ferrets stock to watch: csr limited

Ferret's Stock to Watch: CSR LIMITED
08:52, Tuesday, 11 July 2006

ONE OF AUSTRALIA'S OLDEST COMPANIES IS BACK RELYING ON SUGAR

Sydney - Tuesday - July 11: (RWE Aust Business News)
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OVERVIEW
********

CSR Ltd (ASX:CSR) has always run with sugar in the good and bad
times, reflected by its share price.

In the tough times of the 1980s and 90s building materials saved
the day during the period when the price of sugar got down to 7c lb,
compared with current prices of around 16.5c lb on the New York Board of
Trade.

The sugar price is booming with the spot price almost doubled to
about $550 tonne in the nine months to March.

World prices are expected to rise further in 2006-07 as global
consumption exceeds production for the fourth year in a row, according to
the Organisation for Economic Cooperation and Development.

However, the CSR output might not return as much as anticipated
because of the company's heavy hedging.

In the year to March earnings from sugar were $124 million, or
about 30 per cent of the total EBIT.

CSR has another string to its bow in the sugar department.

It is the one of the two large producers of ethanol in Australia
with a growing business in the renewable fuel ethanol industry.

In February CSR announced a $15 million project to produce fuel
ethanol at its Sarina distillery in Queensland, targeted for completion
in mid 2006.

The Sarina distillery will then be capable of producing 32
million litres of fuel-grade ethanol from the distillery's total ethanol
capacity of 60 million litres.

In support of this project, CSR has received an Australian
Government biofuels capital grant of $4.2 million and a Queensland
Government grant of $250,000 under the Sugar Industry Innovation Fund, to
assist with the engineering and introduction of new technology.

CSR has entered into a major two-year supply contract with BP
Australia to supply 23 million litres of fuel ethanol from the upgraded
Sarina plant to petrol stations in Queensland.

The company expects to be able to fully exploit its increased
fuel ethanol capacity following commissioning of the plant later this
year.

SHARE PRICE MOVEMENTS
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Shares of CSR yesterday slipped 4c to $3.37. Rolling high for the
year has been $4.58 and low $2.43. Dividend is 15c to yield 4.45 per
cent. EPS is 33.5c while p/e ratio is a modest 10.96. The company has 912
million shares on issue with a market capital of $3.11 billion.

In the financial year ended March 31, CSR reported a 16.7 per
cent increase in net profit before significant items to $249.8 million.

Higher profits were assisted by increased commodity prices for
the sugar and aluminium operations, improved property returns and cost
savings, which more than offset a slowdown in the residential
construction market.

CSR's total net profit after tax including significant items was
$305 million which includes a partial settlement of long-standing
litigation with insurers.

Trading revenue rose 21.1 per cent to $2.867 billion due to
higher sugar and aluminium prices and the inclusion of $270.9 million in
revenue from refined sugar subsidiaries following full consolidation from
October 1, 2004.

CSR's sugar operations were not affected by the devasting effects
of cyclones in far north Queensland in March.

The company has worked with its sugar milling neighbours during
the past few months to provide support for both the industry and
community in the cyclone affected region, including donating equipment to
repair damaged mills ahead of the start of the milling season in
June.

The new renewable electricity plant at Pioneer raw sugar mill in
Queensland started generating power last August.

Originally targeted for completion in June 2005, delays and cost
overruns on the project increased the total capital cost from $140
million to approximately $170 million, subject to the resolution of
pending claims.

Greater bagasse (waste sugarcane fibre) availability enabled the
plant to extend its operation until March this year - well beyond the end
of the 2005 milling season.

Additional improvements now under construction will further
lengthen the renewable electricity plant's operating period.

BACKGROUND
**********

CSR is one of Australia's leading manufacturing companies with
operations throughout Australia as well as in Asia and New Zealand.

Through its three principal businesses, CSR is a leading supplier
of building products and sugar and holds an effective 25 per cent
interest in the Tomago aluminium smelter, Australia's second largest
smelting operation.

CSR is also developing a number of former industrial sites for
future land sales.

Each of the CSR group's businesses has leading or established
positions in its target markets.

Originally founded in 1855 as a sugar company, CSR is one of
Australia's oldest companies, with a proven record of consistent returns
and strong cash flows from its well-established continuing assets.

CSR's revenues are about $2 billion a year and the group
companies employed about 5,900 people as of March 2005.

CSR is focused on developing the strengths and performance of its
three businesses to build value for our shareholders by:

* improving the performance of the group's operations, mainly by
reducing costs and enhancing productivity;

* pursuing value-adding, low risk growth opportunities allied to
existing businesses;

* identifying sensible industry restructuring and rationalisation
opportunities.

In addition, CSR's operations generate stable earnings and strong
cash flows which support a significant and highly franked dividend policy
for shareholders.

In March 2003, CSR completed the final step in a five-year plan
to improve shareholder value through the demerger of its heavy building
materials assets - then generating around 70 per cent of group earnings -
in the US, Australia, and Asia, into a new company, Rinker Group Ltd
(ASX:RIN).

CSR shareholders at that time received one share in Rinker for
each CSR share they held.

The five-year plan began in 1998 and focused primarily on
expansion of the group's operations in heavy building materials
(aggregates, cement, concrete and concrete pipe & products), particularly
in the US - whilst concurrently divesting under-performing or non-core
assets.

As part of this five-year plan, CSR sold 22 businesses for $1.5
billion in proceeds and made 25 acquisitions for a total of $2.8 billion.

CSR's present companies include Bradford Insulation, CSR Fibre
Cement, Gyprock Plasterboard, Hebel Lightweight Concrete Products, Monier
& Wunderlich Roof Tiles, PGH Bricks and Pavers, CSR Panel Systems, CSR
Sugar and Aluminium.

ENDS