High Expectations Hurt CSL

Even though CSL beat market forecasts for its interim profit, investors sold the shares off yesterday.

The shares fell more than 7% to a day’s low of $184.50 before recovering some ground in the afternoon session (when the wider market weakened) and ended down 4% at $186.09.

That was despite CSL reporting an interim net profit of $US1.2 billion ($A1.7 billion), a higher dividend and a lift in full-year guidance.

The higher profit was struck on 11% lift in revenue (on a constant currency basis) to $US4.5 billion for the December half year.

The company lifted its dividend to US85c, (from 79 US cents in the first half of 2017-18) equates to a tasty $1.20 in Australian dollar terms (CSL replicated Amcor which this week lifted interim dividend by half a US cent, which translated into a near 14% rise in Aussie dollar terms).

Despite these goodies, the shares ended down 4.4% at $184.16 – it seems much of the improvement and the higher dividend had been expected by investors.

In fact, the upgrade in full-year guidance wasn’t a big surprise either.

Market earnings estimates for the fiscal year were $US1.94 billion ahead of the result, which was at the top end of CSL’s guidance of $US1.88 billion to $US1.95 billion provided last year.

Now CSL earnings for the full year will be around the top end of that range, which would be another record.
“This is a solid result and particularly pleasing given it follows a very strong comparative period,” said CSL chief executive Paul Perrault in the announcement to the ASX.

CSL said the half-year performance was driven by increased usage of its immunoglobulin products for chronic therapies and higher value sales of its flu vaccines.

“Our immunoglobulin portfolio is performing very well, with Privigen sales growing 17 percent and Hizentra sales growing 14 percent.”

Sales of its plasma-based products rose 8% to $US3.55 billion after adjusting for currency movements thanks to a 12% increase in immunoglobulin sales to $US1.7 billion.

Its flu-vaccine based Seqirus business increased sales by 21% to $US949 million as flu again proved to be a headline-grabbing story in the US and Europe in the northern winter.

“Our Seqirus influenza vaccine business is running to plan,” said Mr. Perreault.

“Only three years ago it posted a full-year loss of over $US300 million.”

Mr. Perreault said plans to open 30 to 35 plasma collection centres this year are on track.

“We expect to again outpace the market in growing plasma collections,” he said.

“Seqirus is tracking to plan but due to the seasonality of this business we anticipate it to post a loss in the second half of the year.”

The sales into the southern hemisphere markets in autumn and winter (mostly Australia and NZ) do not generate all that much revenue compared with the northern hemisphere winter sales season.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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