CSL: Interim result 2013

CSL has reported another fantastic half-year result. Revenue increased 11% in constant currency terms to US$2.5bn (it changed to US dollar reporting last year), while net profit rose 25% to US$627, again in constant currency terms and earnings per share leapt even further, rising 31% to 124.7 US cents thanks to CSL’s ongoing share buyback. An interim dividend  of 50 US cents was declared (unfranked, ex date 6 March).

CSL Behring drives growth

Driving this growth was CSL Behring, CSL’s plasma products business. Revenue here rose 9% to US$1,962m in constant currency terms. Standout performers within this portfolio were immunoglobulin sales, which grew 10% led by strong demand for Privigen and Hizentra in the US and Europe. Elsewhere, albumin sales jumped 27% in Asia thanks to new contract wins and a rapidly growing market. Speciality products used in peri-operative bleeding – Maemocomplettan, RiaSTAP and Beriplex – helped boost the division’s sales 15% to US$345m.

CSL Behring continues to outgrow the market by winning market share and selling premium products. Meanwhile, the ruthless pursuit of manufacturing efficiencies has helped expand earnings before interest and tax margins.

CSL’s other businesses – such as local plasma therapies, vaccines and pharmaceuticals – grew 9% in constant currency terms (excluding the albumin sales mentioned above). From 2013 onwards the Australian operations will fall under CSL Behring with the remaining vaccines, pharmaceutical and diagnostics businesses rebranded ‘bioCSL’. More details and comparable financials will be available following the full-year result.

Growth is being supported by expanded albumin and base fractionation facilities in Switzerland, Germany and the US. CSL has also added four new plasma collection centres in the US over the past 12 months.

New information on research and development was scarce, and we recommend members review our coverage of the recent R&D day (see Lessons from CSL's R&D day from 12 Dec 12 (Hold – $54.54)). CSL remains committed to R&D with spending planned to rise 10-15% a year as the business expands.

CSL in rude financial health

CSL remains in sound financial health. Although the company now carries nearly US$400m of net debt due to its current share buyback, the company is producing nearly US$1bn of annual free cash flow meaning it can easily support this modest debt burden.

2013 looks like being another successful year for CSL, with full-year net profit pegged to rise 20%. Long-serving chief executive Brian McNamee will step down in June, to be replaced by Paul Perreault, the current head of CSL Behring. Judging by today’s presentation, CSL appears to be in good hands.

CSL’s share price has continued its march upwards as the market better appreciates its quality. The scope for growth continues to amaze us and we’ll admit we’ve been too conservative in the past. CSL remains an exceptionally high-quality business, which we don't want to sell too cheaply, and we've increased the 'Sell' price in our recommendation guide. For now, with the share price up 5% since 12 Dec 12, CSL remains a HOLD.

Note: The model Growth portfolio owns shares in CSL.