CSL delivers bumper profit but guidance misses expectations

CSL’s annual profit soared 25 per cent amid strong demand for its products, however a weaker than expected outlook has sent its shares sharply lower.

CSL’s business is growing strongly.

CSL has put investors on edge with strong demand in its core Behring division undermined by a challenging outlook for Seqirus and iron deficiency and kidney disease division Vifor, which is still yet to hit its straps since being acquired in an $18.8bn deal two years ago.

Shares in Australia’s largest listed company plunged as low as $291.46 on Tuesday before recovering to close 4.6 per cent lower at $294.78, down $14.15.

Analysts are still overwhelming backing the stock, with recommendations to clients all on the positive side. However, the outlook for net profit for the current financial year was 3 to 6 per cent below expectations, according to Macquarie.

The net profit result for the past financial year was $US2.64bn ($4bn) on a constant currency basis, up 25 per cent on revenue of $US14.8bn, which was up 11 per cent.

This was broadly in line with consensus estimates, but while the company is known for being conservative with its forward looking statements, the projected bottom line growth was flagged as a miss.

“For FY25, net profit guidance is below our expectations, reflecting weaker-than-expected revenue growth,’’ Macquarie said.

“We are looking for details in relation to revenue growth and gross margin expectations for CSL Behring.’’

The company has forecast revenue growth of 5-7 per cent this financial year and net profit growth of 10-13 per cent.

Jarden, which has a price target of $305.34, said it was a “solid result at (the) top end of constant currency net profit guidance” for the past year, but that the focus was on the recovery of CSL’s largest division, Behring.

“Importantly, management (is) reaffirming gross margin percentage on track to improve,’’ Jarden analysts said. “We see (the) CSL story as very much in line with expectations and on track to deliver the highly anticipated margin correction.

“Stock has performed well over the last few months and we think the result supports this.’’

CSL chief executive Dr Paul McKenzie told The Australian that the company had laid out its plans at its capital markets day in October last year and had executed them well.

“I’m extremely pleased how the teams executed to that plan, delivered a strong set of results, and, more importantly, a strong foundation for the next few years, with our margin recovery,’’ Dr McKenzie said.

“Behring is back, we’re doing really good things for patients in public health. So it’s a strong set of results.”

The company’s largest division within Behring, the immunoglobins portfolio, “delivered exceptional growth, driven by significant patient demand and the recovery in CSL Behring’s gross margin is progressing to plan’’, Dr McKenzie said.

“CSL Seqirus outperformed the market in a challenging environment driven by the adjuvanted influenza vaccine Fluad,’’ he said.

“We remain confident in our double-digit earnings growth target over the medium term, reflecting a disciplined focus on the execution of our strategy.

“Over the medium term, CSL is in a strong position to continue to deliver annualised double-digit earnings growth.

“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 under way in plasma collections and our manufacturing operations that will continue to drive efficiencies and lead to an improving CSL Behring gross margin.’’

Dr McKenzie flagged that more work needed to be done to improve the results at Seqirus and Vifor, which in FY24 grew their operating results by just 4 and 3.8 per cent respectively, compared with Behring’s 18 per cent.

“While the market conditions for CSL Seqirus remain challenging, the business is expected to outperform the market, benefiting from its differentiated product portfolio,’’ Dr McKenzie said.

“For CSL Vifor, the iron market continues to evolve, and we are well positioned for increased competition. We continue to believe in the longer term strategic merits of the business.”

Revenue in Behring was $US10.6bn, up 14 per cent, with immunoglobulin up 20 per cent at $US5.66bn, revenue in the albumin division coming in at $US1.2bn, up 12 per cent, and haemophilia products up 10 per cent at $US1.3bn.

Speciality products sales were up 6 per cent to $US1.94bn.

Revenue at Seqirus was up 4 per cent and at Vifor 3.7 per cent.

CSL is continuing to reduce its plasma collection costs, with the rollout of its Rika device in the US, which greatly speeds up collection, on track to be completed by the end of the 2025 financial year.

Dr McKenzie told The Australian that CSL had also rolled out a customer relationship management suite on its donor app.

Wilsons Advisory said the result “improved CSL’s financial position dramatically” with cash flow and conversion “back to previous excellence and solid improvement in net leverage’’ with net debt to earnings falling from 2.7 times to 2.2.

CSL will pay a final dividend of $US1.45 per share, up 12 per cent.

CSL shares have traded as low as $228.65 in the past year.