CSR has a maintained Hold / Medium Risk recommendation from Australian stockmarket analyst Macquarie Research Equities.

CSR Ltd: Building Products Surprise, Sugar Disappoints

Result Ahead — CSR's underlying result of $192.8m was ahead of our $181.0m estimate. The main areas of difference were a stronger-than-expected result in the property division and a weak result in sugar.

Earnings downgrades — We have downgraded our FY09E earnings by 4% and FY10E earnings by 5% to reflect the moderation in residential construction activity, revised sugar hedge book positions, lower sugar price, and a higher effective tax rate.

Risks to earnings remain on the downside — The challenge will be management's ability to manage margins though the cycle, but we note the recent large capex spend will assist earnings growth when volumes recover.

YEM09 Guidance — Mgmt indicated that Sugar and Building earnings should be ahead of last year and Aluminum earnings are likely to be flat, while Property sales should be in the range of $35-$40m. Our forecasts reflect this.

Rating and Target Price — We maintain our Hold / Medium Risk recommendation on valuation grounds and see further downside risk to earnings from a slowdown in both residential and commercial construction activity.