CSR
Recommendation
Of the five major building materials companies, CSR is now the smallest by market capitalisation. If you bought its stock ten years ago, your annual percentage return has been a big, round zero. No wonder it was our least preferred stock in the Building materials roundup from 15 Jan 10 (Avoid – $1.98). Taking into account a capital return and a 3-for-1 share consolidation, the stock has fallen 54% since then.
The sale of CSR’s sugar business Sucrogen in 2010 – the source of the capital return – did little to alleviate shareholder suffering. In fact, the company’s woes have continued, with glass business Viridian continuing to bleed. Managing director Rob Sindel recently said that Viridian would report an operating loss of up to $39m in the year to 31 March 2013.
It’s not much better elsewhere. Operating profits from CSR’s Building Products and Aluminium businesses are respectively expected to be 33% and 59% lower than in 2010.
About the best that can be said is that the balance sheet is in reasonable shape, with net debt of only $46m. But with $432m of asbestos liabilities – and no way of knowing if that’s adequate – low debt levels are essential.
While CSR owns well-known brands, including Gyprock, Bradford and Monier, the share price is already factoring in a profit recovery and it remains an AVOID.