CSR to push into schools, hospitals to buffer against housing shocks

CSR boss Julie Coates is targeting social housing, schools and hospital as growth sectors for the buildings products company to help buffer the business from residential construction shocks.

The ASX-listed $2.3 billion company reported a solid first half result for the period ending September 30 and resumed paying a dividend, after it scrapped its most recent final dividend earlier this year.

CSR chief executive Julie Coates says the company delivered strong cost control in a "challenging" first half.Credit: Peter Rae

CSR’s half year revenue was down 6 per cent to $1.075 billion but ahead of market expectations.

"If you think about non-residential (construction), social and schools and hospitals has actually been quite positive. And we're looking to grow our share of that sector as we move forward and have had some success with that," Ms Coates said.

"Having a diversified business is advantageous, depending on what's happening in the market across detached housing, medium and high density, non-residential and also the alterations and additions market."

CSR makes products including plasterboard, insulation and bricks. The detached housing market generates about 50 per cent of revenue for its building products division, its biggest earner.

In terms of what do investors value in the market place, it's really consistency and resilience of earnings.

Angus Gluskie, CEO of White Funds Management

CSR's bottom line first half net profit was down 15 per cent to $58.7 million, with the overall result buttressed by the strong performance of building products, which lifted earnings before interest and tax (EBIT) to $96.3 million.

But in CSR's aluminium division EBIT plummeted to $6.2 million because of a large decline in aluminium prices, down from $25.4 million in the prior corresponding period. CSR is a joint venture partner in the Tomago aluminium smelter near Newcastle and chief financial officer David Fallu said high electricity prices put the business "in a challenging position" and gave it little margin for error.

Asked if CSR wanted to exit Tomago Mr Fallu said CSR wanted to get lower energy prices for Tomago, which would enable long-term planning for the site that could include investment or alternative plans.

CSR's push into schools and hospital construction comes as it revealed that in the first four weeks of the new half, revenue from its building products division was down 6 per cent on the prior corresponding period.

"As we move forward there's more to play out here. So we need to monitor closely (housing) starts, as things like JobKeeper unwind and the current housing stimulus comes to an end," Ms Coates said.

CSR share rose 6.4 per cent to $4.69 in afternoon trade.

Angus Gluskie, chief executive of CSR investor White Funds Management, backed the company's push in the hospital and education segments of construction.

"In terms of what do investors value in the market place, it's really consistency and resilience of earnings. So if you can orient your business towards drivers that have those characteristics it can mean a lot in terms of the ultimate business valuation," he said.

Ms Coates said CSR had taken a prudent decision six months ago to scrap its final dividend for 2019-20 given the enormous uncertainty facing the world, but added that the company’s performance in the first half of 2020-21 meant that paying an interim dividend was appropriate.

CSR will pay 12.5 cents of fully franked dividends on December 8, including a 4.5 cent special dividend. This compares to 14 cents of dividends for the first half of last year. Those payments included a 10 cent interim dividend and 4 cent special dividend.