CSL reports strong sales and profit growth
Australian Securities Exchange (ASX) leading healthcare services provider CSL (ASX:CSL) reported a strong 11 per cent rise in revenue from $13.3 billion to $14.8 billion, with CSL’s Behring segment, which sells products such as plasma-derived immunoglobulins, accounting for over 70 per cent of total revenue. The company also reported a 21.8 per cent rise in earnings before interest, tax, depreciation and amortisation (EBITDA), a 24 per cent rise in earnings before interest and tax (EBIT) and 15 per cent growth in net profit for 2024, adjusted for currency fluctuations.
Growth across all segments was broadly in line with expectations and was driven primarily by the solid performance of CSL’s Behring division. This business saw strong demand for immunoglobulins and benefited from a return to solid revenues, which rose 23 percent. In fact, Behring’s gross profit growth of 16 percent accounted for 90 percent of the group’s overall improvement.
Behring’s gross profit margins have come under pressure in recent years due to plasma shortages and higher costs of blood donation during the Covid-19 pandemic. A return to pre-pandemic margins of around 56 percent is seen as a key profit driver for CSL in the medium term, and although CSL had forecast a 100 basis point improvement in Behring’s gross margins, the company reported a 120 basis point improvement, mainly due to lower collection costs, operational efficiencies and price increases. However, this improvement was partially offset by unfavorable currency fluctuations. Nevertheless, operationally, Behring’s gross margins are trending in the desired direction.
CSL had previously indicated that it would take three to five years for Behring’s profitability to return to pre-Covid levels.
CSL licensed Hemgenix, a gene therapy for hemophilia B, from uniQure in fiscal 2020. Gene therapies pose a potential long-term risk to demand for plasma-derived treatments, so CSL’s success with its own gene therapies could help alleviate concerns about disruption. However, it is still very early days. Hemgenix and other gene therapies are very costly, so adoption will be very slow at first. Hemgenix received a significant number of recommendations in 2024, but has only been administered to 12 patients.
CSL’s Seqirus business – one of the world’s largest flu vaccine companies – delivered solid results, outperforming the market despite lower vaccination rates and competition. However, the outlook for this business is less clear and more cyclical, with lower demand for flu vaccines having a negative impact. Longer term, the seasonal flu market is shrinking from three to five major players, partly due to the shift from developing egg- or cell-based vaccines to mRNA technology-based solutions.
In 2021, CSL announced the acquisition of global specialty pharmaceutical company Vifor, a company with leading positions in iron deficiency, nephrology (kidney treatment) and cardiorenal therapies. Vifor faced challenges in the US – its key market and revenue grew by only three percent. The slow growth was attributed to patients having to try less expensive treatments first.
CSL forecasts that group revenue will only increase by six percent to between $3.2 billion and $3.3 billion in the 2025 fiscal year. However, EBITDA is expected to increase by almost 18 percent, EBIT growth by 22 percent and net profit by 15 percent.
The Montgomery Fund and the Montgomery (Private) Fund owns shares in CSL. This article was prepared on August 16, 2024 with information available to us today, and our opinion may change. It does not represent formal advice or professional investment advice. If you wish to trade CSL, you should seek financial advice.
Roger Montgomery is the founder and chairman of Montgomery Investment Management. Roger has over 30 years’ experience in fund management and related activities including equity research, equity and derivatives strategy, trading and securities brokerage. Prior to founding Montgomery, Roger worked at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was written by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The primary purpose of this post is to provide factual information and not as advice on financial products. Furthermore, the information provided is not intended to constitute recommendations or opinions on financial products. However, comments and expressions of opinion may only contain general advice which is prepared without taking into account your personal objectives, financial circumstances or needs. For this reason, before acting on the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and, where appropriate, consider seeking independent advice from a financial advisor before making a decision. This post expressly excludes personal advice.
