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CSL reports net profit, dividend growth for 1H17

Glenn Freeman  |  15 Feb 2017Text size  Decrease  Increase  |  

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CSL (ASX: CSL), a Melbourne-based developer and distributor of biopharmaceutical products, reported US$806 million in net profit after tax (NPAT) for the first half of fiscal 2017, up 12 per cent year on year, and an unfranked dividend of 64 cents a share.

It also reported earnings before interest and taxes of US$1.09 million, up 36 per cent year on year.

Strong global sales in its CSL Behring business were up 18 per cent to $2.9 billion, from $2.5 billion a year earlier. This division includes its immunoglobulin, albumins and specialty products.

CEO Paul Perreault highlighted sales of immunoglobulin product Privigen, which saw a 34 per cent bump in revenues, and specialty products, including Beriplex and Beriplast brands, which increased 25 per cent.

Albumin sales revenue also increased 19 per cent, helped particularly by China, with growth of 35 per cent, along with strong sales in Turkey and Brazil.

Perreault acknowledged competitor difficulties had contributed to this positive result--"sales benefitted from some atypical market activity, including some competitor supply constraints".

"By executing on our strategy, we were well prepared to participate and provide life-saving medicines to patients in need," he said.

CSL's Seqirus influenza vaccine business, formed in fiscal 2016 after the July 2015 Novartis acquisition, again reported a loss for the half. However, it continued to progress toward CSL's target of break-even in fiscal 2018 and fiscal 2020 profitability.

"Seqirus has made steady progress, including securing multiple new product licences and executing a number of initiatives designed to position for profitability and growth," said Perreault.

Outlook

Perreault anticipates NPAT to increase in the range of 18-20 per cent for fiscal 2017. This aligns with Morningstar's assessment, which in January 2017 forecast net income of US$1.2 million, adjusted for a US$74 million loss from Seqirus.

"We remain positive on the company's prospects in influenza vaccine and management's ability to achieve breaking even in the Seqirus division by fiscal 2018," said Morningstar equity analyst Chris Kallos.

"We believe recent weakness in the share price, driven by intensifying and expected competition across select product categories, coupled with uncertainty generated by [then] president-elect Trump's comments on drug pricing, provides an attractive entry point for investors to the stock."

For various reasons, Perreault expects an "uneven profit profile" in the second half relative to the first half.

"The one-off market conditions arising from competitor supply constraints in the first half are expected to normalise ... as the competition has indicated they are back on track."

He also anticipates a skewing effect "due to timing of expenses--particularly research and development expenses--timing of milestone payments and licensing agreements, seasonality of the Seqirus business and other initiatives."

More from Morningstar

Cochlear records healthy profit, dividend growth in 1H17

European operations boost Sonic Healthcare's earnings

 

Glenn Freeman is Morningstar's senior editor.

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