Blood plasma and vaccine producer CSL took a whacking yesterday after it warned despite double-digit sales growth in the first half for its albumin and specialty products businesses, growing competition would see full year earnings crimped.
CSL shares dropped more than 7% to $82.95 as investors digested the surprise downgrade.
The company yesterday said first-half net profit grew 7.2% to $US692.2 million ($A891.2 million), which was in line with market forecasts.
In constant currency terms, which strips out the impact of foreign exchange movements (such as the big fall in the value of the Aussie dollar over the past year), net profit rose 9.1% to US$705.0 million.
The surprise came when CSL said it now expects net profit in the full financial year to rise by about 10% in constant-currency terms, down from a 12% rise suggested at the full year profit release last August.
“We expect that global demand for plasma therapies will continue to grow, but the market will become increasingly competitive, with new competitors and new products,” Chief Executive Paul Perreailt said in a statement.
"This growth is prior to the inclusion of integration costs associated with the acquisition of the Novartis influenza business,” Mr Paul Perrault said.
"Earnings per share growth is again anticipated to exceed profit growth."
CSL lifted first-half dividend to 58 USc a share, from 53c a year ago.
CSL 1Y – High flier CSL downgrades
CSL has operations in more than 20 countries, including Australia, Germany, Switzerland and the US. It has expanded globally from its Australian base, making acquisitions while exploiting difficulties such as product recalls and plant closures among its competitors. It has had concerns of its own to contend with in recent years, such as anti-trust problems in the US.
In October CSL agreed to buy Novartis’s influenza-vaccine business for US$275 million to create the No. 2 global player in the US$4 billion global-flu-vaccine industry with manufacturing plants in the US, Britain, Germany and Australia.
Revenue rose 5.6% to $US2.8 billion in the six months to December 31.
Earnings before interest and tax rose 7% to $US878 million, which was ahead of forecasts of $US871 million.
Early last CSL shares fell after the US national health institute flagged issues with the season’s flu vaccines.
The shares were also hit after the Swiss central bank removed their currency cap last month.
CSL operates major facilities and manufacturing plants in Switzerland, and will find its products harder to export with a stronger currency, as it did when the Aussie dollar was at parity or above.
Comment: Irony of ironies, after years moaning about the strength of the Aussie dollar, companies like CSL are being assaulted not only by the rising value of the US dollar, but also the very high value of the Swiss franc. In fact the Swiss economy is heading for a deflationary recession this year. The weaker euro and Aussie dollar should provide some benefit, but seeing the company reports in greenbacks, some of the numbers could surprise on the downside over the next year. In fact the weaker dollar is already boosting the company so far as its Australian shareholders are concerned. That higher dividend of $US58 cents, is actually $A74 cents with the local currency around 78 US cents. It wouldn’t surprise to see the CSL share price recovery today as sheepish investors go looking for a nice earner.
