The CSR Limited (ASX: CSR) share price has fallen 1.57% on the back of its annual general meeting (AGM) held today. CSR is a leading building products company in Australia and New Zealand which has been in operation for 165 years.
The AGM follows the release of the company's full year results for year ended 31 March 2020 (YEM20) in which it delivered a statutory net profit of $125 million.
The CSR share price has fallen 7.4% over the past 12 months. This is in contrast to the S&P/ASX200 Index (ASX: XJO) which has declined 10.3%.
Let's discuss the trading results, financial position and outlook released in the AGM announcement today.
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Trading results
Managing director Julie Coates gave an update on the trading results in her address at the AGM:
"For the first 11 weeks of the current financial year (on a like for like basis), building products revenue in Australia is down 3%. Including the impact of New Zealand COVID-19 restrictions, the decline is 5%."
The trading results were in line with CSR's expectations of a slowdown in activity. As a result of the continuing uncertainty surrounding coronavirus, no guidance was provided by the company for YEM21.
Financial position
CSR's financial position remains strong with a net cash position of $95 million at 31 March 2020. An additional $200 million facility is available should the need arise.
The company has decided to pause dividends and its share buyback, again due to uncertain economic outlook. Before the pause, CSR had returned $69 million in dividends in YEM20 and more than $69 million in an on-market share buyback which commenced in March 2019.
Outlook
Julie Coates gave some guidance regarding the outlook for the construction industry.
"Current lead indicators such as new homes sales in Australia during April and May are down 19% compared to the same period last year. This provides some indication of lower activity expected later in the year due to the lag in demand for our products, noting there will also be benefit from the announced government stimulus measures, but the timing and extent remains uncertain."
The government stimulus Julie is referring to is the federal government's $25,000 HomeBuilder grant. This provides eligible owner-occupiers with cash to substantially renovate an existing home.
Is the CSR share price a buy?
In my view, an investment in CSR Limited looks to be risky in light of the downturn in new home sales. Furthermore, it's too early to tell if the government stimulus will have its desired impact on the construction industry. From my perspective, this assistance also serves to reinforce the severity of the downturn facing the sector.
Having said that, weakness in this cyclical industry could be a great entry point for the contrarian investor as the industry recovers.
