Investors didn’t like the annual results and outlook from Australia’s home-grown “Big Pharma”, CSL (ASX:CSL).
The shares fell more than 4.5% after the company said Tuesday that it had lifted annual profit 20% thanks to strong growth in its main blood-plasma business and that it was forecasting another solid rise in earnings in the current new financial year.
CSL said in the ASX release that net profit hit US$2.64 billion in the 12 months to 30 June from US$2.19 billion a year ago. That was on revenue up 11% at US$14.8 billion in constant currency terms.
CSL said that on the same basis, 2023-24 underlying profit was up by 15% to US$3.01 billion. And looking to the coming year, the company said it expects underlying profit of between US$3.2 billion and US$3.3 billion at constant currency in 2024-25, which would be a rise of between 10% and 13%. That will be on slower revenue growth, with CSL estimating it will grow by “approximately 5-7% over FY24 at constant currency”. And that appears to be what investors didn’t like.
Directors declared a final dividend of US$1.45 per share, taking its full-year dividend to US$2.64 a share, up 12% year over year. CSL said that at current exchange rates, the higher dollar would be equal to around A$4, up from A$3.61 in 2022-23.
CSL has been saying for a while now that it expects annualised double-digit earnings growth over the medium term and, on Tuesday, CEO Paul McKenzie said the company is well placed to achieve that goal. He said the company has recently recorded strong growth from immunoglobulins, a key substance collected from plasma.
“Our largest franchise, the immunoglobulins portfolio, delivered exceptional growth driven by significant patient demand and the recovery in CSL Behring’s gross margin is progressing to plan,” said McKenzie. Immunoglobulin product sales reached US$5.67 billion, up by 20% on a constant currency basis on what CSL said was strong growth across its markets worldwide.
The company continues to benefit from the post-pandemic rebound in plasma collections, which has continued and seen the cost per litre, including for donor compensation and labour, fall further. (That was a major headache for the company in the pandemic and the year afterwards.)
CSL’s Behring unit, which operates a network of collection centres for plasma to make life-saving therapies, took a hit during the pandemic when lockdowns forced people to stay at home.
McKenzie said CSL’s Seqirus business, which makes vaccines, “outperformed the market in a challenging environment” while its Vifor unit, which makes treatments for iron deficiency, continues to grow iron volume in Europe despite generic entrants.
Looking to the rest of this financial year, Dr McKenzie said, “The momentum in our CSL Behring business is expected to continue to be underpinned by the strong patient demand in our immunoglobulins franchise.
“We have a number of initiatives underway in plasma collections and our manufacturing operations that will continue to drive efficiencies and lead to an improving CSL Behring gross margin.
“We are excited about the potential growth in our transformational gene therapy product for haemophilia B patients, HEMGENIX®, and we are looking forward to bringing our monoclonal antibody, Garadacimab, for the treatment of HAE, to market in FY25, subject to receiving regulatory approvals.
“While the market conditions for CSL Seqirus remain challenging, the business is expected to outperform the market benefitting from its differentiated product portfolio.”
And analysts at Moody’s Ratings liked the report, writing in a note on Tuesday, “CSL’s fiscal 2024 results are credit positive, with strong EBITDA growth resulting in reported net leverage reducing to 2.2x from 2.7x in fiscal 2023. This is in line with management’s commitment to reduce leverage following the acquisition of Vifor Pharma in August 2022.
“In fiscal 2025, we expect that CSL’s strong EBITDA growth will lead to a further reduction in its net leverage, which, along with lower capital spending, will continue to improve the company’s already robust credit profile.”