CSR Limited

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CSR Limited

Level 35
Grosvener Place
225 George Street
Sydney, New South Wales
Australia
(02) 235-8333
Fax: (02) 235-8555

Public Company
Incorporated: 1887 as The Colonial Sugar Refining Company
Employees: 22,350
Sales: A$4.89 billion (US$3.86 billion)
Stock Exchanges: Sydney Auckland London Frankfurt

CSR is one of Australia’s largest building and construction materials companies, and operates additionally in New Zealand and the United States. The company is also Australia’s largest manufacturer of raw and refined sugar products. While CSR was established in 1855 to refine sugar and soon after diversified into raw sugar milling, its sugar activities represent only about one-quarter of CSR’s annual sales. In an effort to change its image from that of solely a sugar producer, CSR has been promoting its increasingly strong position in the building and construction materials industry. The company has substantial operations in quarrying, concrete, cement products, bricks and tiles, plasterboard, insulation, and timber products, as well as investments in aluminum.

The Colonial Sugar Refining Company (CSR) was formed as a partnership in January 1855 under the chairmanship of Edward Knox, an ambitious 35-year-old entrepreneur. Having acquired some of the assets of the defunct Australasian Sugar Company, the partnership bought the Brisbane House sugar refinery in Sydney. Two years later, in 1857, a new holding company—the Victoria Sugar Company—was formed jointly by CSR share-holders and Victorian business interests, and a sugar refinery and molasses distillery were set up at Port Melbourne. Later that year, Knox sold his house and some of his shares in the company and left for Europe by ship. Before he reached Europe, he was bombarded with letters telling him the company was ruined. Knox returned to Australia immediately.

The company underwent serious financial difficulties following the depression in the world sugar trade from 1857 to 1858. CSR countered the potentially disastrous effects of the depression by diversifying into sugar milling. By 1869 the company had built a number of new mills in northern New South Wales. With the construction of the Chatsworth, Southgate, and Darkwater mills CSR entered the sugar-milling industry. Darkwater Mill has since been renamed Harwood Mill and is the oldest continually working sugar mill in Australia. Knox’s second son, Edward William, was put in charge of the project.

The 1870’s saw further diversification within the sugar industry. CSR had by now established a network of mills and refineries on the Queensland coast and the purchase of a small freight ship—SS Keera —in 1873 gave the company an entry into the costal shipping business. In 1874, the Victoria Sugar Company’s refinery in Melbourne was destroyed by fire and was replaced by the newly built Joshua Brothers’ refinery.

CSR continued its program of expansion throughout the next decade. On his retirement, Knox handed over management of the company to his son, writing to a friend, “I can only expect to leave a kind of smeary, sugary track behind me.” Edward William Knox was an impetuous and autocratic manager, and anxious to emulate his father’s success. The milling operations were extended to Queensland, where new mills had been constructed in the early 1880s. In 1882 CSR embarked on its first overseas project, building a mill in Nausori, Fiji. The following year, CSR formed the New Zealand Sugar Company to refine sugar in New Zealand, as an equal partnership with the Victoria Sugar Company and business interests in New Zealand. In the mid-1880s, CSR’s research team conducted the first sugar cane-fertilizer trials.

On July 1, 1887, CSR was amalgamated with the Victoria Sugar Company and was incorporated as a public company, the Colonial Sugar Refining Company Limited. The new company merged the following year with the New Zealand Sugar Company, and CSR was established as a leader in the Australian sugar industry. As the 19th century drew to a close, CSR continued to acquire mills along the Queensland coast and set up a new refinery in Brisbane. Administrative changes, designed to make management of the spreading company more efficient, were introduced in the early 1890s: sugar cane estates in Queensland were divided into small farms for leasing—with the rights of purchase—to cane growers. In 1899, the company’s investment in research and development allowed it for the first time to buy cane on the basis of its analyzed sugar content. Other sugar companies were less advanced in the research and application of chemical analysis, and CSR’s commitment to research undoubtedly assisted its domination of the domestic sugar industry. In 1904 the company bred Australia’s first successful commercial variety of sugar cane, which it christened Clark’s Seedling.

Further expansion took place in the early part of the 20th century. An expedition in 1908 to New Guinea to collect samples of sugar cane, to improve breeding of new cane varieties for commercial use, gave rise to better cane and sugar yields. Two years earlier several Fijian plantations had been sold to a group of company officers who wanted to work for themselves. As World War I approached, CSR continued to consolidate its refining and milling businesses, and sent another cane-gathering party to New Guinea. Trade in Australia benefited from the increase in the British government’s demand for sugar and resources after World War I. In 1923 the commonwealth government transferred control of the sugar industry to the Queensland government, and CSR made its first annual refining and marketing agreement with the government. The world Depression of the 1930s was threatening, however, and a downturn in demand was anticipated. In 1933 Edward William Knox retired, four months before his death. His son, Edward Ritchie Knox, took over as general manager.

The onset of World War II precipitated CSR’s second major diversification. A pilot plant set up in 1936 to assess the feasibility of making wallboard from the residue fiber of crushed sugar cane provided CSR with what transpired to be a commercial method of disposing of its sugar millery byproducts. In 1939 CSR acquired shares in a chemicals plant in Sydney and opened a wallboard factory nearby, where the new product Cane-ite was produced. To meet the needs of the Australian war effort, CSR reduced its sugar-based production activities from 1939 onwards in order to manufacture war-related materials. A new plaster mill was introduced in Sydney in 1942. Two years later, CSR began mining asbestos when it acquired Australian Blue Asbestos’s mine in Wittenoom, Western Australia.

While CSR was known mainly as a sugar producer, the postwar program of diversification changed the corporate profile considerably. The last year of the war marked CSR’s first substantial entry into building materials and construction when the company bought an interest in Fletcher Holdings, a large construction and timber company based in New Zealand. During the late 1940s, CSR introduced new building products—plasterboard and floor tiles—and expanded its factory stock in Sydney. The wave of expansion culminated in the formation of a new wholly owned subsidiary, CSR Chemicals, in 1948.

Over the next ten years, under the directorship of Edward Ritchie Knox, CSR continued to expand. The company’s sugar operations were extended and facilities for bulk-loading raw sugar were introduced at two of the original Queensland mills, and later extended to cover all twelve mills. In 1955, CSR was appointed coordinator for the Australian sugar industry’s conversion to bulk handling. From the mid-1950s on, the company increased its involvement in the building-materials industry. The acquisition in 1959 of the Bradford Insulation Group gave CSR a major share of the insulation-products market throughout Australia. In the same year the CSR Chemicals subsidiary spawned two new subsidiaries, and a new product—particleboard—was introduced. Developments at this time included the takeover of Masonite Holdings, which manufactured hardboard.

The company opened new research centers in Brisbane in 1962, and in Sydney in 1963. The following year it joined American Metal Climax in a project to develop the Mount Newman iron-ore deposits in Western Australia. From the mid-1960s until the early 1980s CSR increased its involvement in resources, including bauxite and alumina, tin, copper, coal, oil and gas, gold, aluminum, and minerals exploration. At the same time as CSR was increasing its investment in resources, it also entered the concrete market for the first time. In 1965 it acquired a 50% share—with Blue Metal Industries—in Ready Mixed Concrete (RMC).

The 1969 takeover of Wunderlich Ltd., a large manufacturer of roof tiles, asbestos cement products, and architectural metal products, gave CSR its first significant entry into the Australian roof-tile industry. The business was subsequently sold in 1983 to Monier. In 1972 the Fijian government bought CSR’s Fijian sugar-mills, ending the company’s 90-year involvement in the Fijian sugar industry.

The resource ventures begun in the 1960s, during Australia’s mineral boom, continued throughout the 1970s. The company began to invest in alumina and bauxite; various gold, tin, and copper ventures; and later, coal, oil, and gas. Extensive investments in a number of established coal mines made in the 1970s proved unsuccessful. The prices of coal and oil dropped almost immediately after the acquisitions had been made, near the peak of the energy cycle. A large proportion of loans made for the acquisition of coal and oil assets were in US dollars. The repayments of these loans increased significantly with the fall in the Australian dollar exchange rate in 1983-1984, coupled with falling energy prices.

To reflect recent diversification, and in an effort to modernize corporate identity, the company dropped “Colonial Sugar Refining Company” from its original name and in 1973 it became CSR Limited. In the following year, CSR entered the cement industry through the joint acquisition, with Pioneer International, of Australian and Kandos Cement. The managerial difficulties CSR was experiencing with such diverse business interests forced a strategic reorganization. The sugar division was formed in 1974 and the mineral division and the building- and construction-materials division were formed the following year.

Further diversification took place in 1977, when CSR bought AAR Ltd., an exploration company with natural gas, oil, and drilling contracts. Thiess, a large coal company, was acquired in 1979. When the resources boom of the 1970s and early 1980s petered out, CSR was left with a debt and interest burden that made the company vulnerable to takeover bids. Investors had lost faith in the company and CSR share prices plummeted. The company was surviving largely on the activities of the sugar and building materials divisions, but the drop in world sugar prices in the early- to mid-1980s made the situation worse. Until the extensive management and corporate restructuring which began in 1985, CSR was a struggling company. Bryan Kelman became general manager in 1983.

In 1981 the company significantly increased its investment in the oil industry when it bought an Australian-based, U.S.-owned oil and petroleum producer, Delhi International Oil Corporation. The major investments in coal, and particularly oil, were badly timed. The Delhi acquisition was hit with falling oil prices, lack of new oil discoveries, and a falling Australian dollar, while carrying extensive debt in U.S. dollars. As a result, the company began a process of repaying much of its debt through the sale of iron ore and some coal assets. This was followed in 1987 with the sale of Delhi for US$985 million, resulting in a loss of over US$600 million.

In 1985, sugar profits fell dramatically. Growing public concern about the health risks associated with sugar consumption and a slump in world prices hit CSR badly. In 1985 sugar was at its lowest price in 200 years. Many cane farmers were living below the poverty line and accused CSR of mismanaging the industry in which it played a dominant role.

In 1987 CSR began the process of changing the company from a diversified resources and industrial group to a diversified manufacturing company in building and construction materials and sugar—core activities in which the company had long years of experience, since 1855 in sugar and since 1939 in building materials. Between 1987 and 1989 the company sold over US$2 billion of low-yielding and lossmaking assets in resources and reinvested these funds in building and construction materials and sugar operations, including large investments in the United States. By the end of the 1980s, CSR had sold all its interests in tin, gold, and mineral exploration, its coal mines, and its oil and gas interests. The head office in Sydney, where the company had been based for 106 years, was also sold to compensate for falling profits. A more steamlined management structure was also introduced. Ian Burgess took over as chief executive of CSR in 1987, and his ruthless approach to restructuring the flagging conglomerate is generally accepted as having saved CSR from takeover or collapse. Burgess had joined the company straight from school in 1950, and was anxious to change the antiquated management style. “It was a very conservative place,” he told The Wall Street Journal on May 14, 1987, “you even had to get your wife approved. You had to go to your boss and say ‘Please sir, can I get married?’” Under Burgess’s guidance, each of CSR’s divisions was transformed. The building materials division, for example, had employed 157 senior managers. After Burgess’s reorganization, there were three. Burgess also dispensed with the CSR annual cricket match, a 94-year-old company tradition. By the end of 1989 the reorganization was complete.

The acquisition of the U.S. Rinker Materials Corporation in 1988 gave CSR a large proportion of the Florida concrete and quarry products market. In 1990 CSR acquired ARC America, a large quarry and concrete products operator with interests in 20 states including Ohio, Indiana, Michigan, Washington, California, Nevada, Texas, and Florida. By the end of 1990 the building and construction division made up 64% of total sales. CSR is one of the largest quarrying and concrete operators in the United States, and has more quarries there than in Australia. The same year, CSR announced record profits. Against a background of high inflation rates and a weak Australian dollar in the mid 1980s, CSR’s divestment policy appeared to have paid off. Further expansion in timber, when CSR bought Softwood Holdings in 1988, meant a quadrupling of profits for the timber-products division. Despite slow growth in the construction industry, but with profits increasing by 65% in 1989, CSR began to focus on Europe and the United States for expansion. In 1987, the company bought a 49% share in Redland Plasterboard, a large British construction company with assets throughout Europe. Increasing competition in the U.K. and European plasterboard industry caused CSR to sell out its interest in 1990.

In 1989 controversy concerning the company’s alleged negligence in its management of the Wittenoom asbestos mine, which it had sold in 1966, was settled. CSR paid out an estimated A$30 million in damages to over 300 workers suffering from asbestos-related lung diseases. Australian newspapers referred to the event as “Australia’s Bhopal.”

A commercial development affecting CSR in the 1990s was the deregulation of the domestic refined sugar industry, which began in 1989. CSR is currently reassessing its refining capacity and locations in the face of greater competition, both from domestic sources and eventually from imports. While profits as a commercial refiner are better than those earned as a toll refiner on behalf of the Queensland government, CSR has lost about 20% of its market share within Australia—it now stands at about 75%.

The company has removed itself from the more volatile resources markets, but still has to cope with the cyclical nature of the building and construction industry and the instability of the sugar market.

Because CSR operates in a mature market within the basic end of the Australian building and construction materials sector, major opportunities for growth within Australia are limited. As a result, CSR has focused on the United States as an area for future growth, particularly in quarry and concrete products. CSR already has about 30% of its assets based in the United States. This growth is likely to continue.

Principal Subsidiaries

CSR Finance Ltd.; CSR Investments Pty Ltd.; Farrer Properties Ltd.; Monier PGH Ltd. (51%); Bradford Enercon Inc. (Canada, 70%); Synkoloid Holdings Inc. (Canada); Beadex Holding Inc. (U.S.A.); CSR Hebel Australia Pty Ltd. (82.5%); CSR America Inc. (U.S.A.); Rinker Materials Corp. (U.S.A.); American Aggregates Corp. (U.S.A.); Associated Sand and Gravel Co. Inc. (U.S.A.); ARC Materials Corp. (U.S.A.); Hydro Conduit Corp. (U.S.A.); Southern Aggregates Co. (U.S.A.); Softwood Holdings Ltd.; Hardboards Australia Ltd.; New Zealand Sugar Co. Ltd.; Pioneer Sugar Mills Ltd.; The Haughton Sugar Co. Pty Ltd.; Gove Aluminium Ltd. (70%); Gove Aluminium Finance Ltd. (70%).