CSR adds more sugar to the mixAnthony Klan, MeetingsJuly 14,...

CSR adds more sugar to the mix
Anthony Klan, Meetings
July 14, 2006
A CONTINUING boom in sugar prices will be required to underpin CSR's performance next year as weakness in the building sector continues to bite.

CSR has warned its 2007 forecast of 10 per cent growth in pre-tax earnings - confirmed at the group's full-year results presentation in May - was now more heavily dependent on buoyant sugar prices.

"A number of things have changed since (May), particularly the level of weakness in some building products markets," CSR chief executive Alec Brennan told the annual meeting in Sydney yesterday. "However, as long as sugar prices remain reasonably strong we see no reason to change our guidance."

Mr Brennan said pre-tax earnings attributable to building products had eased 9 per cent to $102 million last year due to softness in the east coast markets, particularly NSW and southeast Queensland.

"All east coast markets remain weak with the NSW market in particular being even weaker than we expected a few months ago," he said.

Mr Brennan said the housing market was expected to remain weak this year, although strong home lending figures released this week could spur demand.

He said the market was expected to recover "some time" in 2007.

Sugar prices remained buoyant, led by the poor performance of crops in competitor countries and a shift to ethanol production in Brazil. "The profit outlook for this year remains dependent on prices over the next six months or so," Mr Brennan said.

CSR was currently suffering from sugar hedging, with the group's sugar prices below the $500 spot price at $400.

Mr Brennan said a more favourable forward exchange contract had now been entered into covering one-third of sugar production until 2010.

He said the group was looking to purchase sugar refineries in Brazil and was also looking at investing in the China market.

An outbreak of sugar cane "smut" disease around Childers in southeast Queensland was isolated and not expected to have a significant impact on profits.

The group continued to book strong profits from selling former industrial sites but profits from property were expected to be lower than the $76 million recorded last year.

Mr Brennan, 59, confirmed he would retire as chief executive of the group in March next year, after 37 years with the company.

Chairman Ian Blackburne said CSR was "currently assessing candidates for the top job.

CSR fell 14 cents to $3.39.