Annual General Meeting in Melbourne on Wednesday turned into a heated discussion regarding executive pay and a declining share price, casting a shadow over the reaffirmation of guidance for the upcoming year.
CSL's chairman, Brian McNamee, found himself defending the pharmaceutical giant's growth prospects as it faced a 23% protest vote against executive pay at the AGM. Additionally, 24.95% of shareholders voted against granting performance rights to CEO Dr. Paul McKenzie.
Shareholders expressed dissatisfaction with the nearly 25% decline in CSL's share price over the past three and a half years, despite factors such as increased costs and supply restrictions due to the Covid-19 pandemic.
Although CSL shares had reached a peak of $336 in February 2020, they were trading at around $254 at the time of the meeting, reflecting a 9% loss in value for the year. However, the company continued to demonstrate solid earnings growth in the range of 13% to 17% annually.
The most contentious items on the AGM agenda were the Performance Share Units awarded to Dr. McKenzie, with 72.492 million shares voted against it, and the remuneration report, which received just over 23% of votes against. The re-election of director Carolyn Hewson faced minimal opposition, with only 2.43% of votes against her, despite her tenure dating back to late 2019.
Shareholders expressed concerns about the slow recovery of profit margins in CSL's blood plasma business, citing persistently high plasma collection costs since the pandemic. Additionally, the performance of Vifor, a Swiss kidney disease treatments maker acquired by CSL for over $18 billion, faced competition from upcoming generic medicines.
McNamee vigorously defended CSL's long-term strategy, particularly the acquisition of Vifor, emphasizing its potential to become a cornerstone of the company's future growth. He also cited the impact of inflation and currency fluctuations on CSL's performance, echoing sentiments expressed in previous meetings and earnings reports.
Regarding the company's share price, McNamee explained that CSL was not positioned as a "dividend stock" and reaffirmed its commitment to being a growth-oriented company focused on effective business management.
Earlier in the meeting, CEO Dr. Paul McKenzie reiterated the August guidance for robust revenue and earnings growth, both at constant currencies. CSL expected revenue growth of 9% to 11% and a rise in net after-tax earnings between 13% and 17% for the year, projecting profits in the range of $US2.9 to $US3 billion, excluding a one-off property sale gain of $US44 million in FY23.
McKenzie reassured shareholders that CSL anticipated stable and recovering margins, particularly in the CSL Behring business. He explained that the gross margin for CSL Behring was expected to return to pre-Covid levels in the medium term, driven by a reduction in the cost per liter of blood. He also highlighted late-stage R&D programs and yield maximization strategies aimed at further improving margins over the coming years.