Investment foresight lifts CSL profit

Andrew Stanley

Blood plasma producer, CSL (ASX:CSL), upgraded its profit forecasts in January and it is now targeting 18-20% profit growth in constant currency for FY17.

CSL attributed the profit uplift to several factors, including market share gains for its core blood plasma products in the US, a factor which we principally attribute to CSL’s investment foresight.

Investors often comment on CSL’s heavy investment in R&D for new products, however we would also highlight CSL’s ongoing investment in both its ‘fleet’ of US blood collection sites and manufacturing capability globally.

In terms of new blood collection sites, our sense is that CSL has capitalised on industry conditions, noting that its peers are either capital constrained or distracted by recent acquisitions.

As a result, CSL’s recent expansion looks set to cement a material competitive advantage in plasma supply given the lag time between opening new sites, drawing blood (so to speak) and producing finished goods (or plasma inventories). In practical terms, the need for blood samples to be stored during production while samples are tested sequentially for contamination, means blood product spends upwards of a year in inventory, reinforcing CSL’s current supply advantage. (VIEW LINK)


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