CSL’s mixed half-year: plasma strength offsets vaccine weakness, bright outlook maintained
CSL (ASX:CSL) has posted its half-year results, delivering results that are best described as mixed. At the headline level, revenue climbed around five per cent, while net profit after tax and amortisation (NPATA) also nudged upward in the low single digits. Beneath these top-line numbers, the company reported a robust rebound in plasma collections, which was offset by weaker sales of its Seqirus influenza vaccines. Despite these mixed signals, management has reaffirmed guidance for FY25, projecting 10-13 per cent NPATA earnings per share (EPS) growth and a five to seven per cent lift in revenue.
Seqirus and lower U.S. vaccination rates
Seqirus, CSL’s vaccine division, experienced reduced U.S. flu vaccination uptake – a trend also seen by sector peers Sanofi and GSK. The result: an eight to 10 per cent revenue drop year-on-year for Seqirus, which weighed on overall group performance and caused some analysts to mark down near-term forecasts. Ongoing questions about U.S. vaccination rates may continue to challenge Seqirus’s growth trajectory, at least in the short run. However, management pointed to a potential boost in 2H25 from pandemic preparedness contracts, suggesting current conditions will ultimately prove temporary. It is also worth remembering that vaccination rate falls were inevitable after the COVID-19 pandemic ended, and the share price has held up relatively well, albeit underperforming broad markets.
Plasma collections & margin recovery in focus
By contrast, CSL’s plasma arm – CSL Behring – emerged as key to current support for the company and its outlook. Immunoglobulin sales remain strong, with reported double-digit growth and healthy market share gains. Importantly, profit margins are linked to rising plasma collections and productivity enhancements from the Rika plasma donation system rollout, which is set to be completed by FY25. This technology boosts plasma yield per donor, driving down costs and recovering CSL Behring’s gross margin toward pre-COVID levels. Management is targeting a circa 200 basis points annual margin improvement, potentially reaching 58 per cent by FY28.
Vifor acquisition – no longer a drag
When CSL acquired Vifor, it raised eyebrows, given initial integration hurdles and generic competition for some Vifor products. However, recent performance suggests that Vifor has turned a corner. It is now making a modest positive contribution to group earnings, aided by robust product launches in Europe. Historically, CSL’s major acquisitions have taken time to bed down before generating strong returns. The Vifor story appears to be following that familiar pattern, reinforcing management’s confidence in its long-term growth potential.
Valuation & outlook
From a valuation perspective, CSL trades on roughly 22× enterprise value/ earnings before interest and taxes (EV/EBIT) – reasonable, if not cheap, compared to historical averages for a company that has delivered consistent double-digit growth. High barriers to entry in plasma collection and niche franchises in rare disease therapies anchor this resilience.
Looking ahead, CSL has reiterated FY25 guidance of five to seven per cent revenue growth and NPATA in the range of US$3.2-3.3 billion, representing a 10-13 per cent annual lift. A stronger second half is expected, propelled by continued immunoglobulin market share gains and additional margin tailwinds from cost efficiencies.
As is often the case, headwinds exist – Seqirus’s near-term growth is likely to be modest, and foreign exchange pressures are higher than initially forecast. Even so, management projects CSL’s overall momentum will keep driving annualised double-digit earnings growth over the medium term.
Key takeaways
Seqirus: Lower U.S. influenza vaccination rates have dampened vaccine revenues, though long-term pandemic contracts could provide a rebound opportunity.
Plasma strength: High immunoglobulin demand and improved yields via Rika technology are fuelling margin recovery at CSL Behring.
Vifor steadying: Early integration pains have eased, and the acquisition is no longer dragging on group results.
Reaffirmed guidance: Despite short-term hiccups, CSL expects to hit 10-13 per cent NPATA growth for FY25, underpinned by its core plasma segment.
The Montgomery Fund and the Montgomery [Private] Fund owns shares in CSL. This article was prepared 17 February 2025 with the information we have today, and our view may change. It does not constitute 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 three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
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