CSR upbeat on earnings as housing market strengthens

Optimism about a strengthening in the housing cycle has prompted CSR to signal full-year earnings will come in at the top of analyst forecasts thanks to cost cutting and price rises.

The company has upgraded its forecast of housing starts amid strength in the NSW and West Australian markets, which helped offset weakness in Victoria, with other markets remaining flat.

A rebound in earnings of all divisions - except for its problematic glass unit - pushed the September-half net profit to $36.2 million from $18.9 million a year earlier, on revenue up 2 per cent at $877.1 million.

Earnings per share rose to 7.2¢ from 3.7¢, allowing CSR to declare an interim dividend of 5¢ a share, from 3¢ last time.

Price rises, coupled with cost reductions, drove the improvement, with rising confidence of a recovery in volumes in the months ahead.

The pre-tax profit contribution from building products rose 19 per cent to $51.8 million with a 32 per cent rise in the contribution from the aluminium division to $24.2 million and $6.8 million from its property unit. The Viridian glass unit remained a drag, with a loss of $10.6 million for the half - "in line" with management expectations.

CSR said it expected the full-year profit to come in at the top end of the analysts' forecasts of $51 million to $70 million, thanks in part to its view that housing starts for the year will be about 155,000, 5 per cent ahead of its earlier forecast. "In a flat market we want to see a 10 per cent improvement in EBIT [earnings before income tax] year on year," CSR managing director Rob Sindel said, referring to internal benchmarks.

"There is a lot of scope in every business in manufacturing for improvement. Continuous improvement that needs to happen in manufacturing has only just started."

Analysts expressed surprise with the degree of cost containment.

■ Leighton Holdings has written off its $18 million investment in Sydney's ill-fated Cross City Tunnel, following the collapse of the company in September. It held a 6 per cent stake, indicating that the other shareholders' losses - principally ABN Amro - total $282 million.

Leighton and its partners bought the tunnel from receivers in 2007 for an estimated $700 million. Earlier this week, toll-road operator Transurban paid $475 million for all of the senior debt of the tunnel.

The write-off came as the civil engineer posted a net profit of $444 million for the nine months to September, up 40 per cent year on year, on revenue up 6 per cent at $17.9 billion.

The underlying net profit rose 65 per cent to $389 million.

It held to its forecast of a full-year underlying net profit of $520 million to $600 million, amid lingering caution over receiving prompt payment for projects in hand.