RESULTS PRESENTATION - Corporate...Completed sale of Viridian Glass consistent with strategy to deliver targeted returns of 15% ROFE › Network optimisation to reduce volumes from

RESULTSPRESENTATIONFull year ended 31 March 2019

Agenda

2

Details

1. Overview – Rob Sindel, Managing Director, CSR Limited

2. Financial Results – David Fallu, Chief Financial Officer, CSR Limited

3. Business Unit Performance – Rob Sindel

4. Market & Outlook – Rob Sindel

5. Q&A

Rob Sindel, Managing Director

OVERVIEW

Strong operational and financial position

4

Operational and financial performance

› Completed sale of Viridian Glass consistent with strategy to deliver targeted returns of 15% ROFE

› Network optimisation to reduce volumes from higher cost plants in line with market activity

› Locked in energy contracts over next 2-3 years to secure pricing and supply

Portfolio optimisation

Building ProductsReturn on funds employed 1

Strong financial positionNet cash/(debt)

› 25% improvement in safety in YEM19

› YEM19 NPAT (continuing operations before significant items) of $181.7m –down 14% due to lower Aluminium earnings

› $65m final dividend (13.0 cents per share) 50% franked

12.0%15.0%

19.4%22.8% 23.8%

22.1%

YEM14 YEM15 YEM16 YEM17 YEM18 YEM19

1. All ROFE calculations are based on EBIT (before significant items) for the 12 months to 31 March divided by average funds employed which excludes cash and tax balances and certain other non-trading assets and liabilities as at 31 March.

-28.5

68.4 70.9

-11.4 -14.3

50.0

YEM14 YEM15 YEM16 YEM17 YEM18 YEM19

ROFE %

Net cash (debt) A$m

Building Products and Property represent 87% of Group earnings

51. Excludes Corporate costs.2. All ROFE calculations are based on EBIT (before significant items) for the 12 months to 31 March divided by average funds employed which excludes cash and tax

balances and certain other non-trading assets and liabilities as at 31 March. YEM19 excludes Viridian Glass.

CSR Group EBIT Building Products and Property business now represents 87% of group earnings1

Sale of Viridian improves group ROFE

Aluminium reset at a lower level of earnings with new electricity contract

-50

0

50

100

150

200

250

300

350

YEM13 YEM14 YEM15 YEM16 YEM17 YEM18 YEM19

A$ m

illion

BP Property Aluminium Viridian

ROFE 2 5.0% 20.7% 21.6% 23.2% 21.8%9.9% 18.4%

David Fallu, Chief Financial Officer

FINANCIAL RESULTS

Group results for the year ending 31 March 2019

7

Results summary

1. All references are for continuing operations before significant items.

CSR Group EBIT1 down 17% largely due to lower Aluminium earnings following the step-up in electricity related costs

Revenue up 4% following growth in all businesses4%

A$m (unless stated) YEM19 YEM18 change

Trading revenue from continuing operations 2,322.8 2,237.7 4%

EBIT from continuing operations

Building Products 206.5 214.1 (4%)

Property 38.8 47.8 (19%)

Aluminium 36.6 79.5 (54%)

Corporate (16.9) (21.1) 20%

Group EBIT from continuing operations 265.0 320.3 (17%)

Net finance income (costs) 0.1 (1.2)

Tax expense (74.7) (90.5) 17%

Non-controlling interests (8.7) (18.0) 52%

Net profit after tax from continuing operations 1 181.7 210.6 (14%)Significant items after tax from continuing operations (42.8) (11.6)

Statutory net profit after tax from continuing operations 138.9 199.0 (30%)

Statutory net loss after tax from discontinued operations (60.9) (10.2)

Total statutory net profit after tax 78.0 188.8 (59%)

146.5166.0

183.8210.6

181.7

YEM15 YEM16 YEM17 YEM18 YEM19

CSR Group NPAT (pre sig items) A$m

Note: YEM18 and YEM19 exclude the Viridian Glass business

EBIT overview by business

8

Building Products (A$m) Property (A$m) Aluminium (A$m)

› Solid performance across most products and segments with some moderation in volumes in the second half of the year

› Includes $14m in long-term growth investments including digital platforms and Inclose façade systems

› Includes Stage 1 of industrial property at Horsley Park, NSW and settlements from the residential development at Chirnside Park, VIC

› Ongoing investment in a number of major projects in Western Sydney

› Higher realised aluminium price offset by significant step-up in electricity costs

119.7

167.6

202.8 214.1 206.5


30.2

23.3

15.0

47.8

38.8


104.3 104.193.1

79.5

36.6


Strong cash flow supports dividends, investment in growth projects and Property

9

Operating cash flow

1. Cash conversion based on operating cash flow (pre-tax, asbestos and significant items) divided by EBITDA excluding asset disposals. Viridian included until 31 January 2019.

A$m YEM19 YEM18 change

EBITDA 348.5 408.2 (15%)

Net profit on asset disposals 44.3 51.2

EBITDA excluding asset disposals 304.2 357.0 (15%)

Net movement in working capital (44.5) (14.7)

Movement in provisions/other 5.2 2.5

Operating cashflows(pre tax, asbestos & sig. items) 264.9 344.8 (23%)

Asbestos payments (29.1) (31.7)

Tax paid (12.1) (40.6)

Significant items (16.4) (23.3)

Operating cashflows(post tax & sig. items) 207.3 249.2 (17%)

Reduced cash flow from Aluminium

Cash conversion1 of 87% following working capital increases to manage plant consolidation and scheduled maintenance

Property capex continued to be self funding in YEM19, with $110m cash inflow from committed sales at Horsley Park, NSW and Rosehill, NSW expected in the second half of YEM20

Final dividend of $65m (13.0 cents per share) 50% franked. CSR policy to maximise the distribution of

franking credits to shareholders

The lower level of franking for the final dividend represents the impact of tax losses realised following the sale of Viridian Glass

Future dividends expected to be in line with CSR’s target dividend payout ratio of 60-80% of full year net profit after tax (before significant items)

Consistent dividend returns

10

Payout ratio

Dividends

Total dividend

50% franking

50% franking

75% franking

100% franking

0% franking

0% franking

0% franking

0% franking

0% franking

X0% franking

8.5 11.5 13.0 13.5 13.0

11.5

12.013.0 13.5 13.0


Interim

Final

$101m $119m $131m $136m

69% 71% 71% 64%

20.0

23.526.0 27.0 26.0

$131m

72%

50% franking

50% franking

75% franking

100% franking

0% franking

0% franking

0% franking

0% franking

0% franking

50% franking

Note YEM18 and YEM19 payout ratio excludes the impact of discontinued operations.

Major Building Products projects include: Hebel – $75m expansion at Somersby, NSW

completed in April 2019

AFS – Rediwall expansion at Minto, NSW and new AFS site purchased in Victoria

Bradford – site purchased in WA

$18m of capex from Hebel project to be included in YEM20

Excluding Hebel, Building Products capex expected to be in line with depreciation in YEM20

Investments to support growth in Building Products

11

Capital expenditure 1 (ex property & acquisitions, A$m)

3243 37 39 37

24

2927

4439


Op capex Dev capex Depreciation

56

7264

83

105

Hebel29

1. YEM19 excludes Viridian Glass.

Depreciation

$78m $83m $89m $84m $65m

68.4 70.9

-11.4-14.3

50.0


Strong financial position going into YEM20

12

Net cash / (debt) A$m YEM19 net cash of $50m

Additional cash to be received in YEM20 $110m from two Property settlements

$78.5m from Viridian deferred settlement

$100 million share buyback launched in March 2019 $9m purchased to date

Share buyback to continue during YEM20

Rob Sindel, Managing Director

BUSINESS UNIT PERFORMANCE

Building Products revenue up 1% with growth from new products

14

EBIT Margin %

1. EBITDA and EBIT (before significant items).2. Excludes cash and tax balances and certain other non-trading assets and liabilities as at 31 March.3. Refer note on slide 5.

EBIT A$m

Revenue up 1% with higher pricing and improved product mix offsetting the moderate reduction in volumes in the second half of the year

Includes $14m in growth investments in CSR Connect digital platform, new product development and Inclose façade systems

10.2 12.1 14.0 13.9 13.1

9.510.7

11.6 11.6 11.1


1H 2H

9.9%11.4%

12.9% 12.8% 12.2%

214.1

3

16

410

206.5

YEM18 Volume and price Market Incrementalgrowth investment

Cost saving andother

YEM19

A$m unless stated 1 YEM19 YEM18 changeRevenue 1,695.9 1,672.2 1%

EBITDA 258.9 265.4 (2%)

EBIT 206.5 214.1 (4%)

Funds employed2 947.4 919.1 3%

EBIT/revenue 12.2% 12.8%

Return on funds employed3 22.1% 23.8%

Growth and resilience of the Building Products portfolio

15

Building Products EBIT A$m Lightweight Systems (including Gyprock and Cemintel) have grown by a CAGR of 13% since YEM14 - ahead of housing starts CAGR up 5%

Rest of Building Products CAGR of 26% since YEM14 includes the benefit of acquisitions and industry consolidation in bricks

YEM14 YEM19Gyprock Cemintel Rest of BP New business development

BP EBIT $206.5m

BP EBIT $91.5m

Gyprock and Cemintel 13%Rest of BP 26%Housing starts 5%

5 year CAGR

47%

5%13%

35%

Broader revenue base from wider addressable market

16

YEM14 Building Products revenue YEM19 Building Products revenue

Lightweight SystemsConstruction SystemsBricksEnergy and Roofing Solutions 39%

13%18%

30%

Revenue $1.0bn

Revenue $1.7bn

16

Lightweight Systems Construction Systems Bricks Energy and roofing solutions

Continued strength in Property earnings

17

A$mProperty EBIT A$m

1. EBIT (before significant items).2. Excludes cash and tax balances and certain other non-trading assets and liabilities as at 31

March.3. Refer note on slide 5. ROFE varies due to timing of projects.

EBIT of $38.8m includes Stage 1 Horsley Park, NSW and sales at Chirnside Park, VIC.

Chirnside Park project has delivered $44 million in EBIT to date (including $12.5m in YEM19). Marketing and construction continuing on the

townhouses and duplexes in Stage 6 during YEM20 and YEM21

A$m unless stated 1 YEM19 YEM18 changeEBIT 38.8 47.8 (19%)

Funds employed2 224.5 185.7 21%

Return on funds employed3 18.9% 29.2%

30.223.3

15.0

47.8

38.8


5 year average

$31m

Major residential projects in Western Sydney

18

Schofields, NSW Bringelly, NSW

Size › 70ha – future residential› Approximately 1,250+ lots › 92 hectares

Zoning › Public exhibition closed in September 2018› Rezoning due for completion in mid 2019

› Future residential (approximately 1,000 lots)› 1.8km south of future Western Sydney CBD

aerotropolis

Area› Rapidly growing area in northwest Sydney› Richmond Road upgrade completed to South Street› North West Rail Link underway – opening in 2019

› Southwest Sydney growth centre › North South Rail link announced

Timing › Stage 1 (approximately 400 lots) to begin development in YEM21 › Rezoning in process for the area

Redevelopment works

› Quarry rehabilitation completed› Masterplan for local planning (roads, lots,

infrastructure)› Studies commencing on rezoning

Market outlook› Infill location, well located in growth area › Marketing to begin in 1.5+ years based on market

outlook

› Residential, key growth area› Government focus on infrastructure spend

Major industrial projects in Western Sydney

19

Horsley Park, NSW Badgerys Creek, NSW

Size › 30 hectares – industrial (current surplus)› 20 hectares – current operating factory › 200 hectares

Zoning › Zoned industrial› Stage 1 – registration and title due for completion in

mid 2019› Future zoning Flexible Employment / Urban land

Area› Established industrial area› Adjacent to Oakdale Industrial Park (Goodman

development)

› Located within the Western Sydney Aerotroplis release area

Timing› Stage 1 – 10 hectares sold in YEM19 for EBIT of

$32 million› Stage 2 – 20 hectares

› Subject to final government rezoning and infrastructure availability – 5 + years

Redevelopment works › Land rehabilitation continues › Applications with government for rehabilitation works

Market outlook › Strong demand from both institutional investors and owner occupiers

› Located adjacent to the future Western Sydney CBD with solid growth prospects once rezoned

79.5

0

60

1222

61

8

36.6

YEM18 Volume PriceA$/t inchedging

A$ alumina Cokeand rawmaterials

Energyrelatedcosts

Other YEM19

Aluminium – earnings impacted by higher electricity costs

20

1. EBITDA and EBIT (before significant items). 2. Includes hedging and premiums.3. Excludes cash and tax balances and certain other non-trading assets and liabilities as at 31 March.4. Refer note on slide 5.

EBIT A$m

Higher coke and pitch costs due to supply

constraints

12 months of new energy contract

and delivered coal costs

Revenue up 11% following 11% increase in realised aluminium price

Delivered EBIT of $36.6m despite $61m in increased electricity related costs (including $27m in delivered coal costs)

Raw material costs including coke and pitch up by $22m offset by the higher realised aluminium price

A$m unless stated 1 YEM19 YEM18 changeSales (tonnes) 213,280 212,801 ̶A$ realised price2 2,939 2,657 11%Revenue 626.9 565.5 11%EBITDA 48.3 97.1 (50%)EBIT 36.6 79.5 (54%)Funds employed3 140.3 120.0 17%EBIT/revenue 5.8% 14.1%Return on funds employed4 28.2% 61.8%

US$ aluminium prices traded in a wide range during the year with the average US cash price per tonne of US$2,035 down slightly from prior year

Australian dollar averaged 72.95 US cents during the year down from 77.36 US cents

Alumina costs higher due to weaker A$

A new two-year contract is now in place for 50% of alumina volumes linked to the US$ aluminium price

A contract for the balance of GAF’s requirements is expected to be finalised within the first half of YEM20

Secured new alumina contract

21

As of 30 April 2019 YEM20 YEM21Average price A$ per tonne (excludes premiums) A$ 2,718 A$ 2,976

% of net aluminium exposure hedged 71% 15%

LME 3m US$ and A$ price per tonne

GAF aluminium hedge book

1,400

1,800

2,200

2,600

3,000

3,400

1-Apr-14 1-Apr-15 1-Apr-16 1-Apr-17 1-Apr-18 1-Apr-19LME 3m US$/t LME 3m A$/t

MARKET AND OUTLOOKRob Sindel, Managing Director

-

10

20

30

40

50

60

Mar

-200

7

Sep-

2007

Mar

-200

8

Sep-

2008

Mar

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9

Sep-

2009

Mar

-201

0

Sep-

2010

Mar

-201

1

Sep-

2011

Mar

-201

2

Sep-

2012

Mar

-201

3

Sep-

2013

Mar

-201

4

Sep-

2014

Mar

-201

5

Sep-

2015

Mar

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6

Sep-

2016

Mar

-201

7

Sep-

2017

Mar

-201

8

Sep-

2018

Mar

-201

9

A$ b

n (M

AT)

Commercial Social

Support for construction demand over the longer-term

23

Increased demand for construction tradesNon-residential construction growth

Australian population growth Stability in detached housing market

Source: ABS cat 8731, 3101, 6291, 6354

0

5

10

15

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Full time employment Vacancies

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Natural increase Net Overseas Migration

0

50000

100000

150000

200000

250000

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Mar

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5

Mar

-200

6

Mar

-200

7

Mar

-200

8

Mar

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9

Mar

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0

Mar

-201

1

Mar

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2

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3

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4

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5

Mar

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6

Mar

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7

Mar

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8

Mar

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9

appr

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Unit 4+ storey Medium density Detached

Property

Outlook for year ending 31 March 2020 (YEM20)

24

• Volumes in the first month of YEM20 remain consistent with the final quarter of YEM19. Mixed economic signals make it difficult to predict building activity levels for the year ahead. CSR is making changes to its operating footprint and overheads to mitigate the impact on earnings.

.

Building Products

• Whilst the quantum of earnings may fluctuate due to the timing of transactions, the ongoing development of a number of major projects will underpin Property earnings over the next 10 years.

Aluminium • Currently 71% of net aluminium exposure for YEM20 is hedged at an average price of A$2,718 per tonne (excluding ingot premiums) as of 30 April 2019.

Year ended 31 March 2019

APPENDICES

Further reductions in asbestos liability

26

Asbestos provision - A$m Product liability provision of A$268m

Provision includes a prudential margin of A$35.7m

Cash payments A$29m during the year37.9 38.4

34.7 33.831.1

27.629.4

31.729.1

449 442424

369351

335312 289 268

0

5

10

15

20

25

30

35

40

45

50

0

50

10 0

15 0

20 0

25 0

30 0

35 0

40 0

45 0

YEM11 YEM12 YEM13 YEM14 YEM15 YEM16 YEM17 YEM18 YEM19

A$ payments A$ provision

Review of significant items

27

Additional information on significant items is contained in Note 3 in the full year report.

$million 2019 2018Significant items from continuing operations:Impairment of Roofing assets (32.8) ―Restructuring costs (11.6) (0.9)Remediation, supply disruption and other costs (4.0) (7.6)Significant items from continuing operations before finance costs and income tax (48.4) (8.5)

Discount unwind and hedging relating to product liability provision (8.0) (8.3)Income tax benefit on significant items from continuing operations 13.5 5.0Significant items after tax from continuing operations (42.9) (11.8)Significant items attributable to non-controlling interests 0.1 0.2Significant items from continuing operations attributable to shareholders of CSR Limited (42.8) (11.6)Loss from discontinued operations after tax attributable to shareholders of CSR Limited (65.3) (12.3)Significant items and discontinued operations loss attributable to shareholders of CSR Limited (108.1) (23.9)Net profit attributable to shareholders of CSR Limited 73.6 186.7Significant items and discontinued operations loss attributable to shareholders of CSR Limited 108.1 23.9Net profit from continuing operations before significant items attributable to shareholders of CSR Limited

181.7 210.6

Earnings per share from continuing operations attributable to shareholders of CSR Limited before significant items

Basic (cents per share) 36.1 41.9Diluted (cents per share) 36.1 41.6

CSR exposure across construction segments

28

NSW/ACT39%

Vic/Tas29%

Qld17%

SA/NT5%

WA4%

NZ5%

Other1%

Detached52%

Medium density

12%

High density

11%A&A7%

Non-res17%

Other1%

80%

90%

100%

110%

120%

130%

140%

150%

160%

170%

Mar

-07

Sep-

07M

ar-0

8Se

p-08

Mar

-09

Sep-

09M

ar-1

0Se

p-10

Mar

-11

Sep-

11M

ar-1

2Se

p-12

Mar

-13

Sep-

13M

ar-1

4Se

p-14

Mar

-15

Sep-

15M

ar-1

6Se

p-16

Mar

-17

Sep-

17M

ar-1

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p-18

Mar

-19

Net sales indices CSR BP Work done

Source: ABS-CSR analysis.Note: CSR Building Products revenue normalises impact of the PGH Bricks JV. Work done –weighted index based on CSR estimate of exposures to constructions market segments.

End market exposure

Regional exposure

Indexes CSR Revenue vs Market Activity (Work Done)

Documents

RESULTS PRESENTATION - Corporate...Completed sale of Viridian Glass consistent with strategy to deliver targeted returns of 15% ROFE › Network optimisation to reduce volumes from