By Millie Muroi
Healthcare giant CSL’s chief executive Paul McKenzie has pegged volatile currency movements for dragging down its profits as the company competes for plasma donations in a high-fee environment.
In a market update to the ASX on Wednesday, CSL said it expected net profit after tax and adjustments to grow between 13 and 18 per cent to between $US2.9 billion and $US3 billion ($4.3 million and $4.4 billion) in the 2024 financial year – below consensus expectations of about $US3.5 billion ($5.2 billion).
CSL chief executive Paul McKenzie said currency volatility had impacted the company’s profits.Credit: Eamon Gallagher
“Our profit result has been impacted by a volatile currency environment,” McKenzie said on a call with analysts on Wednesday morning.
He added that global demand for CSL’s products remains robust and the company’s research and development pipeline had “never been better”, with the first patient expected to take CSL’s treatment Hemgenix, the first FDA-approved gene therapy for hemophilia B, within the next few weeks.
While CSL had provided guidance for a foreign currency headwind of about $US175 million ($258 million) in February, chief financial officer Joy Linton said the company now expected a headwind of between $US230 million and $US250 million ($340 million to $369 million).
CSL CFO Joy LintonCredit: Tash Sorensen
“In the second half of the year, so between December and May, the euro improved against the US dollar, but there wasn’t much movement in the yuan,” Linton said, noting they were the biggest components of the company’s currencies pairs.
“In the back part of the year, the two currencies that moved most were the pound to the US Dollar and the Australian dollar to the US dollar. Currencies have moved against us, and the greater the currency headwind in the 2023 financial year, the lower our starting points growth point financial year 2024.”
Shares in the company plunged 8 per cent in early trade and were down 6.9 per cent to $287.3 at the close on Wednesday.
Linton said the negative impacts from the currency movements were partly a function of the company’s capital investments in Australia. “We’ve had major capital works in Australia, including the Tullamarine cell culture facility,” she said.
The $800 million vaccine plant in Melbourne’s north-west is expected to be running by 2026.
Linton also said the company was cautious about labour costs, which have increased in the last 12 to 18 months. “The inflationary environment in the US is still fairly robust,” she said. “We’re not seeing big demand for wage increases but remain cautious on that front because the inflationary environment is still out there.”
McKenzie said improving plasma yield at acquisition and manufacturing was a constant and critical part of helping the company to return to its pre-COVID margins.
Linton said the pandemic had made it more difficult for the company to collect plasma and that it still had to compete for donors after donor fees peaked about 9 months ago.
“The cost per litre of plasma is expected to be down 15 to 20 per cent through the year, but it’s still not enough to get the plasma margin back to pre-COVID levels in the medium term,” she said.
She added the rollout of plasma collection centre efficiencies was slower than originally anticipated. “We thought it might be finished by now, but we’re still working through it,” she said.
The company said it expected modest improvements to its margin in the 2024 and 2025 financial years, but provided a three to five-year time frame to return to pre-COVID margins.
Morningstar equity analyst Shane Ponraj said the 2024 financial year net profit guidance was the main disappointment from CSL’s market update but that it remained a strong company.
“The net profit figure was well below consensus and there was commentary around gross margins taking a while to return to pre-pandemic levels,” Ponraj said. “But the inflationary environment will be attractive to new donors because they’ll receive higher amounts, diagnosis rates are improving and CSL is a high-quality company, undervalued to its fair value. We’re optimistic about their long-term trajectory.”
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