[PDF] - RESULTS PRESENTATION HALF YEAR ENDED 30 SEPTEMBER 2008 5 November PDF Document

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RESULTS PRESENTATION

HALF YEAR ENDED 30 SEPTEMBER 2008

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5 November 2008

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Presentation agenda

Introduction and overview Jerry Maycock, Managing Director Divisional results – Building Products, Sugar, Aluminium and update on Capital Projects Jerry Maycock Property and Capital Management Shane Gannon, CFO Strategic overview and outlook Jerry Maycock

Intro Building Products Sugar Outlook Property Aluminium Capital

SLIDE 2

INTRODUCTION

steady result in difficult market conditions JERRY MAYCOCK

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Earnings increase in difficult market conditions

Group EBIT increased by 12 per cent to $177.4m

In difficult market conditions CSR increased group EBIT by 12 per cent
Stronger result from Sugar reflects higher raw sugar price and continuing improved

returns from Refining and Ethanol – earnings weighted to second half of year

Significant operational improvement programmes across Building Products portfolio to

maintain competitive position in deteriorating residential housing market

Aluminium earnings slightly ahead through higher realised price after hedging
Solid first half contribution from Property

CSR continues to build medium term position

Continue to manage through challenging building cycle, operational improvements

provide recurring benefits – Building Products well positioned for upturn in cycle

Value adding capital upgrade program is now significantly advanced with several

major projects at or near completion

Positive longer term fundamentals remain for sugar, aluminium
CSR well positioned for medium term growth

Intro Building Products Sugar Outlook Property Aluminium Capital

SLIDE 3

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Financial results summary

+40.4 (39.1) (54.9) Net Finance Expense +7.3 (30.2) (32.4) Tax Expense +10.8 (16.6) (18.4) Outside Equity Interests 6c 6c Interim DPS (fully franked) 8.2c 7.2c EPS pre sig. items (51.3) 67.5 32.9 Net profit after sig. items (0.8) 72.3 71.7 Net profit pre sig. items +12.1 158.2 177.4 EBIT +11.7 229.1 255.9 EBITDA +16.5 1,552.2 1,807.6 Trading Revenue %∆ 2007 2008 A$m

EBIT 12% ahead of

previous period

Like for Like Group EBIT

(excl Viridian) up 5%

Significant items include

asbestos provision of $48m

Finance expense

represents impact of increased net debt (predominantly to fund acquisitions)

Higher no. of shares on

issue impacts EPS

Interim Dividend

maintained at 6 cents per share, fully franked

Intro Building Products Sugar Outlook Property Aluminium Capital

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EBIT by Division

Building Products up

but weak residential market and cost pressures affect ‘like for like’ EBIT (down 7% ex Viridian)

Higher average

realised price and earlier start to the season improves Sugar earnings from poor previous period

Aluminium earnings

slightly ahead

Property earnings

weighted to 2nd half

Group EBIT ahead in

difficult markets +12.8 66.3 74.8 Building Products +12.1 158.2 177.4 Total EBIT 4.6 0.4 Restructure and Provisions (8.6) (8.6) Corporate +65.8 7.6 12.6 Property +6.8 65.9 70.4 Aluminium +24.1 22.4 27.8 Sugar %∆ 2007 2008 A$m

Intro Building Products Sugar Outlook Property Aluminium Capital

SLIDE 4

BUILDING PRODUCTS

managing through the cycle to position for growth

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Building Products revenue summary

n/a 104.8* 248.2 +4.4 159.0 166.0

Bricks and Roofing

+12.8 142.2 160.4

Performance Systems

+12.2 213.7 239.7

Lightweight Systems

% ∆ 2007 2008 Trading Revenue A$m

Price increases

implemented across portfolio

Reasonable

plasterboard volumes in Q1 commercial markets & insulation to all segments

Easter fell in first half

last year

Abnormal energy -

related cost increases incurred in first half

Accelerated operational

improvement programs in response to weaker markets

Intro Building Products Sugar Outlook Property Aluminium Capital

*3 months of Pilkington only

SLIDE 5

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Residential commencements lower than previous forecasts

Australia YEM09 Dwelling Commencements Forecasts 140 145 150 155 160 2007 Forecast 2008 Forecast

Dwelling Commencements ('000)

Residential market represents ~ 70% of sales in Building

Products

Continued weak residential market activity affects market

volume

Dwelling commencements have fallen further than forecast

from previous year

Latest BIS Shrapnel forecast commencements for YEM09 –

147,000 vs previous forecast of 155,000 and YEM 08 actual of 156,000

New Zealand – considerable decline in forecast

commencements and YEM 08 actual of 25,600

Source BIS Shrapnel Dwelling Commencement Comparison - Australia

100 110 120 130 140 150 160 170 180 190 200 Jun-93 Dec-93 Jun-94 Dec-94 Jun-95 Dec-95 Jun-96 Dec-96 Jun-97 Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Commencements ('000) May07 Forecast Oct08 Forecast Actual Source BIS Shrapnel

New Zealand YEM09 Forecast Comparisons

15 20 25 2007 Forecast 2008 Forecast D w e llin g C o m m e n ce m e n ts ('0 0 0 )

Source: Infometrics

Intro Building Products Sugar Outlook Property Aluminium Capital

5% decline 21% decline 10

Underlying demand in Australia continues to accumulate

Dwelling Commencements - State (MAT)

10000 20000 30000 40000 50000 60000

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Number of commencements

NSW VIC QLD SA WA TAS ACT NT Source: ABS

Total forecast commencements

in YEM 09 of 147,000 (BIS Shrapnel) vs underlying demand

f 180,000 - underlying demand

at record levels

Housing demand drivers:
Affordability

declining interest rates government stimulus package

Demographic Trends

immigration levels remain high strong population growth move to medium density

Land availability

land release

Dwelling Commencements vs Underlying Demand

100 120 140 160 180 200 220 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Dwellings ('000)

Dwelling Commencements Underlying Demand

Forecast Source: BIS Shrapnel, CSR Analysis

Intro Building Products Sugar Outlook Property Aluminium Capital

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Viridian – synergies achieved ahead of target

Weaker markets and rising input costs

have affected returns

Sharp unbudgeted increases in energy

related key inputs (e.g. energy, PVB)

Price increases and freight recovery

charges implemented

Additional cost out and price increases

expected to recover substantial portion of negative volume and input cost impact

Dandenong shut down in first half will

skew earnings to 2nd half

On track to meet original synergy target
f $33m by YEM 10 – YEM09 synergies

will exceed $22 million

Positive market for energy efficient glass
Viridian sales of energy efficient glass

up over 50% on prior period

Further encouraging regulatory signals
n energy efficient glass

12.7* 25.1 EBIT 18.8* 39.4 EBITDA 104.8* 248.2 Trading Revenue Sept 2007 Sept 2008 A$m

* Three months Pilkington Intro Building Products Sugar Outlook Property Aluminium Capital

Coating Plant at Dandenong to support new CVD coater to produce low e glass

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Managing through cycle for cyclical upturn

Operational and revenue improvement initiatives have also been accelerated across the rest of the Building Products portfolio:

Intro Building Products Sugar Outlook Property Aluminium Capital

Gyprock

Reduction in overheads
Reduction in factory operating costs
New product releases

Cemintel

Factory headcount reduction

Bricks & Roofing

Realisation of the full year benefits from a further reduction

in overheads

New product releases

Bradford

Improved labour utilisation
Reduced waste
Leverage Asia sourcing in construction of new plant

Building Products organisation

Combined structure to drive efficiency and productivity

SLIDE 7

SUGAR

higher realised price and continued growth in refining and renewables

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Sugar earnings up on higher realised price and improved earnings in Ethanol and Refining

Higher average

realised price improves Sugar earnings

Fertiliser sales and

fuel ethanol sales drive improved ethanol earnings

Refining continues to

grow as margins and service propositions improve

Raw sugar earnings,

ethanol weighted towards second half

f year

+164.7 1.7 4.5 Ethanol (1.6) (2.7) Other 3.5% 3.9% EBIT margin +7.8 16.6 17.9 Refining +42.1 5.7 8.1 Raw Sugar Milling EBIT by Business +24.1 22.4 27.8 EBIT +10.7 642.0 710.9 Trading Revenue %∆ 2007 2008 A$m

Intro Building Products Sugar Outlook Property Aluminium Capital

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Continuing to build a stable earnings base in Sugar

CSR continues to build more stable earnings base in Sugar business Refining – margins continue to improve towards import parity Ethanol – despite wet start to season, good demand experienced across all markets (fuel, agricultural services and industrial) Challenges of wet weather/reduced crop and collapse of clarifier at Pioneer off-set by increased raw sugar price Pioneer incident to extend season in Burdekin by approx 3-4 weeks compared to “average” season

Intro Building Products Sugar Outlook Property Aluminium Capital

Yarraville Refinery (upgrade) 10 20 30 40 50

2002 2003 2004 2005 2006 2007 2008*

Herbert Mills (4-4.5mt) Burdekin Mills (7.5-8.5mt) Plane Creek Mill (1.2-1.4mt)

Days of crushing lost to wet weather

* First Half 16

Longer term fundamentals support sugar price Good prices in A$ terms

Longer term trend for sugar price is

positive, supported by: – Continued rising costs of production in Brazil – Indian production moving towards deficit – Increasing demand for Brazilian fuel ethanol which tightens sugar supply

A$/Brazilian Real cross rate remains steady
CSR mills remain competitive with Brazil

150 200 250 300 350 400 450 500 550 600

Sep- 01 Mar- 02 Sep- 02 Mar- 03 Sep- 03 Mar- 04 Sep- 04 Mar- 05 Sep- 05 Mar- 06 Sep- 06 Mar- 07 Sep- 07 Mar- 08 Sep- 08

A$ per tonne 4 6 8 10 12 14 16 18 20 22 USc per pound

A$ per tonne USc per pound

Intro Building Products Sugar Outlook Property Aluminium Capital

150 200 250 300 350 400 450 500 550 600

Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 A$ per tonne

4 6 8 10 12 14 16 18 20 22

USc per pound A$ per tonne USc per pound

SLIDE 9

ALUMINIUM

earnings slightly ahead through higher realised price

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Aluminium earnings slightly ahead

0.84 0.916 US$/A$ average rate 23.3% 25.3% EBIT Margin 2,702 2,913 LME/US$ tonne 3,217 3,179 LME/A$ tonne +6.8 65.9 70.4 EBIT (1.5) 282.5 278.2 Trading Revenue +1.1 3,033 3,065 Ave realised price per tonne (2.5) 93,137 90,764 Sales (‘000 tonnes) %∆ 2007 2008 A$m

Revenue down

slightly due to planned recovery of inventory levels

EBIT slightly ahead

in first half mainly due to higher realised price

Around 80% of net

aluminium exposure hedged at A$3,037 per tonne for second half

Intro Building Products Sugar Outlook Property Aluminium Capital

SLIDE 10

UPDATE ON CAPITAL PROJECTS

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Capital projects to strengthen market position

Intro Building Products Sugar Outlook Property Aluminium Capital

On track for commissioning in Dec 2008 Expected Final Cost $8m Relocate rockwool plant, finalise consolidation on Guangzhou site Initial cost estimate $8m Bradford ™ rockwool Line 2 Guangzhou Stage 1 Gypsum handling shed commissioned in October 2008. Higher costs due largely to under- estimate of gypsum handling. Higher expected cost inflation over the 3 year duration. Total project due for completion mid/late 2010. Expected Final cost $168m upgrade/ expansion of plasterboard factory/distribution hub Initial cost estimate $140m Gyprock™ factory upgrade, Yarraville Almost complete – target completion date Dec 08. Scope change to allow for additional product range Expected final cost $55m Construct glasswool manufacturing insulation plant Initial cost estimate $50m Bradford™ glasswool insulation plant, BNE Equipment manufacturing commenced – scheduled for completion July 09 Expected final cost $18m Upgrade to produce 60ml of fuel grade ethanol Initial cost estimate $18m Sarina Ethanol Distillery 80 per cent complete -scheduled for completion by July 2009 Expected final cost $56m Upgrade of refinery to improve operational efficiency Initial Cost estimate $56m Yarraville Sugar refinery Commenced upgrade at Clayton (VIC) – finalised by March 2009 Expected Final Cost $38m YEM09, YEM10 under review Install fully automatic double glazed glass unit production capability and Australia–wide integrated software solution Initial Cost estimate $40-50m in each of YEM09 & YEM10 Viridian Downstream processing operations Glass plant successfully commissioned in October

2008. CVD coater to be commissioned in March

2009 Expected Final cost of $132 m due to asbestos removal and IR costs Upgrade of factory to increase capacity and install CVD coater to produce energy efficient (low e) glass. Initial Cost estimate $120m (net of Vic Govt grant of $20m) Viridian™ Dandenong plant upgrade

Status Description Capital Project

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PROPERTY

solid development pipeline SHANE GANNON

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Property – solid development pipeline earnings weighted to second half

5.2 7.2 Capital Investment 7.6 12.6 EBIT 2007 2008 A$m

Half year EBIT main

contributor - land sales from Darra

Capital investment attributed

(mainly) to earthworks and site remediation

Major transactions in

negotiation and/or near completion: Industrial property, Darra Brisbane – contracts exchanged 26 lots, settlement subject to site construction expected early 2009 Site disposal, Welshpool, WA – marketing program commenced

Continue to advance a mix of

industrial and residential projects in Queensland, Victoria and NSW

Intro Building Products Sugar Outlook Property Aluminium Capital

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CAPITAL MANAGEMENT

Strong focus on cash flow and capital management improvements

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Capital management – balance sheet

926.8 1,021.3 Shares on issue (million) 2.1 2.4 Leverage ratio (times) 7.8 5.2 Interest cover (times) 42.4% 44.5% Gearing (net debt / net debt + equity) 1,086 1,342 Net debt (A$m)

Sept 2007 Sept 2008

A$m

Intro Building Products Sugar Outlook Property Aluminium Capital

Net debt slightly higher than

target primarily due to timing

f key receipts
Key Funding ratios i.e.

leverage ratio and interest cover well within bank covenants

Refinancing of Medium Term

Note due to be refinanced in March 09 now complete

DRP to remain in operation

for interim dividend

Average maturity of net debt

2.8 years

SLIDE 13

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Capital management – operations

(20) (34) Other 147 73 Cash Flow from Operations (21) (109) Working Capital Change (34) (33) Tax Paid (7) (7) Significant Items 229 256 EBITDA

Sept 2007 Sept 2008

A$m

Intro Building Products Sugar Outlook Property Aluminium Capital

Working capital affected by

delay of to after balance date key receipts. Specifically: aluminium shipment $38m, sugar advance payments

Significant items - primarily

Viridian integration costs

Effective tax rate 26.4%
Interim dividend 6 cents per

share, fully franked, payable 12 December 2008

Credit management remains

key focus – No major adjustments (to date) in debtors bad debt provision

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Capital management – investing

Total capital expenditure

$229 million representing:

perating (stay in

business) $135m development $94m

Major spend of development

expenditure was in Building Products - $84m

Majority of operating capital

expenditure allocated to Building Products ($70m) and Sugar ($48m)

Minimal M&A activity during

period, ~ $10m

Operating capital program to

revert to levels consistent with depreciation charge from YEM10 onwards

Intro Building Products Sugar Outlook Property Aluminium Capital

(828.5) (119.0) Net Cash used in investing (712.7) (11.6) Purchase of controlled entities and businesses 25.1 121.9 Proceeds of sale of property plant and equipment (140.9) (229.3) Purchase of property plant and equipment

Sept 2007 Sept 2008

A$m

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Debt maturity

Funding and maturity (A$ millions)

Total existing debt facilities Less MTN Remaining bank facilities Net Debt at 30 September $1,921 million $200 million $1,721 million $1,342 million

Intro Building Products Sugar Outlook Property Aluminium Capital

YEM Maturity Profile

350 230 169 175 370 105 322 200

2H YEM09 1H YEM10 2H YEM10 1H YEM11 2H YEM11 1H YEM12 2H YEM12 1H YEM13

Additional bank facilities in place to retire MTNs when due.

STRATEGIC OUTLOOK

JERRY MAYCOCK

SLIDE 15

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CSR well positioned for growth

Completion of most of the capital reinvestment programs in YEM09 starts to liberate cash flow for debt amortisation Building Products development projects add to substantial operational leverage from cyclical upturn in the residential housing cycle, and growing demand for energy efficiency in the built environment Sugar to benefit from reinvestment in mills, positive raw sugar price fundamentals and a growing proportion of refining and ethanol earnings Aluminium continues to provide steady cash flows from Tomago, with excellent position on global cost curve Property continues to liberate value and generate cash flow CSR has good growth potential, and may be able to generate additional shareholder value by restructuring its asset portfolio under more favourable market conditions

Intro Building Products Sugar Outlook Property Aluminium Capital

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Outlook YEM 09

Building Products

– Too soon to see meaningful positive impact of stimulus package on residential leading indicators. Commercial market softening – EBIT expected to be similar to last year

Sugar

– Refining and renewables to continue earnings growth – Based on current hedge book, fx rates and forward curve, realised sugar price improvement expected to outweigh effect of Pioneer incident and wet weather. Assuming reasonable finish to season, total Sugar EBIT expected to be higher than last year

Aluminium

– Carbon material costs likely to have peaked, but benefits won’t be seen this year. Tomago competitive position on cost curve and lower A$ supports earnings – EBIT expected to be slightly lower than last year

Property

– EBIT expected to be in the sustainable range of $35-40m, subject as usual to timing

f transactions
GROUP LEVEL

– Group EBIT expected to be in line with last year – NPAT and EPS to reflect provision adjustments and more shares on issue

Intro Building Products Sugar Outlook Property Aluminium Capital

SLIDE 16

APPENDIX

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Forward Pricing update – Sugar

Realised raw sugar price A$ per tonne IPS

Further hedging to lock in attractive exchange rates and prices on market rallies (includes fixed price contract)

100 200 300 400 500

YEM 04 YEM 05 YEM 06 YEM 07 YEM 08 YEM 09 YEM 1 YEM 1 1 YEM 1 2

89% hedged @ ~ A$315 49% hedged @ A$360 40% hedged @ A$407 19% hedged @ A$433 $A per tonne IPS

as at 31 October 2008

Intro Building Products Sugar Outlook Property Aluminium Capital

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Hedging update – Aluminium

100 123 173 132 111 165

50 100 150 200 250 300 HYEM09 YEM10 Beyond Aluminium Currency

Average hedged aluminium price A$ per tonne A$3,716 A$3,116 A$3,037 % of net aluminium exposure hedged1 N/A 57% 80% Average hedged aluminium price US$ per tonne US$2,657 US$2,254 US$2,280 Average currency rate in US cents 0.715 0.724 0.751

Aluminium Hedge Book US$ millions

1. CSR hedges net aluminium exposure which takes into account the natural hedge involved in alumina purchases. Net aluminium exposure equates to around three quarters of metal production. Figures as at 31 October 2008.

A luminium price - LME A$per tonne 500 1000 1500 2000 2500 3000 3500 4000 4500 31/10/03 31/10/04 31/10/05 31/10/06 31/10/07 31/10/08

A$ per tonne

Intro Building Products Sugar Outlook Property Aluminium Capital

RESULTS PRESENTATION

HALF YEAR ENDED 30 SEPTEMBER 2008

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5 November 2008