profit drop in FY20.
I am not brave enough to bargain hunt CSR. I think other building materials stocks with large US market exposure make more attractive options.
This includes Boral Limited (ASX: BLD) and James Hardie Industries plc (ASX: JHX).
There are other large-cap buying opportunities that are also more attractive than CSR. The experts at the Motley Fool have picked three of their hottest blue-chip stocks for FY19 and you can find out what these are by following the free link below.
