Why did Aussie investors get a 9% dividend cut from CSL (ASX:CSL)?

Aussie investors may be feeling a bit perplexed after it was announced that they’d be getting a 9% dividend cut from CSL Limited (ASX:CSL).

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CSL Limited (ASX: CSL) announced its FY21 half-year result to the market today. In the result was a 9% dividend cut for Aussie investors.

Why did CSL cut the dividend for Aussies?

To understand what happened, it’s important to note that CSL reports its result in US dollars. It also makes a lot of its revenue and profit in US currency too.

So, bearing that in mind, some investors may have been surprised to see that in Australian dollar currency terms, the interim dividend that CSL declared represented a 9% cut to approximately $1.34 per share.

However, in US dollar terms, the interim dividend was actually increased by the CSL board by 9% to US$1.09 per share. A year ago the Australian dollar with worth around US$0.67 and now it’s worth around US$0.78.

What was the rest of the CSL result like?

CSL reported that it delivered a strong first half result with reported net profit after tax (NPAT) growth of 44% to US$1.8 billion. Earnings per share (EPS) also grew by 44% to US$3.98.

The large healthcare business said that there was solid growth of its core immunoglobulin portfolio. It also said there was a successful transition to its own distribution model in China, this helped albumin sales grow by 93%. This new distribution model is expected to help improve CSL’s participation in the value chain as well as improving its sales, marketing and distribution network.

CSL also said that there was exceptionally strong growth by the vaccine division, Seqirus. This was achieved by growth in seasonal influenza vaccines, driven by record demand and the ongoing shift to Seqirus’ differentiated product portfolio.

New manufacturing facility

During the six month period, CSL announced that it would be building a new biotech manufacturing facility in Australia to manufacture influenza vaccines for countries around the world.

This facility will use cell-based technology to produce influenza vaccines for use in both influenza pandemics and seasonal vaccination programs. It will be the only cell-based influenza vaccine facility in the southern hemisphere.

Expectations for the rest of the year

CSL CEO and managing director Paul Perreault said:

Demand for CSL’s core plasma, and influenza vaccine products remains robust. Seqirus is performing well as strong demand for influenza vaccines together with our differentiated products portfolio will see it deliver another strong profitable year. Consistent with the seasonal nature of the business we anticipate, however, a loss in the second half of the year.

CSL’s net profit after tax for FY21 is anticipated to be in the range of approximately US$2.17 billion to US$2.265 billion at constant currency, representing growth over FY20 of up to 8%.

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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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