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ASX stock of the day: This ASX construction share jumped 10% today on a 61% surge in profits

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The CSR Limited (ASX: CSR) share price has lifted 10% today after the building materials supplier reported a 61% surge in profits. In its results for the year ended 31 March 2020, CSR revealed statutory net profit after tax of $125.3 million, up from $78 million for the year ended March 2019. 

What does CSR do?

CSR is a leading building products brand in Australia and New Zealand. Its products are used in both residential and commercial construction and include Gyprock plasterboard and Bradford insulation.

CSR is a participant in a joint venture aluminium smelter and also generates earnings from a property division that develops surplus former manufacturing sites and industrial land for sale.

CSR’s results 

CSR reported solid full-year results despite an expected decline in residential construction markets. Aluminium division earnings increased 63% to $60 million following a decline in the Australian dollar and lower input costs. 

Revenue was down 6% in building products to $1.6 billion reflecting lower residential construction activity. No material transactions were recorded in the property division during the year. Group earnings were down 18% reflecting the lower building products result and timing of property transactions. 

Statutory net profit after tax (NPAT) from continuing operations declined 10% to $125 million. Total statutory NPAT increased 61% to $125.3 million from $78 million the previous year. The prior year’s figure included impairment charges from the Viridian glass business which was sold in 2019. 

Financial position 

CSR ended the March quarter with net cash of $95 million and total debt facilities of $520 million. It has paused its on-market share buyback, having purchased $69 million of the $100 million planned. No final dividend will be paid for the year ended March 2020. Total dividends of 14 cents were paid during the year, down from 26 cents in the year ended March 2019.

Significant capital expenditure was incurred in the year due to the $75 million expansion of Hebel, CSR’s autoclaved aerated concrete (AAC) business. Hebel is the only manufacturer of AAC panels in Australia and New Zealand. 

Outlook

CSR is managing its liquidity and optimising profitability via cost controls. A prudent approach to cost management is being taken – working hours are being reduced where appropriate and non-essential expenditure ceased or deferred. 

A high degree of uncertainty in the current economic environment means plans have been implemented to adjust to demand changes across the network. CSR is monitoring a range of lead indicators to allow for an adjustment in production and cost profile as early as possible. 

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Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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