CSL Raises Profit Forecast

CSL Ltd. (CSL), Australia’s biggest drugmaker, raised its full-year profit forecast as demand for blood-derived treatments increased and licensing fees rose.

Net income will climb about 13 percent to A$1.06 billion ($1.1 billion) in the 12 months ending June 30, Melbourne-based CSL said today. The company, whose forecast is based on exchange rates in the prior fiscal year, previously projected profit of A$1.04 billion.

Demand for immunoglobulin products, which raise antibody levels, and royalties earned from treatments such as Merck & Co.’s Gardasil cervical-cancer vaccine boosted earnings, CSL said. That’s helping cushion the impact of a stronger Australian dollar, which is cutting the value of overseas sales.

“The company is making a great transition from a commodity to an intellectual property company,” Shane Storey, an analyst at Wilson HTM Investment Group in Brisbane, Australia, said by phone. “It is increasingly becoming more of a biotechnology company,” said Storey, who rates CSL “buy.”

CSL rose 2.5 percent to A$31.72 at the close of trading in Sydney. The shares have fallen 0.9 percent this year, compared with a 5.8 percent advance for Australia’s S&P/ASX 200 index.

Net income fell 3.4 percent to A$483.3 million in the first half ended Dec. 31, hurt by a stronger Australian dollar, CSL said. Analysts projected profit to fall to A$485.3 million, based on the average of four estimates compiled by Bloomberg.

‘Mighty Aussie Dollar’

Gains in the local currency cut earnings by about A$95 million. That compares with an October forecast for an A$85 million reduction.

Excluding the impact of exchange rates, first-half profit rose 16 percent, CSL said.

Revenue climbed 6.3 percent to A$2.3 billion in the six- month period. Fees from licensing of intellectual property totaled A$80 million, 60 percent more than a year earlier.

The Australian dollar advanced 6.3 percent against its U.S. counterpart in the past 12 months, the second-best performer among 10 major currencies tracked by Bloomberg.

“We have the mighty Aussie dollar,” Chief Executive Officer Brian McNamee said on a conference call. “As we translate where we make profits worldwide back to Australian dollars, we are open to the vagaries of what happens when speculators want to see the Australian dollar as an opportunity.”

‘Natural Hedges’

The company will try to put in place “natural hedges” against currency movements, such as generating more expenses in the U.S., where it has a high revenue base, McNamee said.

North America was CSL’s biggest market, accounting for 42 percent of revenue, followed by Europe with 32 percent and Australia with 10 percent.

CSL said it plans to begin reporting in U.S. dollars in the year starting July 1, in line with industry practices and to reflect the predominance of the company’s global sales.

The company made a provision of about 11 million euros ($15 million) in the first half in case of delays or defaults in payments by southern European customers, McNamee said. “Hopefully we don’t have to use it.”

To contact the reporter on this story: Natasha Khan in Hong Kong at nkhan51@bloomberg.net

To contact the editor responsible for this story: Jason Gale at j.gale@bloomberg.net