The CSR board deserves praise for promptly announcing capital...

The CSR board deserves praise for promptly announcing capital management initiatives after obtaining NZ OIO approval, rather than leaving shareholders in limbo by not knowing over the holiday break. I believe these initiatives are acceptable in the present circumstances.

The successful completion of the sale of Sucrogen to Wilmar will see CSR become a focused building products company. In my view, there is unlikely to be much capital
gain in the company share price in the near-term, unless an industry-wide building boom occurs or some dramatic out-of left-field positive event happens. The share
price is also unlikely to reflect any takeover premium because potential predators are deterred due to the uncertainty of asbestos compensation (even though the
company has always met past claims and will continue to do so).

CSR, however, has an established portfolio of leading building product brands as well as an extensive domestic distribution network. This business can generate relatively stable revenue and earnings flows. Accordingly, I believe the strategic direction for management to maintain should be to drive efficiencies (by reducing operating costs) and maximise profit margins within the current operation. The aim should be to pursue the regularity of future earnings, notwithstanding periodic cyclical fluctuations, to ensure consistent dividends
are paid to shareholders and adequate funds are available for other stakeholders of the company.

Given the above strategic direction and aims for management, I thought (before the capital management initiatives were announced) the net proceeds of $1.6 billion from the Wilmar deal could be broadly allocated as follows:-

1. About 50% (ie $800 million) paid direct to
shareholders as a capital return and/or special
dividend (subject to available franking credits)

2. About 25% (ie $400 million ) applied to reduce existing
debt. The reduction of debt will
free up earnings, otherwise used to service loans,
for other uses.

3. About 25% (ie $400 million) kept aside for cash
acquisitions (without borrowing) of businesses
likely to enhance the sustainability of existing
earnings streams. Possible acquisitions that might
fit the criteria here include, the purchase of the
remaining 30% interest in Gove Aluminium
Finance Ltd., to increase CSR's effective investment
in the Tomago aluminium smelter joint venture.
Historically, this enterprise has generated fairly
steady profits and produced an attractive return on
investment (ROI) for the participants. Another option
might be to purchase a building products business
with an extensive local retail distribution network.
Such an operation should have reasonably stable
earnings and high retail margins.

Let us hope that directors continue in this mode of decisiveness and implement the relevant processes
in a timely manner.





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 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.