CSR lifts underlying profit but cautious

Higher prices for sugar have helped CSR Ltd improve its underlying profit in fiscal 2010, but the sugar, energy and building materials supplier is cautious about the outlook for the current year.

CSR also said on Wednesday that it would continue talks with Chinese company Bright Food Group on Bright's proposal to acquire CSR's sugar and renewable energy business, Sucrogen, for $1.75 billion, but also would continue plans to demerge the division into a new listed company.

CSR on Wednesday reported a net loss for the year ended March 31, 2010, of $111.7 million, a 66 per cent improvement upon the loss of $326.5 million in the prior year.

Net profit before significant items, or underlying profit, rose 29 per cent to $173.4 million.

The full year result included a non-cash, pre-tax impairment charge of $250 million to reduce the carrying value of CSR's Viridian glass business, which has suffered a significant deterioration in market conditions since it was acquired in 2007.

CSR said it was inappropriate to forecast fiscal 2011 earnings at this early stage of its fiscal year, given current market conditions.

The group expects to provide guidance at its annual general meeting on July 8.

CSR said market conditions in the building products sector remained volatile and hard to predict.

An increase in residential housing was expected in fiscal 2011, but the sustainability of the increase was unclear.

Commercial activity was expected to remain weak in the near term.

In aluminium, prices this year would be influenced by new smelting capacity in the Middle East and China and the restoration of demand as global economic growth recovers.

The sugar crop this season was expected to return to average size, after an earlier finish to the 2009 crush and good rain in the early part of the year.

While raw sugar prices had fallen recently, they remained at levels higher than the long-run average price.

CSR managing director Jeremy Sutcliffe told reporters that CSR continued to engage with Bright Foods because its headline offer was "attractive".

"The issues are: Is that an offer that is capable of being delivered, and on a timely basis?" he said.

"Shareholders have been waiting for a long time for the board to implement the demerger strategy, and there's a limit, naturally, on the amount of time that we can wait for Bright both in a negotiation context and in Bright obtaining necessary regulatory approvals.

"Having said that, if Bright is able to confirm its proposal, I think our shareholders would expect us to allow a reasonable period to see if that offer could come to fruition."

CSR also said it was in shareholders' interests to continue with the demerger plans, with a view to a shareholder meeting to consider the matter in August, 2010.

Mr Sutcliffe said that over 2009/10, CSR's two main operating businesses, Sucrogen and Building Products, had strengthened their competitive positions.

Building Products EBIT of $115 million was broadly in line with the prior year's $117.9 million despite generally weaker conditions for most of year, particularly in commercial construction.

Sucrogen EBIT rose 62 per cent to $135.7 million due to higher sugar prices and growth in earnings from refining.

Aluminium EBIT was up 12 per cent at $123.5 million, ahead of previous market guidance due to higher unhedged aluminium price towards the end of the year and lower input and operating costs.

CSR's trading revenue for the year rose eight per cent to $3.75 billion.

CSR will distribute a final dividend of six cents per share fully franked, up from 1.5 cents in the prior corresponding period.

The full year dividend totalled 8.5 cents per share, up from 7.5 cents in the prior year.

CSR shares were four cents higher at $1.70 at 1243 AEST on Wednesday.

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