CSL Limited (CSL) develops, manufactures and markets human pharmaceutical and diagnostic products derived from human plasma.

The company's operations are concentrated in Australia, Germany, Switzerland and the US, although its reach extends to almost 27 countries with over 10,000 employees. CSL's main operational businesses include CSL Behring (including CSL Plasma) and CSL Biotherapies.

The company's products include pediatric and adult vaccines, infection and pain medicine, skin disorder remedies, antivenoms, Albumin, anticoagulants and immunoglobulin's (IG).

FY12 results:

As the above shows CSL has a solid history of growing its earnings. Total sales for FY12 were $4.4 billion, which was on a constant currency basis is a 12% jump on FY11.

On a constant currency basis CSL's FY12 NPAT was $983 million, a 14% increase on the previous year's result. The balance sheet is also healthy with FY12 cash flow from operations was up 14% to $1.16 billion and $1.16 billion of cash on hand.

Aussie dollar:

Given the company earns a majority of its earnings in US dollars the falling Aussie dollar is a benefit to CSL. Several of the pillars that have been holding up the Aussie dollar are not looking as stable as they once were.

One of these pillars being Chinese demand for Australian commodities is not as strong as it once was, and this in turn means less demand for our currency. Another fact hurting the Aussie dollar is the RBA moving to an easing bias, as characterised by this week's interest rate cut.

Buy-Back

Another factor likely to underpin the company's stock price is the undertaking of share-buybacks. The company is currently in the middle of an on-market share buy-back that it is 77% complete.

What was interesting in the release of CSL's FY12 results was the fact it flagged the potential for another on-market share buy-back. Given its strong cash flow, we think the company will be able to complete another buy-back without stretching its balance sheet.

Outlook:

CSL appears to be in solid shape as we move further into FY13.

The company is expecting constant currency NPAT growth of 12% in FY13, which we think is achievable given its recent history of meeting or exceeding guidance. We also think that a weaker Aussie dollar and the likelihood of another share-buyback will underpin further share price gains.

Our Recommendations:

On the 5th of October 2012 we issued a recommendation to our clients of the Traders Report to purchase CSL at $46.10. The stock has since moved to a price of $47.17 as of 11:30am October 11th.

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