Why the CSR (ASX:CSR) share price climbing higher today

The CSR Limited (ASX: CSR) share price is on the move today following the release of its FY21 half-year results.

At the time of writing, shares in the building products company are up 4.65% to $4.62. In comparison, the S&P/ASX 200 Index (ASX: XJO) has made a mini recovery today, up 0.5% to 5,956 points.

Let’s take a look how CSR performed for the first half of FY21.

Performance review

For the period ending 30 September, CSR reported a softened result for the first-half of the financial year.

The company recorded $1.07 billion in revenue, representing a 6% decline compared to the prior corresponding period (pcp). This reflected a slowdown in residential construction and lower aluminium prices over the first six months.

Earnings before interest and tax (EBIT) for its building products portfolio came to $96.3 million. Strong cost control and operational efficiency offset the lower residential construction activity, sending EBIT marginally higher over HY FY20.

CSR noted that no significant property earnings were received, however a further sale of industrial land was secured. The site at Horsley Park, New South Wales was agreed upon with $226 million in development proceeds expected over four years.

Aluminium EBIT was down 76% to $6.2 million following a strong decline in aluminium prices from COVID-19 market volatility.

In total, group EBIT stood at $94.4 million, a drop of 17% in the $113.1 million reached in the pcp.

Statutory net profit after tax took a hit at $58.7 million, shedding 15% from the $68.8 million. Almost $8 million was spent in team reorganisation and streamlining costs that contributed to the after-tax result.

Cash preservation strategy drove cash flows during the half with strengthened the balance sheet. CSR advised of a net cash position of $153.1 million reflecting a strong liquidity position.

A fully-franked interim dividend was declared of 8.5 cents per share, to be paid to shareholders on December 8.

What did management say?

Commenting on the result, CSR managing director and CEO Julie Coates said:

While it has been a challenging half on many fronts, we are very pleased with the performance of building products. The increasing diversification of our business across segments and markets, coupled with strong cost control and operational efficiency enabled us to maintain our building products EBIT in a contracting market.

We have also made good progress across a number of key strategic initiatives. We secured the next phase of development at Horsley Park, with our property development pipeline set to unlock significant earnings over the coming years. We have reorganised the business to drive a stronger customer solution focus, started our supply chain transformation and continued to optimise our footprint.

We are building CSR into a more diversified, streamlined business to increase resilience as well as growth potential.

Outlook

Looking towards the final six months of FY21, the company remains focused on closely monitoring market levels. Revenue for the first four weeks of the second-half in the building products segment is 6% down on the pcp. CSR noted that the longer-term of the environment is uncertain given the impact of COVID-19. Economic activity and employment levels will play a big part in the industry recovery.

In the property space, the company will see delivery of the first tranche of the Horsley Park stage 2 project. It is anticipated that this will provide $53 million in earnings for 2H FY21.

Aluminium EBIT is forecasted to be in the range of $14 million to $23 million. However, this assumes all other costs and revenue are unchanged.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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