CSR Limited

A few months ago, CSR announced a full-year net profit of $250m, plus a $55m windfall gain from a settlement with its insurers. Excluding the insurance gain, earnings per share came to 27.4 cents. The final dividend was 9 cents fully franked, bringing the total for the year to 15 cents a share. The Sugar, Property and Aluminium divisions performed strongly, although the Building division disappointed. This is a cyclical business with no obvious competitive advantage, so we found it somewhat surprising that, at the AGM in July, management confidently predicted a 10% rise in operating profit for the 2007 financial year. The stock is up 31% since we last covered it in issue 176/May 05 (Sell—$2.55) and we're not likely to become positive any time soon. AVOID.