CSL 1.40% $271.25 csl limited


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    Downgrade triggers CSL slump
    By Jan Eakin
    October 3 2002

    CSL shares slumped almost 9 per cent yesterday after Salomon Smith Barney downgraded core earnings forecasts by 18 per cent for the current financial year.

    Delays to the registration of the blood processor's sandoglobulin product in Europe and its exposure to a falling US dollar against the Swiss franc triggered the broker's second downgrade on CSL in the past month.

    Analyst Andrew Goodsall is forecasting a reported net profit of $112.8 million in fiscal 2003 compared with $123.8 million last year.

    CSL shares dropped $1.86 to $19.75 as reports also circulated that house broker Merrill Lynch had lowered its forecasts again.

    Merrill was not available yesterday, but it is understood analyst Michael Carmody lowered his estimates on concerns about the weakening intravenous immunoglobulin (IVIG) prices and the higher costs at its Switzerland-based ZLB plant.

    Merrill's forecasts for the current financial year are understood to have been cut by 15.2 per cent and by 8.3 per cent in fiscal 2004.

    In a research note published yesterday, SSB's Mr Goodsall said delays in the sandoglobulin product (a type of IVIG product) had been blown out from two months to four months following problems with its outgoing distributor, Novartis.

    The distributor "appears to have created some disruption in European markets for CSL by all but withdrawing from the UK during calendar 2002 and dumping large volumes of product in other countries as the agreement expired", Mr Goodsall said.

    Europe previously represented approximately 30 per cent of CSL's sales by volume.

    Mr Goodsall believes the delays will mean that Europe-destined product will be stockpiled, with a large amount unlikely to be moved until the latter half of the current financial year or next year.

    Salomons believes the delays could cut sales from the ZLB plant by about 20 per cent.

    CSL's share price has more than halved in the past four months - the more recent downturn triggered late last month as analyst concern grew that IVIG prices would continue to soften due to oversupply in the US market. In the past five weeks the stock has fallen more than $5 a share.

    At the group's full-year results, posted the day before the latest IVIG concerns were raised, CSL managing director Dr Brian McNamee revealed a 58 per cent increase in net profit to $123.8 million.

    The result matched analysts' forecasts and helped CSL shares to rise as much as 10 per cent on the day
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