CSR Upbeat on Housing Market Despite Investor Concerns

Building products company CSR has beaten expectations in half-year profit but experienced a slump in share price amid concerns by investors on the outlook for the residential property market.

CSR posted a four per cent rise in net profit after tax of $118.7 million. The company said that higher prices and volumes were supported by the solid market for residential housing on the east coast of Australia.

The lift in half year net profit after tax was also driven by increased property earnings following the settlement of two transactions which delivered $46.5 million in EBIT, up from $15.3 million.

[Related reading: Building Approvals Rise Again in September]“The detached housing market in Australia, which accounts for almost 50 per cent of CSR’s Building Products’ revenue, remains stable, underpinned by record low interest rates and steady population growth," CSR managing director Rob Sindel said.

"Whilst the high-rise apartment market, which represents only 12 per cent of revenue, has slowed during the last year, the pipeline of projects underway will continue to support demand for CSR’s products."

Despite this, the Housing Industry Association reported that new home sales suffered a drop of 6.1 percent during September 2017 and that it expects activity will bottom out sometime in 2019. The volume in new home sales is well down from a peak in March 2016. This is clearly weighing on investors’ minds.

CSR also reported that earnings for its aluminium division would be affected by higher raw material and power costs.

In its outlook for building products for the full year ending 31 March 2018 the company said earnings will be supported by solid demand from the east coast detached housing market and multi-residential projects currently under construction.

Back in May, CSR acknowledged that building approvals were pointing to a softening in activity in residential markets, which also triggered a sell-off in the company.

The HIA commented in October that new dwelling starts were down eight per cent from a year earlier and constraints on lending to investors are compounding a slowdown in building activity.

[Related reading: APRA Signals Lifting of Intervention After an 'Erosion' of Standards]