Avoiding disaster a good result for Julie Coates at CSR

Labor leader Anthony Albanese Cartoon: John Spooner

The market was priced for doomsday for CSR, but in the end chief Julie Coates delivered something well short of that with her annual profit at the top end of the forecast range at $134.8m.

This was the number for continuing operations, down some 26 per cent from $181.7m last year, but still CSR’s stock jumped 10 per cent to $3.72.

This, it should be noted, was where the stock was on April 30, compared with more than $5 at the start of the year.

Still, the increase in the share price came despite the fact no second-half dividend was paid as the company bunkers down for a tough year ahead.

Being bad is OK if it’s not as bad as the market was expecting.

The result release covers the COVID-19 downturn, but the building products company is a lagging indicator, with work being done on investment decisions dating back months beforehand. This means the worst is still to come.

Coates said the first six weeks of the fiscal year saw building products earnings down 3 per cent, which once again wasn’t good, but wasn’t nearly as bad as the market feared.

She has been in the job for eight months, learning to bake bricks after three years baking bread at Goodman Fielder, and Tuesday’s results showed Coates performing well in the face of tough conditions.

This could have been a company that joined the investment banking bonanza by raising discounted equity, but to her credit Coates resisted and this too helped boost the stock price, in part because shareholders won’t suffer the dilution faced by Incitec Pivot et al.

CSR starts the year with net cash of $95m and an extra $200m in debt facilities.

It also has the benefit of some excess property ready for sale in the new year to boost liquidity.

In the last half Coates made key changes such as combining the Bradford insulation business with Monier roof tiles, cutting a Queensland brick plant, and completing an upgrade of the Hebel plant in Somersby while also boosting Hebel’s market share in Victoria to offset the downturn in NSW high-rise building.

Building product revenue was down 6 per cent in a market that fell 21 per cent, so CSR is looking comparatively good.

None of this says the result was great, but in the circumstances it was a good result.

Eyes on ‘Magic’ Matt

CBA’s “Magic” Matt Comyn is expected on Wednesday to give the market some idea on the COVID-19 loan loss provisions and Jefferies’ Brian Johnson is tipping in the high $2bn range.

The other three banks have taken collective provisions of $3.7bn, led by Westpac at $1.9bn. Based on market share and higher tier-one capital ratio of about 11.4 per cent, CBA can afford a bigger provision.

As a third-quarter update there is no need for any statement on dividends, so the market focus will be on the provision taken for any hit to the home loan book.

Johnson figures the banks won’t really get a feel for bad debt charges until October because by then the government JobKeeper and other subsidies will be finished, the home loan deferrals will be finished and all going to plan the domestic economy at least will be up and running.

Brownie points will go to Comyn for providing as much detail as possible on scenario forecasts and a bigger than expected provision will also get a tick.

Bupa’s aged-care fine

Health fund giant Bupa was fined $6m by the Federal Court on Tuesday and ordered to pay compensation to aged-care residents for misleading statements about the services it offered.

The ACCC alleged the fund made false and misleading representations about services that were not provided in about 20 aged-care homes.

Bupa has already started making compensation payments and figures it will end up costing about $18.3m.

The ACCC has separately delayed the decision due next week on Google’s proposed $US2.1bn ($3.2bn) acquisition of Fitbit.

The regulator said it was awaiting information from the “parties” and an announcement would be made shortly on the new decision date.

The decision was formally unveiled in November last year, but only appeared on the ACCC’s register in February.

The regulator in October last year launched a Federal Court ­action against Google alleging false and misleading claims about its privacy claims.

In July it is also due to finalise a code of conduct detailing how Google and Facebook will compensate media companies whose material is used by the big platforms.

Separately, Downer EDI is at the centre of two new ACCC merger inquiries. The first centres on its $250m laundry sale and the second on the $US7bn global rail acquisition of Downer’s joint venture partner, Bombardier, by France-based Alstom.

The laundry sale has long been on the ACCC books, but Anchorage’s South Pacific Laundry has emerged as the party to apply for clearance.

The combined firm would control 57 per cent of the laundry linen market, with the former Spotless operations having a 25 per cent market share.

The Downer division is also a big player in the garment market dominated by Alsco.

The ACCC is due to make its decision on July 23.

Downer has signed an exclusivity agreement with rival private equity firm Adamentem on the laundry deal and Anchorage has lodged the ACCC notice to ensure it can complete the sale if the rival offer fails.

The global train deal between Alstom and Canada’s Bombardier was unveiled in February. Downer and Bombardier have a rail joint venture in Western Australia.

Retail battle lines

The battle lines are now drawn between Solly Lew and Scentre Group’s Peter Allen over rental paid in the latter’s malls.

Lew said on Tuesday that Smiggle, Peter Alexander, FCUK and other outlets would reopen on Friday, restoring jobs for some 5000 of the 9000 staff stood down on March 26 during the COVID-19 lockdown.

The rest of the staff are either offshore, contractors or without a job.

Some 70 per cent of Premier’s retail outlets are in holdover, which means their lease is yet to be settled and can be terminated by either side.

Allen figures his job is to provide floor space and appropriate support for retailers to do their bit.

Lew said in line with Prime Minister Scott Morrison’s statements when the stores open, he would pay rent in arrears based on sales.

This means Allen would be sharing the retail risk, which he doesn’t think is part of the bargain.

Just to remind Allen where he stands in a statement on Tuesday, Lew made a lot of noise about the success his Peter Alexander brand had in online sales.

The point being who needs shopping malls or living centres, as they are called now, when you can sell products online?

In truth, Lew needs both and that is where the battle starts.