CSL (CSL) reported its first-half 2026 profit results, which followed the muted guidance given at the AGM. The results were overshadowed by the sudden departure of the CEO last night. The HNW Core Portfolio holds a 7% weight to CSL.

  Key Points:

  • Profits Down: CSL profits were down -7% to US$1.9 billion, this was expected due to a range of factors such as lower US flu vaccine sales, China delaying buying albumin, weaker Behring sales and an additional US$100M Medicare tax.  CSL’s iron division had a record half with profits up +22% with the successful launch of two new kidney drugs.  The surprise for us was the flu vaccine business that came in better than expected, with a very bad Northern winter flu season spurring vaccinations, particularly in Europe.
  • CEO Change: Last night, CSL revealed that CEO Paul McKenzie had “retired” effectively immediately and would not be presenting the results today. A very unusual turn of events and a move that one could expect from a sketchy West Perth mining explorer rather than an ASX Top 5 company.  Interim CEO Gordon Naylor is well-known to the market and comes from the CSL board after spending 33 years at CSL as both the head of vaccines and across the numbers as CFO. His appointment should calm the investor base that was unhappy about the moves made by the former CEO.  This looks like a boardroom coup with Chairman McNamee (the CEO who built the company over 23 years) not happy about the events of the past year and the damage being done to his legacy, perhaps stepping into a quasi-executive chair role in the shadows as the Australians take back the reins.
  • Restructuring done: Over the half CSL reduced their R&D sites down from 11 to 6 and have reduced headcount by 3,000, executing on the transformation program announced in August.  This is expected to see an annual benefit of US$500-500M by FY28, with US$400M in savings flowing through next year.
  • Dividend flat:  US$1.30 per share, representing a payout ratio of 32%
  • On-Market Share Buyback: CSL management announced a $750 million buyback, citing strong cash flows over the last 12 months.
  • Why is the stock down? Surprise CEO changes always are negative, given the events of the past year any negative news would weigh on the share price.
  •  Guidance: CSL management reiterated their full-year guidance of 4-5% revenue growth and 7-10% profit growth for 2027 and beyond, saying that they have seen a turnaround in late 2025/26.  CSL are in “show me mode” with the market sceptical.

Portfolio Strategy: CSL is a world leader in manufacturing medicines from human blood and flu vaccines, and, along with Sonic Health, is a core healthcare position in the Portfolio. The business enjoys substantial barriers to entry and sells non-discretionary life saving drugs and, in Australia, holds exclusive rights to the production of blood plasma-derived medicines. The company earns over 90% of its profits offshore and benefits from a falling AUD.  While CSL is in the dog house at the moment, there is a path to recovery and looks cheap trading at a large discount to the ASX on a PE of 17x with a 2.8% dividend yield.

CSL finished down -4.6% to $163.44 a big recovery after being down -12% at 10:30am before the analyst call.