CSR Limited today announced anet profit after tax of $160.2 million for the year ended 31 March 2004, down6.7% from its continuing businesses due to a significant fall in raw sugarprices. Profit from Aluminium improvedstrongly while returns from Building Products were lower in a softeningbuilding market in Australia. Earningsper share were 17.1 cents compared with 18.3 cents last year.

Tradingrevenue from CSR’s operations reduced by 3.9% to $1,971 million due to lowerSugar revenue. Earnings before interest and tax (EBIT)were down 4.7% to $262.7 million. Excluding a $10.5 million one-off restructure charge, EBIT was in linewith the previous year.

CSR’s diversified range ofbusinesses ensured strong cash flow generation of $290 million and thereturn on funds employed remained steady at 20.1%. CSR Limited distributed $154 million to shareholders during theyear in the form of dividends and a share buyback.

Keyfacts

1. Theprevious period results shown here exclude the Rinker Materials Corporation andReadymix businesses demerged from CSR on 28 March 2003. Corporate costs have also been adjusted toreflect the demerger.

2. Breakdownof net operating cash flow between continuing operations and discontinuedoperations is not available.

3. Based onpast 12 months EBIT divided by funds employed as at 31 March.

Overview

“CSR has delivered a satisfactory result inits first full year of operations following the successful demerger in March2003 of the heavy building materials businesses of Rinker Group Limited. It was a particularly challenging year as A$raw sugar prices fell by 17%. AlthoughSugar profits fell, we achieved a strong result from Aluminium with EBIT up14%. Building Products’ results were down slightly as the building market hasdipped from the previous year,” said Managing Director and CEO Alec Brennan.

“CSR last yearreturned $154 million to shareholders, an amount equivalent to just under 10%of CSR’s current market capitalisation – by way ofdividend payments and a share buyback. It also utilised its balance sheet to pursue some $237 million of growthinitiatives allied to its existing businesses. We see continuing opportunities to grow CSR while strengthening thelong-term capabilities of our businesses,”Mr Brennan said.

Financial review

CSR’s financial position remainsstrong, with net debt at 31 March 2004 of $164.1 million, down 27.4% from$225.9 million at 31 March 2003. Strongcash generation enabled the company to reduce net debt by $61.8 million afterfunding capital investments, share buyback and dividend payments. Gearing (net debt/net debt + equity) of12.5% is well down from the already modest rate of 16.4% at 31 March 2003. It is expected that gearing will increase tothe 25% range in future periods as funds are allocated to previously announcedprojects.

The board has decided that CSR will enter into taxconsolidation with effect from 1 April 2004. Initial indications are that CSRwill gain a one-off benefit of at least $35 million reflecting the increase infuture tax deductions arising from reset tax values. This benefit will berecognised in CSR's net profit forthe year ending March 2005.

Extendingshare buyback to purchase an additional 5% of CSR shares

In May 2003, CSR announced anon-market buyback of up to 5% of its shares. To date, 64% of the program is completed with 30.1 million sharespurchased for an average price of $1.81. The current buyback period concludes on 10 June 2004.

The board has decided to buyback up to a further 5% of CSR shares during the 12 months commencing mid-June2004.

Final dividend

Thedirectors have declared a final dividend of 6 cents per share, payable on 1July 2004. Franking has been maintainedat 70%. The total dividend for the yearending 31 March 2004 remains at 11 cents per share in line with the previousyear (pro-forma for the demerger of Rinker). CSR is confident of returning to full franking with the next interimdividend payment to be announced in November 2004.

Reviewof results by segment

Building Products – improved prices for all products Tradingrevenue of $918 million was up 2.4% with price increases achieved for allproducts. Earnings before interestand tax were $112.6 million and included $5.5 million of additionalfactory commissioning costs. Excludingthese costs, the operating result was only slightly below EBIT in the previousyear of $119.7 million.

Aluminium – EBIT up 14.2% EBIT rose 14.2% to $144.2 million on trading revenue of$449 million largely due to a strong increase in US$ aluminium prices andprior year hedging of exposure to the A$/US$ exchange rate.

Sugar – difficult conditions as global prices reachrecent lows EBIT of $37.6million was down from $70.8 million the previous year as the A$ price for rawsugar fell 17% to $229 a tonne – the lowest price in recent years. The sugarcane crop was slightly larger,despite the effect of continuing drought. Productivity improvement initiativesunder way with growers in CSR’s milling regions are contributing to improvedcrops.

Property – $15.9 million EBIT In May 2003, CSR announced a majorresidential development of a site in Woodcroft, Sydney. This project, withother Property activities, contributed $15.9 million in EBIT. Increasedcontributions from Property activities are expected in future years.

$237 million of growth projectsannounced

Building Products In April2004, CSR expanded its operations in the rapidly growing southern Chinainsulation market by leasing a modern glasswool insulation manufacturing plantin Nanning, capital of Guangxi province. This low cost project expandsglasswool production by 6,000 tonnes a year and will be operated in conjunctionwith CSR’s efficient 8,000 tonne a year glasswool factory in Zhuhai, 100kilometres west of Hong Kong.

Aluminium In November 2003, Gove AluminiumFinance (GAF) (70% CSR) committed to invest $75.7 million as its share ina project to expand capacity at the Tomago aluminium smelter, near Newcastle,New South Wales, by 15% over the next three years.

Sugar In September 2003, CSR announced a $100 millioninvestment to build a 63 megawatt electricity plant at the Pioneer raw sugarmill in the Burdekin River region, North Queensland. This will expand CSR’scommercial generation of renewable electricity – fuelled by sugarcanewaste fibre produced in the milling process. Similar projects at two or threeother mills are being considered.

In April 2004, CSR agreed topurchase an additional 25% in the refined sugar joint ventures Sugar Australiaand New Zealand Sugar Company for $61 million. This brings CSR’s stake in the refiners to 75%.

Outlook for the full year to March2005

The commercial environment forCSR is subject to a number of influences, including movements in currencyexchange rates, interest rates, commodity prices and levels of building activity.

Building Products We expect the slowdown in residentialbuilding to continue this year, with demand for new dwellings likely to fall byat least 5%. This should be partly offset by continued growth in thealterations and additions market and in the commercial building sector. Despite the softening market conditions, weexpect returns to be in line with last year due to efficiency gains and lowercosts.

Property’scontribution is expected to increase significantly, although timing isdifficult to predict precisely, due to the need to finalise regulatoryapprovals and commercial negotiations.

Aluminium We expect lower A$ returns will reduce GAF’sEBIT by at least 10%. Stronger worldeconomic growth is expected to result in increased US$ aluminium prices in themedium term.

Sugar Continuing low world raw sugar prices willadversely impact raw sugar returns, although the weaker A$, if sustained, willhelp offset this. The outlook for this year’s sugarcane crop has improved dueto better weather and continued improvement from sugar industry productivityinitiatives.

Overall The uncertain outlook for raw sugar makes itdifficult to predict CSR’s overall profit outcome for the year. Although somebuilding product markets are slowing, we expect additional cost savings as aresult of operational improvements and the significant reduction in overheadsto offset these factors.

At this early stage in the year,we expect to achieve a CSR pre-tax result broadly in line with last year.

Priorities for the year ahead

CSR has a number of prioritiesto improve business performance and maximise value for shareholdersincluding:

· further improving safety and environmental performance;

· continuing to lift operational and distributionperformance at our factories to drive unit costs down;

· successfully completing the major capital works now underway and maximising value from these projects;

· maintaining active capital management while seekingopportunities for further value creating growth in areas related to CSR’sexisting businesses.

Summaryof operations by business

Building Products

1. Total recordable injury frequency rate – the number oflost time, medical treatment and restricted work injuries per million workhours.

Tradingrevenue was $918 million, slightly ahead of the previous year due to a strongincrease in pricing. This improvementwas achieved despite a 3.3% drop in residential starts (year to December 2003).The fall was higher in two main markets, New South Wales and Victoria, whichaveraged a drop of 10.1%. This waspartly offset by strong growth in Queensland’s residential market, and inAustralia’s commercial construction market. EBIT reduced to $112.6 million from$119.7 million the previous year, due mainly to costs of $5.5 millionrelated to problems in commissioning the Rosehill, Sydney, concrete roof tile factory.

While operational performanceimproved EBIT by $7.7 million, further supplementary maintenance and capitalspending during the year ahead is needed to resolve cost issues in a few of ourfactories.

Building Products successfullylaunched several new products. The new SAP integrated computer and managementsystems are working well. All businesses are striving to ensure that we gainfull advantage from the better information to reduce costs and improve customerservice.

CSR has eliminated a layer ofsenior management to further reduce costs – the executive general managers ofthe Building Products businesses now report directly to CSR Managing DirectorAlec Brennan.

Pricesincreased in most markets

GyprockÔPlasterboard, Fibre Cement and Hebel revenue of $408 million was6.9% above the previous year. Pricesand sales volumes increased although returns were lower due to the acquisitionof additional distribution centres and increased costs required to meet ahigher than expected level of demand. CSR GyprockÔincreased its sales of value added wall and ceiling lining products designed toimprove sound insulation and water, fire and impact resistance. Market sharewas maintained despite a fourth competitor entering the east coast market.

CSR Fibre Cement sales volumes were steady despite increasedcompetition from imports. We successfully launched the CSR ExpressWall™compressed exterior lining sheets in the commercial market.

HebelÔLightweight Concrete Products Hebel lightweight panels increased volumes and profits due tostrong demand from the multi-residential market.

CSR Roofing revenuewas $173 million – down 4.7%. Salesvolumes for MonierÔ and WunderlichÔ rooftiles were lower as the residential market slowed. However, prices and profitmargins rose. Although delays in commissioning the Rosehill concrete roof tileplant significantly reduced profitability, the factory is gradually increasingproduction and improving efficiency. A launch of new, stylish Wunderlich™ flatprofile roof tiles has been well received by the market.

PGHÔ Bricksand Pavers increased revenue by 3.6% to $168 million. A strong increase in prices improved returnsalthough volumes fell slightly. An increased share of the multi-residentialmarket helped offset the effect of a slowdown in the detached housing market.Capacity constraints limited our ability to meet higher demand in some markets.Plans are well advanced to expand the capacity of the low cost plant at Oxley,south of Brisbane and also to significantly lift production at the Aucklandfactory.

CSR Insulation revenuefell 3.7% to $145 million. InAustralia, profitability of Bradford Insulation increased as pricesimproved with steady sales volumes and better cost control. Improved packagingequipment being installed at our Ingleburn, Sydney, glasswool insulationfactory will substantially reduce logistics costs. The Asian regionalinsulation business performed strongly in China but overall returns fell,affected by the strong Australian dollar and a price war in Malaysia.

We launched the imported ParocPanel™ system in the commercial building market. Paroc is a fire-resistantwall and ceiling panel system with a mineral fibre core and rigid coated steelexterior.

Progressagainst priorities

· Improve pricing in all products while retainingmarket share: Satisfactory price increases in most products withmarket share generally steady or better.

· Grow through product innovations: Severalnew value added products launched, with good market acceptance.

· Increase effectiveness of sales force and theservicing of customers: SAP computer based management system fullyoperational, providing better information for customers on orders and improvingmarket information for our sales force.

· Improve efficiency of production and distribution:Operational improvements saved $8 million. All factories improvedcost-effectiveness.

· Improve safety and environmental performance: The rate of recordable injuries fell by 12.3%. Minor andsignificant environmental incidents rose slightly. There was one serious incident.

Keyobjectives this year

· Grow the business through new products and increased capacity.

· Improve factory management, distribution and customer serviceefficiency to reduce unit costs.

· Bring Rosehill concrete roof tile plant into full production.

· Further improve safety and environmentalperformance.

Aluminium

CSR’s70% share of Gove Aluminium Finance (GAF) net profit before finance costs rose13% to $72 million. Trading revenue rose marginally to $449 million,resulting in average revenue per tonne of A$2,696. The result was strongly supported by prior year hedging of GAF’sexposure to the US$ price of aluminium and the A$/US$ exchange rate.

The average world aluminiumprice was US$1,497 per tonne, up 9.8%. Due to the strengthening A$, the worldprice of aluminium when denominated in A$ fell 12.8%. In a year of low A$forward aluminium prices, we hedged selectively as market opportunitiespermitted.

As Tomago aluminium smeltermarginally increased production as part of its continuing expansion program,GAF’s sales rose 1% to a record 166,723 tonnes. Sales of value added billet andslab aluminium rose 2.5% to 40,405 tonnes (24% of sales), constrained byTomago’s current production capability.

Global aluminium productionexceeded consumption for the third successive year. But, improving prospectsfor world economic growth helped improve aluminium prices.

Progress against priorities

· Seek opportunities to grow CSR’s aluminiuminvestment to achieve the best outcome for shareholders:Optionexercised to participate in Tomago’s project to expand annual productioncapacity by 15% over the next three years.

· Continue to hedge the world aluminium price and US$revenue to provide a base level of profitability and to reduce volatility ofearnings: Returns were strongly supported by prior year hedging.We continue to hedge the majority of our aluminium price and US$ currencyexposures.

Keyobjectives this year

· Continue to hedge the world market aluminium price and US$revenue to provide a base level of profitability and to reduce volatility ofearnings.

· Maximise value from the efficient operation of theexpanded Tomago smelter.

Sugar

1. Finalpool price for the year ended 31 March 2004 was $229 per tonne compared to $274per tonne in the previous year.

2. Totalrecordable injury frequency rate – the number of lost time, medical treatmentand restricted work injuries per million work hours.

Trading revenue of $600 million was down 15%.EBIT was $37.6 million, down from $70.8 million mainly due to lower rawsugar prices. Operational improvementscut costs by $7 million. Wecontinued to work with sugarcane growers and harvesters to increase farmproductivity and harvesting efficiency.

Continuingpressure from low world sugar prices is accelerating the need for restructuringof the Australian sugar industry. CSR welcomed the announcement in April 2004by the Australian Government of a 
$444 million sugar industry reform program. A critical component of the programis its clear focus on substantive industry reform, necessary to ensure thatAustralia retains a dynamic and viable sugarcane industry.

CSR’s raw and refined sugar faced challengingmarkets

Raw sugar EBIT fell to $15.6million from $37.1 million last year as the raw sugar price fell 17% to $229a tonne as a result of increased supply and the rising A$/US$. Total productionincreased slightly, despite continued drought, especially in the Mackay region,Queensland.

Refined sugar Lowerdemand from key Australian food and beverage customers and increasedrestructuring costs from CSR’s interest inSugar Australia and the New Zealand Sugar Company reducedEBIT to $17.1 million – a drop of 28.2%.

Ethanol EBITreduced by 24.8% to $9.1 million despite operational improvements, as exportprices fell, a result of increased competition from Brazil. Sarina distilleryachieved a record output.

Progress against priorities:

· Drive harder for commitment from entire sugarindustry to productivity initiatives: Improved results demonstrateclear benefits from the Cane Productivity Initiative.

· Get renewable energy projects under way: The$100 million renewable electricity project at Pioneer raw sugar mill wasannounced in September 2003. Two tothree additional projects are under review.

· Improve safety and environmental performance: Therecordable injury frequency rate fell by 24%. The 760 people of Sugar’s Burdekin region achieved the best rate ofimprovement, reducing recordable injuries by 59%. The total number of minor and significant environmental incidentsalso fell.

Keyobjectives this year

• Ensure full benefit from restructuring and productivityimprovement.

• Construct therenewable electricity plant at Pioneer sugar mill on time and within budget.

• Boost the performance of the refined sugar joint ventures.

• Continue to improve safety and environmental performance.