CSR Limited (ASX: CSR) shares have fallen nearly 3% in early trade following the release of slides and speeches for their Annual General Meeting (AGM).
About CSR
CSR is one of the leading building products businesses in Australia and New Zealand. Brands offered by CSR include Gyprock plasterboard, Bradford insulation and Monier roof tiles. The company is also part of a joint venture in the Tomago aluminium smelter, located near Newcastle, NSW.
CSR also has a ‘Property’ division focused on developing former manufacturing sites and industrial land.
AGM Key Points
CSR reported that EBIT for the year ended 31st March 2019 fell around 17% compared to 2018 (click here to learn what EBIT is). EBIT across the Building Products, Property and Aluminium divisions fell, but the Aluminium business took the biggest hit.
According to CSR, a significant increase in electricity costs was the reason for an almost 54% decline in Aluminium EBIT.
The slides highlight the five-year growth rate of the Building Products business, showing a compound annualised growth rate (CAGR) in EBIT of approximately 17.5% for that sector from 2014 to 2019.
Over the same period, revenue from the Building Products sector has grown approximately 11% per year, showing that CSR’s margins have improved over the last five years.
2020 Outlook
CSR provided an outlook for the year ending 31st March 2020. Reductions in interest rates, improving credit availability and stable tax policies are all expected to benefit CSR, although they say the timing of positive impacts is “difficult to predict”.
The first two months of the financial year have been broadly consistent with the final quarter of the year ended 31st March 2019.
Summary
While the long-term growth rate and margin improvements are positives, the sharp decline in EBIT for the financial year is worrying. It seems as though CSR is relying on improving property prices or falling electricity costs to make the next financial year a better one. Unfortunately, as they stated, that’s difficult to predict.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.