CSR's Viridian, Euroglass to merge operations to cut costs

Viridian, Euroglass JV to merge operations in cost cutting exercise

By Paul McBeth

Feb. 20 (BusinessDesk) – CSR, the ASX-listed owner of Viridian New Zealand, has entered into a joint venture with Euroglass Systems that will rationalise the companies’ local glass-making sites in a bid to cut costs and clamp down on spare capacity in the sector.

The venture will result in “a more efficient operational structure for both entities through ongoing synergies and site rationalisation savings,” CSR said in a statement to the ASX. That will see the companies’ operations combined to clamp down on spare capacity, primarily in Auckland, Tauranga, Christchurch and Dunedin, spokesman Martin Cole told BusinessDesk.

“The joint venture structure will enable both Viridian and Euroglass to have more streamlined operations, improved national coverage and a wider range of products,” Cole said. “The JV will also benefit from efficiencies achieved from merging sites where there is an overlap in terms of national coverage and servicing.”

CSR’s Viridian unit flagged a restructure of its glass and laminating operations last year as the rising cost of raw materials and tepid building sectors sapped earnings.

Managing director Rob Sindel said the deal “is consistent with our strategy to pursue accretive transactions to strengthen our competitive position in our key building products markets.”

“Bringing Viridian and Euroglass together under the one structure enables us to deliver a significantly more cost efficient operation in the New Zealand glass market,” he said.

The decision comes after the local entity holding the glass operation, CSR Viridian New Zealand Holdings, more than doubled its loss to $11.1 million in the 12 months ended March 31, 2011, after taking an $8 million charge writing down the value of its assets.

CSR said it will let both companies benefit from a greater product range, and enable new developments in the glass market.

Viridian has traditionally targeted the building market, with Euroglass focusing on more specialised glass ranges. Their biggest rival in building glass manufacturing is Metro GlassTech.

The deal is expected to get the necessary regulatory approvals this month, with the JV effective from March. Viridian will hold 58 percent of the new entity and Euroglass 42 percent.

CSR’s shares rose 4.6 percent to A$1.925 in trading on the ASX, and have shed 6.1 percent this year.

(BusinessDesk)

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