Smashing result
1H23 RESULT
Need To Know
- Strong Result ~6% ahead of market.
- No formal Building Products guidance. Likely to see small earnings upgrades.
- Operating environment likely to get tougher for FY24.
Investment Implications
1H23 Result: A strong result given the current difficult trading conditions. Building products margins strengthened from 14.7% to 15.3%, the market was forecasting a compression. The group appears to be managing costs well are disciplined with their pricing.
Group NPAT and the Interim dividend came in ahead of consensus. Group NPAT was A$110m vs ~A$97 market and Interim dividend was A$16.5c vs ~A$15c market.
Guidance for FY23
Building products: No formal guidance was provided, but underlying demand remains strong with good visibility on the pipeline.
Aluminium: downgraded to $8-$24m vs previous guidance of $33-$49m. This is due to a higher cost base which management has suggested will likely remain for the second half of the year.
Property guidance was upgraded by $16m to $68m which will largely offset the aluminium downgrade.
Capex is expected to be lower over the remaining part of the year.
Market reaction: Investors were positioned for a large miss on earnings. Instead, CSR delivered a displayed strong performance for 1H which contrasts with other building related companies like Adbri (ABC), Boral (BLD), and Downer (DOW) in recent weeks.
Summary: A strong result given market conditions. The downgrade in aluminium guidance was overshadowed by the strong performance in other core areas of the business. The margin expansion is indicative of the diligent cost control and pricing power within building products.
Market earnings estimates are likely to be upgraded for 2H23E and FY24E. The market currently has Group earnings falling from $203m in FY23 to $185m in FY24E given the expected rollover of building activity.
We have a Hold rating due to the tightening macro-economic conditions for building product suppliers into FY24E.
Stock overview
Share Price
Company overview
CSR Limited is an Australia-based building products company in Australia and New Zealand. Its principal activities include the manufacture and supply of building products.
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