CSL Ltd (ASX: CSL) is a global company that develops and manufactures biopharmaceutical products mainly derived from blood plasma. It also develops and manufactures influenza vaccines. CSL’s key markets are the United States (48 per cent of revenue) and Europe (25 per cent of revenue), CSL’s market capitalisation is around $A141 billion and CSL is the largest company listed on the ASX.
CSL has been one of the strongest performing Australian companies since its public listing on the ASX in 1994. For example, the average annual growth in CSL’s share price has been over 25 per cent per annum since being publicly listed in 1994. Currently, CSL is ranked number 1 in global plasma therapies (a $US30 billion global industry and CSL has only two other global competitors) and number 2 in influenza vaccines (a $US6 billion global industry).
Update on COVID-19
The coronavirus (COVID-19) was first reported from the Wuhan province in China on 31 December 2019. The World Health Organisation data shows a total of confirmed cases of 1,353,361 and 79,235 deaths globally. As of today (8 April 2020), there have been over 6,052 confirmed cases in Australia.
What did CSL announce today?
The most significant announcement from CSL today is that the company has reaffirmed its profit guidance for FY20. FY20 profit guidance remains approximately US$2,110 million to US$2.170 million in constant currency terms. CSL notes that if exchange rates remain unchanged for the remainder of FY20, then this lowers this guidance by around US$100 million. In addition, CSL announced that the company has a strong balance sheet with approximately $1.1 billion available liquidity.
Regarding CSL operations, CSL management notes that plasma collections is expected to be impacted due to COVID-19 conditions. However, in the current business environment, there is very strong demand for influenza vaccines and requests for IVIG has been elevated. There have been no interruptions in to CSL supply chain, and the Wuhan facility operations have recommenced.
What is the outlook for CSL?
The short-term and long-term outlook for CSL is positive. In the short-term, CSL has announced that FY20 profit guidance remains unchanged in constant currency terms (unlike several blue chips ASX listed stocks), and several of the company’s products will see an increase in demand to help battle COVID-19.
Looking forward over the medium to long-term the outlook for CSL is positive.
CSL has achieved economies of scale and has a very strong competitive position in both the plasma and influenza vaccine markets. Additionally, both industries have very high barriers of entry, reducing the likelihood of further competition in the future. An example of CSL’s competitive position is that it is the most efficient in the United States market at collecting plasma which enables it to keep its costs at industry best practice.
CSL is expanding production facilities located at Broadmeadows in Victoria and Kankakee in the United States as well as elsewhere. The Broadmeadows facility is expected to produce therapies with an estimated annual market value of A$850 million by 2026.
This expansion in production reflects growing demand partly stemming from the aging population and a growing proportion of the population having access to high technology medicine.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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