The CSL Limited (ASX: CSL) share price is on the slide on Wednesday.
In morning trade, the biotherapeutics company's shares are down almost 1% to $253.33.
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Why is the CSL share price falling?
Investors have been selling the company's shares today after it released an update at its annual general meeting.
Among the various topics covered, management touched on current trading conditions, its outlook, and its margins.
In respect to the latter, the company provided a bit of colour on the margin headwinds the CSL Behring business is facing and its expectations for the future. CSL's CEO, Dr Paul McKenzie, said:
We expect CSL Behring gross margin to return to pre-COVID levels in the medium term. The path to margin recovery however is different to the COVID driven margin decline. The largest contributor to gross margin improvement, [is a] reduction in our cost per litre. The biggest components within cost per litre are donor compensation and direct labour. Cost per litre is around 17% off the peak, so we are making genuine inroads, but there is more to do and it's just going to take some time.
Dr McKenzie also believes that new product launches and improving yields will soon help boost its margins. He adds:
We have a number of late-stage R&D programs that are approaching fruition. These are potentially high value medicines that will help drive the improvement in our margin. […] We have a yield maximisation strategy that aims to extract even more Ig from each litre of plasma collected. We will target a 5% improvement over the next 5 years, then a further 10% improvement on top of that by the back-end of the decade.
Judging by the CSL share price performance today, it seems that the market may have been betting on a quicker recovery for its margins.
FY 2024 outlook
CSL also provided an update on its FY 2024 outlook at the meeting. The good news is that it continues to forecast solid constant currency revenue and earnings growth this financial year.
Management has reaffirmed the following guidance for FY 2024:
- Revenue growth of 9% to 11%
- NPATA in the range of approximately US$2.9 billion to US$3 billion at constant currency, an increase of between 13 and 17%. (This comparison excludes the one-off gain from the sale of property in FY23 of US$44 million.)
Looking ahead, the company spoke briefly about its 2030 strategy. Dr McKenzie summarises it as follows:
This [strategy] is largely the same framework that has underpinned the long-term success of CSL […] This strategy is proven and resilient. CSL will continue to follow this strategy under my leadership with the aim of delivering sustainable, profitable growth well into the future.
