Facing up to the carbon challenge

Ask Rob Sindel what the biggest change for him has been since being promoted to chief executive of buildings materials mainstay CSR, and he answers with little hesitation.

 

For a man with a hands-on management style who prefers to be out on site visits talking with staff - he keeps a pair of safety boots under his desk at the ready - he admits to have underestimated the public requirements of the job, which takes up about half his time.

 

''You don't realise the external requirements - the time required to talk to banks, the time required to talk to media and government.

 

''Things like meeting with ministers and bureaucrats are absolutely essential to have your voice heard - and it takes time.''

 

With the federal government's introduction of a price on carbon imminent, the 46-year-old first-time chief executive has been one of the more vocal, and arguably more articulate, industry leaders to speak out against the tax.

 

The easy, media-friendly soundbites are there, where like others before him, he warns of ''hundreds of thousands'' of manufacturing jobs at risk.

 

But Sindel also has a grasp on the details of the tax which has impressed analysts and investors, and has mounted measured and convincing arguments about the long-term detriment the tax can cause.

 

''This isn't a short-term issue. It is a long-term issue,'' he says.

 

The challenge facing government, Sindel says, is how to deal with trade-exposed businesses rather than just focusing on the level of carbon emissions intensity.

 

Placing extra imposts on Australian manufacturers, which are already struggling to compete against cheaper overseas alternatives, he says, will only lead to job losses.

 

A case in point is CSR's glass business, Viridian, the only float glass manufacturer in Australia, which is under threat from cheap Chinese imports (which are getting cheaper all the time due to the rocketing Australian dollar). Local glass processors and glaziers are increasingly buying from Chinese manufacturers, which charge about half as much in some cases, instead of Viridian.

 

In his short stint as chief executive, Sindel has already made 140 jobs at Viridian redundant.

Even without the carbon tax, Sindel has taken the reins at CSR at a crucial juncture in its proud 156-year history.

 

Now a pure-play building materials company, the CSR name remains, as does the bronze bust of Sir Edward Knox, the founder of the Colonial Sugar Refinery in 1855, which takes pride of place in the boardroom of the company's North Ryde headquarters. But the iconic sugar business is gone, sold to Singapore conglomerate Wilmar International last year.

 

Shares in CSR have fallen steadily since the sale, losing about 25 per cent of their value, as building activity in both commercial and residential markets struggles to fully recover after the financial crisis.

 

Add to that the global economic woes, particularly in the US and Europe, and the high Australian dollar putting pressure on CSR's trade-exposed glass business, and it becomes clear that Sindel has his work cut out.

 

''It's one of those challenging periods in everyone's career when you can't read the market as well as you normally can because there's a lot of external factors that are influential in many different ways,'' Sindel says.

 

Plummeting consumer confidence levels on retail sales has been well publicised, but the gloom and fear of interest rate rises has also prompted investors to put off big decisions like home purchases or renovations.

 

Weak housing approvals and stagnant auction clearance rates have prompted analysts to slash their housing start forecasts - a key indicator of earnings for building materials companies.

 

Nomura and RBS have predicted the number of houses being built next year to fall by up to 15 per cent to below 140,000. Housing starts were at 130,000 during the global financial crisis.

 

Though he admits he is getting ''nervous'' about it, he is sticking to CSR's own forecast of 148,000 for now.

 

''The positive is there still is a lot of underlying demand,'' he says, referring to Australia's strong immigration levels and an inherently strong economy reinforced by its mining industry.

 

In 2008, Sindel was keen to return home with his family. He rang CSR's then chief executive Jerry Maycock, for a job, and was appointed the head of the company's gypsum and fibre cement division in July that year.

 

Just over a year later, Sindel was selected to head up the entire building products arm of CSR, earmarking him for the top job.

 

Sindel found doors kept opening for him as he kept working hard and demonstrating his worth. Seen as a serious, straight-shooting executive not yet engulfed by management speak, analysts who attended a recent site tour were also impressed by what appeared to be genuine camaraderie between him and factory staff.

 

''The first six months [as chief executive] has been about getting out and meeting all of our 4000 employees if I possibly can,'' he says.

 

For all the opposition to the carbon tax, there has been a level of inevitability in the way the building industry has had to adapt and innovate or risk being left behind. CSR is no exception.

Under Sindel, there has been a concerted push to benefit from the shift towards energy efficiency.

 

''We're looking at a whole different range of business opportunities that we think will come out of energy efficiencies,'' Sindel says. ''We see energy efficiency, where you save the consumer money, as a huge opportunity.''

 

CSR has spent $10 million rebuilding its glass furnace at its Ingleburn facility, which will reap a 30 per cent energy reduction. It has also set up a solar business, and another to help homeowners rate the energy-efficiency of their houses. It is pushing its range of lightweight fibre-cement products as a less carbon-intensive alternative to bricks. It is selling the merits of double-glazed glass and insulation to help cut heating bills.

 

''It hasn't quite hit the consumer yet [but it will] when the carbon tax actually gets introduced.

''They'll have $800 from the government and have a choice to make.

 

''They'll say, 'Do I take that $800 and just pay $200 a quarter more on my electricity bill, or do I try to pocket that money by actually reducing the amount of energy that I use?'.''

 

Does that mean there is some justification in the carbon tax since it will actually be effective in changing the behaviour of consumers and businesses?

 

''You can look it at that way [but] the real issue is for those industries that are trade-exposed like our glass and aluminium business, and like the steel industry,'' Sindel says.

''These businesses employ hundreds of thousands of people.''