Lower $US impact on CSL.
Hi MM. With the expectation that the USD will fall due to lower US interest rates, what impact would this have on companies like CSL and would this already be 'priced in' Cheers Alain
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Answer
Hi Alain,
A good question:
- CSL generates about 50% of its overall sales in the US but it’s not a straightforward case of a stronger AUDUSD negatively impacts them.
CSL’s Behring division, which accounts for ~70% of their overall earnings enjoys around 50% of sales occurring outside the US, but the majority of costs are incurred inside the US. When combined with a long manufacturing cycle, it can experience a margin squeeze when the US dollar advances.
While a higher US is a negative influence, it’s not significant and we think there’s more important things for CSL than the currency, such as margins in their Vifor division. In any case, we think CSL remains reasonable value as it trades ~$300, about 13% ‘cheap’ relative to history with a countercyclical earnings profile.
