From its recent lofty highs of $120 earlier this year, shares in vaccine and blood product manufacturer CSL Limited (ASX: CSL) have dropped back below $100. With the company's recent investments in building capacity for the future, CSL appears to be in a solid position.
A number of recent developments have strengthened the investment case, in my opinion, with the recent debt reissue foremost among them. CSL recently launched a US$550 million private placement with a weighted average interest cost of 3%, and an average life of 12.5 years. Even with super-low interest rates globally, CSL's cost of debt is among the very lowest on the ASX.
This is important because as contributor Regan Pearson illustrated here, a significant chunk of the company's long term returns have come from (sustainably) high levels of debt.
Building manufacturing capacity
CSL is also developing a number of new facilities to boost the capacity of its business all throughout the supply chain. In addition to new production facilities in several countries, CSL is also expanding its packing facilities as well as its network of plasma collection centres. CSL's plasma collection network grew by 20% to 140 facilities throughout Europe and the USA in the past year.
All of these developments will improve the company's ability to maintain supply of its important products, as well as potentially increase efficiency and reduce operating costs. In addition to the ongoing turnaround of the Seqirus vaccine division the continued high spending on Research & Development (R&D) provides additional upside potential over the long term.
CSL is starting to look interesting as its shares drop below $100.
