“That provides the active pharmaceutical ingredient. That provides us the tariff conversation strength in our view.”
A good answer but clearly not the whole story, hence the caveat in his outlook statement.
CSL chief executive Paul McKenzie. The biggest impact of Trump’s pharmaceuticals tariff is expected to be on CSL’s US exports.Credit: Eamon Gallagher
But McKenzie did not wait for questions on vaccines before putting out an elbow in the direction of Trump’s anti-vaxxer health department boss, Robert F. Kennedy Jr, who appears to have already triggered a decline in vaccination rates.
“We view the softness in the US seasonal category as highly irrational based on the vaccine’s risk-reward profiles and the scale of disease burden, which this year reached a 15-year-high,” McKenzie said.
It will be a drag on a business that will be spun off into a separate ASX-listed giant over the next 12 months.
But this brings us to the nub of the thousands in job cuts and the main reason CSL shares were dumped on Tuesday.
The CSL share price tripled over the past decade as the former government enterprise became a global giant, but its earnings growth mojo has wavered recently despite reporting a 15 per cent rise in net profit to $3 billion.
That is not a situation the market will accept for a stock that is trading on such a high earnings growth multiple, and something had to give on Tuesday.
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“Whilst the cost-out and other strategic re-prioritisations might ostensibly lift EPS [earnings per share], we need to question whether a lower multiple might be appropriate in valuing them,” Wilsons Advisory analyst Shane Storey said in a note after CSL announced its results.
The restructure, which will remove up to 15 per cent of the CSL workforce, may pay off down the track. Along with the rationalisation of research and development to six centres and honing the focus of CSL itself around its main plasma business – while the vaccine business, Seqirus, gets its own separate corporate home.
But there is execution risk. And then there is the Trump tariff risk factor. The latter may get some clarity in early October.
Trump’s White House sent letters to 17 pharmaceutical giants warning that high-income nations such as Australia could not be offered cheaper prices than the US. These companies, which did not include CSL, have until the end of September to respond.
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If there was some reason for cheer around CSL’s Melbourne headquarters, it is that the company’s approximately 3000 Australian-based staff will be spared the worst of the job cull, in which about 3000 staff are expected to go from CSL’s global operations.
But the company has too many eggs in Trump’s basket for anyone to breathe easily at this stage.
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