Australian vaccine and drugs maker CSL has found itself an unwitting victim of the financial crisis gripping Greece.
CSL revealed on Tuesday that the fallout from the crisis had spread to its balance sheet because Greece’s state-owned hospitals could not afford to pay millions of dollars worth of bills.
The Melbourne-based biotech had supplied Greek hospitals with various products to treat haemophiliacs and trauma patients but was still waiting for the bills to be paid four years later.
The Greek government, which has sparked a storm of protest over austerity measures designed to get a grip on its massive economic problems, issued bonds to cover the overdue bills.
But CSL was worried it would never recover the money and sold the bonds at a discount, forcing it to write off $25 million in its accounts for 2010/11.
“You have to describe it as collateral damage,” CSL managing director Brian McNamee told reporters.
“Over a number of years we have been selling important and life-saving medicines to the Greek population through government-owned hospitals.
“They seem to have a habit of not wanting to pay very rapidly.”
Details about CSL’s Greek tragedy emerged as the company reported a 10.7 per cent drop in net profit to $940.6 million for the 12 months to June 30.
CSL shares were down 81 cents, or 2.71 per cent, at $29.05 at 1521 AEST.
The main reason for the fall was $116 million worth of unfavourable foreign exchange movements for the company, which generates 90 per cent of its profits overseas.
On a constant-currency basis, operational net profit rose 13.6 per cent to $1.06 billion.
Weakness in the US dollar and euro, particularly against the Swiss franc, inflicted most of the pain on CSL’s earnings.
CSL’s main manufacturing plant for its intravenous immunoglobulin products is in Switzerland, where strong rises in the franc pushed up the prices of CSL’s exports.
Dr McNamee said CSL had been caught in a “perfect storm” of currencies that could again affect profits in 2011/12.
Despite this, he still expects a 10 per cent profit increase if exchange rates stay around the same levels.
CSL will also increase its staff numbers with the construction of a new manufacturing plant at its Broadmeadows site in Victoria.
“We think, overall, there will be many hundreds of jobs created through the construction and long-term operation of the plant,” Dr McNamee said.
“This is a 10- to 20-year decision, not a one-year decision.
“(The plant) will be designed for further modular expansion.”
Construction is expected to be completed by 2016 when the plant will begin making Privigen, CSL’s intravenous immunoglobulin treatment for people whose immune system does not function properly.
CSL, which currently makes Privigen at its main factory in the Swiss capital of Bern, will export the product from Broadmeadows to the United States, Europe and Asia.
Meanwhile, CSL has completed its on-market share buyback and foreshadowed further capital management initiatives, with $479 million cash on hand.
It will pay a final dividend of 45 cents per share, 4.4 per cent franked.
