It is interesting to note that large competitor, Boral, is selling minor operations to refocus on core businesses. The stated rationale is to improve efficiencies and grow margins. In present circumstances, this is a sound strategy for CSR to also follow in building products. After selling Sucrogen, it should similarly concentrate on improving the profitability of the existing operation (with its leading brands and extensive distribution networks) and avoid any large-scale external investments.
To me, a key obstacle to deciding whether to allocate proceeds between retaining cash and paying a capital return to shareholders may be uncertainty about likely future net earnings in building products and aluminium. Management requires reasonable confidence to at least maintain profit levels to plan an optimal capital structure.
Presently, executives of domestic building products companies do not appear too confident in providing outlooks for expected future earnings in the industry. This is understandable given the extended lows in the building cycle. Federal and state government policies and regulatory hurdles, as well as macro-economic factors, do not seem to indicate any likely changes in the short-term.
Unless some earnings certainty can be restored, management might be very reluctant to make any allocation determination or otherwise a very conservative one to members.
Disclaimer Please note that I am not providing valuations, advice, information, recommendations or predictions. The above statements are merely my own comments and thoughts as an ordinary shareholder without any special skills or knowledge. I absolutely disclaim any responsibility or liability whatsoever r for any consequences arising from the use of my comments and thoughts expressed. If you require advice or information, you should seek the services of an appropriately qualified independent expert professional person as well as do your own proper research.
CSR Price at posting:
$5.10 Sentiment: Hold Disclosure: Held
