Merrill report bloodies CSL 12/06/02 AFR News - 12.06.02 03:08...

Merrill report bloodies CSL 12/06/02

AFR News - 12.06.02 03:08


CSL shares plunged 10 per cent to their lowest levels since mid-2000 yesterday after the blood products group's house broker, Merrill Lynch, downgraded its profit forecasts and cut its recommendation on the stock.

Merrill analyst Michael Carmody warned that CSL was facing fierce competition and aggressive discounting in the US for its intravenous immune globulin (IVIG) products, which are used to boost antibody production in patients.

The report, which slashed $3.50 from the group's shares to just $31.99, said competition was heating up because CSL's major IVIG rivals were producing near-capacity levels for the first time in three years.

Shares in the former high-flying company are now just half their January peak of $62. At the peak, CSL shares had delivered investors a 140 per cent return in just two years.

Merrill lowered its net profit forecast for CSL's current financial year by 4.6 per cent to $124.4 million. The new estimate is in line with CSL's own forecast of between $120 million and $125 million.

The main reason for the downgrade was a fall in prices for CSL's IVIG product. This was expected to sell for $US42 a gram in the current half-year, but after speaking with major purchasers, Merrill now expects a price closer to $US40.

The downgrade also took into account a reduction in expected volumes from CSL's European plasma business.

Merrill's comments had a big impact on the market due to the broker's perceived closeness to CSL.

CSL's last major share placement, a $330 million raising in June 2001, was managed by Merrill's investment banking arm. The funds were used to purchase the US-based Nabi group.

Merrill also acted as lead manager of a $300 million placement in 2000 which helped in the $890 million acquisition of ZLB, then the world's fifth-largest manufacturer of plasma products.