csl to rebound, page-17

CSL stumbles on broker downgrades
August 20, 2009 - 4:12PM

CSL fell the most in more than three months in Sydney trading after Citigroup and Macquarie Group lowered their ratings on the stock, citing concerns about the impact of foreign exchange rates on profit and the possibility CSL may lower prices for its products.

The world’s second-biggest maker of treatments for blood disorders fell 4 per cent to $31.80, the biggest drop since May 7. The stock was the biggest decliner on the S&P/ASX 200 Health Care Index of 10 companies.

Citigroup analyst Julia Bailey cut her rating to “hold/medium risk” from “buy/medium risk,” saying the Australian dollar is likely to rise against the US dollar and euro this year, reducing the value of CSL’s sales in foreign markets.

Macquarie lowered CSL to “neutral” from “outperform,” saying it expects the company to lower the price of its key Privigen treatment 1.5 per cent this year as it more than triples production.

Foreign exchange “is once again becoming a headwind for CSL,” Bailey said in a note to clients today.

CSL’s chief executive Brian McNamee said yesterday he doesn’t expect the company to raise its prices for blood plasma products in the current financial year, and may lower them.

“There is more risk to product prices than we’ve seen for a number of years,” said David Low, a health-care analyst with Deutsche Bank. He maintained his “hold” rating on the stock. “After two or three years of shortage, the industry has reacted and increased the amount of supply. You can see that manifested by the normalization of inventory levels.”

CSL pays people in the US to give plasma, the watery liquid in which blood cells are suspended and on which products such as Privigen are based.

The Melbourne-based company expects profit in the 12 months ending June 2010 to grow as much as 24 per cent to $1.26 billion, McNamee said yesterday.

The company’s forecast is based on the average value of the Australian dollar against the US dollar, euro and Swiss franc last year, CSL said. Based on current values for those currencies, net income may be between $1 billion and $1.1 billion, the company said.