Ignore the one-offs that cut CSL’s 2014-15 earnings growth.
Because the company bought the Novartis flue business and the fact that CSL operates in US dollars, the bottom line result was not a true indication of another solid performance for the year to June 30.
Shareholders should also focus on the benefit of a US dollar reporting company based in Australia delivering a one-off boost to local shareholders, courtesy of the slide in the value of the Aussie.
CSL said yesterday that the currency fluctuations and one-off costs linked to the Novartis influenza vaccine expansion trimmed earnings growth of 5.5% in the year to June.
That was a net result of $US1.38 billion ($A1.9 billion), falling short of market expectations of $US1.41 billion (close to $A2 billion).
Adding back in $22 million of one-off costs because of the Novartis flu business and working in constant currency, CSL said net profit rose 10% or around $US1.4 billion, which is on forecast from the market.
And CSL expects to lift profits in the current year by a similar amount, and it’s looking at a similar share buyback (the $950 million one in 2014-15 has ended), and has foreshadowed a private placement to raise funds in the US to the tune of $US500 million. Announcements are likely in October.
And then there was the one-off joy of the devalued Aussie dollar – while the board lifted the US dollar dividend 10% to 65 cents a share in Aussie dollars, the payout leapt 39% to 90 a cents a share.
Sales for the blood plasma product and vaccine maker rose 2.3% to $US5.5 billion in the year to June, from $US5.33 billion the year earlier.
On a constant currency basis, sales rose 7%.
CSL said it spent $US463 million on research and development investment in the year to June.
CSL shares were up 45% in the year to Tuesday night, compared with a 1% fall in the ASX200, and hit a 12-month high of $100.77 last week.
Yesterday the shares fell 2.2% to $93.
CSL 1Y – CSL earnings up 5.5%
CSL expects strong underlying demand for its products to continue in FY16, with sales growth similar to gains achieved in FY15.
"The market place will remain competitive, particularly as new manufacturers and products emerge," CEO Paul Perreault said in yesterday’s statement.
“FY16 will be a critical year in investing in our sustainable growth,” Mr Perreault said. “We continue to invest substantially in our research and development pipeline. A major investment in our commercial capabilities will be made ahead of our anticipated launch of new recombinant coagulation products in 2017.
"Our significant capacity expansion coming on line in FY16 will trigger a lift in fixed asset depreciation. Notwithstanding these additional costs, we anticipate net profit after tax to grow by around 5%, with earnings per share growth to exceed profit growth.
“Given the accelerated close of the Novartis deal, we are not yet in a position to provide guidance on this business beyond what was announced in October 2014.
"Consequently the gain on acquisition, integration costs and operational contribution are excluded from our guidance. We expect to provide an update on the outlook for this business in the coming months,” Mr. Perreault said.
