More solid results for the year to June from leading multinationals Amcor and CSL, the company behind the AstraZeneca Covid vaccine and key global influenza jab.
Both reported higher profits and returns to shareholders and while Amcor was quietly confident about the year ahead, CSL was very cautious and in fact predicted what looks like being a result with no growth in earnings from 2020-21.
CSL’s June 30 profit topped forecasts at $US2.375 billion ($3.3 billion) but CEO Paul Perreault has warned of a challenging year ahead.
The business has weathered tough pandemic conditions to record product sales up 10 % on a constant currency basis to $US9.98 billion, with its vaccine business Seqirus continuing to grow strongly after record production of 130 million flu doses.
That means revenue will crack $US10 billion for the first time this financial year.
CSL did however see a slowing in profit growth in the June half, as the company had warned in the interim results in February.
The company earned $US1.8 billion in the December half (meaning second half profits slowed to only $US600 million).
Mr Perreault warned at the time the second half of the year would not be quite as strong due to a range of factors including challenges collecting plasma, the key ingredient in many of CSL’s therapies, thanks to the problems caused by Covid and the various lockdowns, especially in the uS had made it harder to get hold of blood and plasma.
Costs rose as a result (investors and analysts didn’t appreciate that news at the time and the impact was made tougher with demand for its core immunoglobulin products, which use plasma, remaining strong in the second half.
Mr Perreault said demand for CSL’s plasma products remained robust, and that he was optimistic that greater social mobility due to vaccinations would help bring collections back to pre-COVID levels – especially in the huge US market.
“Our influenza vaccines business, Seqirus delivered an exceptionally strong performance with revenue up 30% at CC2. This was achieved by significant growth in seasonal influenza vaccines driven by record demand and the ongoing shift to Seqirus’ differentiated and high value product portfolio.”
“During the year, we announced plans to construct a new world-class biotech manufacturing facility in Australia as a further sign of our promise to provide safe and effective influenza vaccines around the world. The state-of-the-art facility will use cell-based technology to produce influenza vaccines for use in both seasonal influenza vaccination and pandemic programs,” Mr Perreault said.
“Furthermore, we have accelerated our research in mRNA technology – in the next generation self-amplifying mRNA for influenza. Pre-clinical results appear promising with human clinical trials expected to commence next year,” he said in the statement on Wednesday.
Despite that optimism on the part of the CEO, the company is guiding to lower profits for the 2022 financial year of between $US2.15 and $US2.25 billion at constant currency basis.
“At the half-year results, we foreshadowed margin easing as a result of increased plasma costs, this will continue into FY22. We see FY22 as a transitional year as we continue to invest and deliver against our long-term strategy,” Mr Perreault said on Wednesday.
Predictably the shares eased 2.7% yesterday to $291.17. They then rebounded to end at $293.56 for a loss of 1.4% on the day. Investors know the company has a history of doing better than its forecasts.
CSL will pay a final dividend of $US1.18 per share (around $A1.61 as share), bringing the final dividend to $US2.22, up from $US2.02 the in 2019-20.
Chair Brian McNamee told investors this was because “the Board has every confidence that CSL’s strong foundations and disciplined execution of strategy will allow us to return to sustainable growth”.
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Believe it or not, compared to CSL, Amcor – the transplanted Melbourne-born packaging multinational – had a more upbeat outlook, even though its optimism was tempered by the rising tide of new Covid Delta infections.
Amcor, which moved its domicile to the US when it took over rival Bemis several years ago, delivered a record year of earnings in 2020-21 but like so many other companies here and offshore this reporting season, it warned the Covid Delta upsurge will make for an uncertain and complex path ahead.
Amcor lifted net sales by 3% – or $US400 million – to $US12.9 billion for the year to June – as profit leapt 53% to $US939 million.
Holders of Amcor CDIs (Chess Depository Interests) trading on the ASX will receive an unfranked dividend of 15.93 A cents a share, which reflects the quarterly dividend of 11.75 US cents a share, the same as the interim dividend.
“Amcor delivered record full-year earnings in 2021, as our teams successfully executed against our strategy, delivered growth and increased EBIT margins while managing exceptionally well through steep raw material cost increases and supply constraints,” chief executive Ron Delia said in Wednesday’s release.
“In the two years following our transformational acquisition of Bemis, we have strengthened our financial profile and consistently built earnings momentum.”
The Bemis integration is essentially complete and the company exceed its original $US180 million cost synergy target by at least 10 per cent, with free cash flow for fiscal 2022 expected to be almost double pre acquisition levels.
“Amcor is now better positioned strategically than ever with global scale, strong innovation capabilities and greater exposure to more attractive, higher growth end markets like healthcare and protein which offer more potential for differentiation and growth.
This improved foundation will enable stronger growth and value creation for all stakeholders into the future,” Mr Delia said.
Unlike CSL and its forecast of lower earnings (at the moment) for the coming year, Amcor sees growth.
For the twelve-month period ending June 2022, Amcor says it expects adjusted earnings per share growth of approximately 7% to 11% on a comparable constant currency basis, or approximately 79 US cents to 81 US cents a share on a reported basis.
Approximately $US400 million of cash will be allocated towards share repurchases, meaning that the EPS will be improved by fewer shares being on issue over the next year.
“While Amcor’s business is expected to continue demonstrating resilience given it plays an important role in the supply of essential consumer goods, the level of earnings and free cash flow generated across the business could be impacted by COVID-19 related factors such as the extent and nature of any future operational disruptions across the supply chain, government-imposed restrictions on consumer mobility and the pace of macroeconomic recovery in key global economies,” Amcor said.
“The ultimate magnitude and duration of the pandemic’s impact on the company’s business remains uncertain at this time.”
Amcor’s share performance here yesterday reflected that modest optimism – they rose 2.4% to $17.02.
