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CSL flags softer growth after strong FY profit

Prashant Mehra  |  19 Aug 2020Text size  Decrease  Increase  |  
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Biotechnology giant CSL has posted a 9.6 per increase in full-year profit on the back of solid growth in its key immunoglobulin portfolio.

CSL (ASX: CSL), Australia’s biggest company by market value, reported net profit after tax of $US2.1 billion ($2.9 billion) for the 12 months to June 30.

Revenue for the year rose 7.2 per cent to $US9.15 billion.

Morningstar analyst Nicolette Quinn said the results were in line with expectations but the biggest takeaway from Wednesday’s announcement was the fiscal 2021 guidance.

“As a result, we have tempered our forecasts for sales of immunoglobulins, which is a really big part of the business,” Quinn said.

CSL managing director Paul Perreault said the company’s largest franchise, the immunoglobulin portfolio, performed extremely well, with sales of the two main products—Privigen and Hizentra—growing 20 per cent and 34 per cent respectively.

“Underpinning this growth has been continued high patient demand for chronic conditions such as Primary Immune Deficiency, increased utilisation in the treatment of Secondary Immune Deficiency, together with the expanded CIDP (Chronic Inflammatory Demyelinating Polyneuropathy) label claim for both products,” he said.

Softer outlook

But the biotech giant has flagged a softer FY21 because of the possible impacts of covid-19 on plasma collection.

CSL has previously indicated the pandemic has presented challenges for its supply chain and the collection of plasma, an essential raw material used in the production of many of its therapies.

The business has remained largely immune in 2020 due to a store of plasma donations.

It is forecasting profits to be in the range of $US2.11 billion to $US2.17 billion for FY21.

“What's happened there is the reduction in plasma collections was down between 20 and 30 per cent in the final quarter of FY20 but certainly more than we had anticipated, so we're kind of tempering our fiscal 21 forecasts,” Morningstar’s Quinn said.

But this was really just due to supply constraints, she said, adding that demand remains for the product, so it doesn't change the long-term view on the company, and the impact on valuations will be minor.

“In our long-term view for immunoglobulins we're really factoring them gaining market share on an ongoing basis,” she said.

The company’s influenza vaccine business Seqirus also reported an 11 per cent lift in revenue to $US1.3 billion as governments sought to protect their citizens from flu outbreaks on top of covid-19. Earnings at the business jumped 70 per cent.

Shares jump 7pc

Shares in the narrow-moat company jumped 7 per cent on the news and were trading at $315 each. This is a 17 per cent premium to Morningstar’s fair value estimate of $265 a share.

Quinn attributed this to the market getting excited about the growth at the Seqirus business as more people get flu vaccine, but cautioned that growth may not necessarily be sustained.

CSL, meanwhile, said it remains optimistic that an effective vaccine and treatment for covid-19 will be developed “in the near future”.

It underlined its multi-pronged approach towards global efforts to develop a vaccine, saying "no single vaccine or therapeutic approach is going to solve the health crisis.”

CSL (CSL) - 1YR

CSL - 1YR

Source: Morningstar Premium

The company is currently helping the University of Queensland develop a covid-19 vaccine and has also been in talks with AstraZeneca to manufacture another one being developed by Oxford University in the UK.

It is also looking to develop a hyperimmune treatment for the most serious cases.

"We remain optimistic that the extraordinary amount of scientific collaboration happening across industry, academia and government ... will lead to effective treatments and vaccines in the near future.”

CSL declared a final dividend of $US1.07 a share, up from $US1.00 per share a year earlier.

Visit Morningstar's Reporting Season 2020 coverage. The calendar will be updated daily to connect you with our equity analysts' take on the financial results.

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is a freelance journalist.

Any Morningstar ratings/recommendations contained in this report are based on the full research report available from Morningstar.

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