CSR boss Rob Sindel has problems most chief executives would die for: too much cash and a question mark over where he is going to spend it.
You would think again about a building products company not making money in the present climate, and with on-hand funds approaching 20 per cent CSR (CSR) is doing very nicely thank you.
Glass the only dud in the pack yielding only a 2.6 per cent rate of return.
Pre-Rob Sindel the company spent the better part of $1 billion on its Viridian glass business which has been a disaster, as shown by the $2.3 million in earnings in the latest half and the fact its value was written down to $200 million a couple of year’s back.
Sindel thinks the division has turned and he is happy with its growth trajectory. Then again, if it isn’t earning in this climate it never will.
The building market is strong and with stellar returns from its aluminium division CSR will have around $50 million net cash on its balance sheet at the end of the financial year.
In the old days that was called a lazy balance sheet, but the global financial crisis is still strong in some minds and the plight of Origin et al has our debt into a different category this time around.
Sindel also has an asbestos liability, which at last count was up around the $344 million mark. This acts as quasi debt for the company and it certainly weighs on directors’ minds when the inevitable “conga line” of investment banks knocks on the door wondering about a buyback or special dividends.
The trick for Sindel is to continue finding accretive acquisitions to grow earnings, which is not so easy at this stage of the building cycle.
It’s a nice problem to have and one Sindel is in no hurry to throw away, nor to lose in an investment bank-friendly share buyback.
Full year earnings will be closer to $162 million than $128 million, and right now it’s the best of times for CSR.
This article was taken from here.