CSL feels pinch as prices for blood products fall

MELBOURNE - CSL shares headed for their biggest decline on record yesterday after the world's third-biggest maker of blood products said falling prices in the US and a rising Swiss franc might reduce full-year earnings.

The stock, the worst-performing of Australia's 50 biggest shares this year, tumbled 11.6 per cent to A$18.90 ($21.58) in afternoon trade in Sydney, before recovering to close down A$2.42 at A$18.96.

Its 63 per cent slide this year has wiped A$4.6 billion from the company's market value.

Chief executive Brian McNamee told shareholders at the company's annual meeting that he could not predict when prices for intravenous immunoglobulin (Ivig) product, which have fallen about 10 per cent this year, would recover, or whether they had stopped falling.

The Swiss franc's 11 per cent rise this year could shave up to a further A$20 million from earnings, he said.

Andrew Waddington, who helps to manage A$10 billion worth of stock at Sagitta Wealth Management, said nothing came out of the annual meeting to change people's uncomfortable feelings about CSL's near-term profit outlook. McNamee said after the meeting that it would "be a challenge" to reach the company's August target that Ivig prices would fall by an average 5 per cent this year to US$38 ($79) a gram.

Prices in the US, where CSL makes more than half its sales, were between US$36 and US$38.

European prices had fallen to between US$30 and US$35 a gram, he said.

The stronger Swiss franc was also squeezing earnings because CSL made most of its Ivig products in Switzerland.

At the same time, more people were selling blood in the US, lowering prices for blood-based products.

Blood supply in the US was stronger, said Brent Mitchell, an analyst at Shaw Stockbroking.

"When economic conditions are weak, people give more blood", and the extra supply affected prices.

McNamee said net income this year could fall below last year's, depending on currency movements.

The first-half result would be weaker than the year-earlier result, while the second-half would be stronger than a year ago, he said, declining to be specific.

CSL's net profit in the year ended June 30 rose to A$123.8 million on sales of A$1.35 billion.

Analysts had forecast that it would report a net profit of A$128 million this year.

But analysts cut earnings forecasts for CSL this month because of delays in establishing a European distribution business.

McNamee said yesterday that CSL had started selling its own-brand blood products in some parts of Europe.