CSR to create separate sugar business

Posted by Daniel Palmer on 17th June 2009

CSR, Australia’s largest sugar producer and exporter, is planning a separation of their sugar and building products businesses.

The company advised investors this morning that they were “proceeding with final evaluation and due diligence to confirm the benefits of undertaking a demerger”, which would see two separate listing on the ASX.

If the demerger goes ahead it will ensure the creation of a Sugar and Renewable Energy business, and a Building Products business and Property division.

“Today’s announcement is an important step in the evolution of CSR’s strategy and underlines the Board’s resolve to maximise shareholder value from CSR’s mix of businesses,” CSR’s Chairman, Dr Ian Blackburne, explained. “The proposed demerger recognises the fundamentally different strategic and operational characteristics of CSR’s businesses and is expected to facilitate better recognition of their value over time by creating two ASX-listed companies.”

CSR has been hit hard by the global financial crisis, with profits falling by 30% in the year ended March 31. A marked deterioration in the residential and commercial construction markets more than offsett a strong result in their sugar division.

CSR’s Managing Director, Mr Jerry Maycock, advised that the iconic company, founded in 1855 as the Colonial Sugar Refining company, had been reviewing its portfolio “for some time” to determine the potential of a successful demerger.

“This has included the creation of more independent management within each business and adding directors to the CSR Board with skills relevant to a standalone Sugar business,” he advised. “However, very difficult market conditions, particularly with the onset of the global financial crisis last year, delayed any decision to proceed with the demerger proposal at that time.”

“Improving market conditions, combined with the stronger performance and outlook for the Sugar business, mean it is now an appropriate time to move forward with this proposal and address any issues associated with a demerger through formal due diligence.”

The Sugar and Renewable Energy business is the clear market leader in raw sugar milling in Australia. It also has leading positions in sugar refining, ethanol production and cogeneration of renewable energy, with a growing proportion of stable earnings from these businesses.

Mr Maycock said further investigation of the proposed demerger would proceed as quickly as possible with an objective of completing any restructure by the end of March 2010. Any decision to proceed with a transaction would also be subject to formal due diligence, a range of regulatory and statutory approvals, finalisation of appropriate capital structures for the two companies, market conditions and finally, shareholder and court approval of a scheme of arrangement.