Industry News

Lonza Delivers Strong and Improved Performance in First Half 2015

Published on 2015-07-29. Author : SpecialChem

BASEL, Switzerland -- In the first half of 2015, Lonza’s Specialty Ingredients and Pharma&Biotech segments both delivered a strong and improved performance and are on track to deliver their growth targets. Compared with the same period in 2014, sales growth of 6.1% to CHF 1,910 million in constant exchange rates (5.8% in reported currency) and CORE EBIT growth of 8.3% in constant exchange rates to CHF 261 million (7.9% in reported currency to CHF 260 million) are coming from improved operational performance and the implementation of market-driven activities.

Fig. 1: Lonza

“Our customer- and market-orientation, as well as our positioning as a high-quality, innovative and reliable supplier, are all gaining momentum now, as our strong overall results confirm,” said Richard Ridinger, CEO of Lonza. “This steady improvement gives us the stability to look at further optimization of our portfolio and our asset footprint, including consolidation of our expertise into specific sites.”

One of the key developments in the first half of 2015 was the Swiss National Bank’s lifting of the ceiling of the Swiss franc to the Euro. Since the acquisition of Arch Chemicals, Lonza has improved the natural hedge globally from a sales-versus-costs perspective for nearly all our trading currencies; so Lonza is less exposed from a Group point of view than in previous years. Remaining foreign-exchange effects are being managed through business performance and counter-measures.

In Visp (CH), however, we risk being less competitive because of the Swiss franc-related fixed cost base there; so we have continued the existing Visp Challenge program started in 2012. The solid basis of this program allowed us to take a careful approach to the current challenges and to find dedicated, well-targeted measures, such as further automation, slight adaptations to our capacity offering in lower-margin assets and portfolio adaptations. Thus, we implemented a hiring freeze in specific areas that will allow us to reduce the workforce through natural attrition and balance the Euro foreign exchange impact. Over time these actions will lead to a reduction of about 90 positions, and further efficiency and productivity measures will continue to be implemented.

Specialty Ingredients Segment

The Specialty Ingredients segment had a positive uptake in the first half of 2015 with an especially strong contribution from Agro Ingredients and Wood Protection. Water Treatment showed improved results, and Consumer Care and Industrial Solutions also performed as expected.

Market demand in general was steady across nearly all geographical areas. The main driver overall was market demand coming from global megatrends.

Pharma&Biotech Segment

Pharma&Biotech substantially increased sales and CORE results compared with the same period last year. Ongoing strong momentum in commercial biologics over-compensated for the impact of restructuring activities in other areas. Bioscience Solutions also delivered a strong performance during the first half of 2015.

Lonza experienced firm market demand for commercial and clinical products, as well as for make-to-stock products. In addition to offering services to its customers in its multi-purpose plants, it now has begun offering suites with dedicated manufacturing capacity to give customers greater flexibility in determining production quantities and timings. It continuous quality updating not only supports its productivity targets, but also fulfills its customers’ requirements.

Financial Summary

• Revenues grew by 6.1% in constant exchange rates to CHF 1,910 million (+5.8% to CHF 1,904 million in reported currency)
• CORE EBITDA margin of 20.5% compared to 20.4% in H1 2014
• CORE EBIT growth of 8.3% in constant exchange rates to CHF 261 million (7.9% in reported currency to CHF 260 million)
• CORE RONOA at 16.1 % compared with 14.5% in H1 2014
• CORE profit for the period increased by 2.5% to CHF 166 million
• Restructuring measures of CHF 45 million due to portfolio optimization in Kouřim (CZ), which is another step in our consolidation of microbial operations into Visp
• Operational free cash flow improved significantly to CHF 299 million
• Debt reduction on track, with net debt reduced to CHF 1,842 million, leading to a net debt/EBITDA ratio of 2.4x and a debt/equity ratio of 0.94, releasing all financial covenants

Full-Year 2015 Outlook

The good momentum in the first half of the year gives it the opportunity to further optimize its portfolio as it continue to implement higher-margin products and services, as well as to improve productivity in its manufacturing and business services networks. With its broad technology toolbox and increasing customer- and market-orientation, its businesses have a stable product and project pipeline that will support future growth.

Therefore, based on the present macro-economic environment and current visibility, Lonza reiterates its Full-Year 2015 outlook with sales growth in reported currency compared with last year’s sales and a CORE EBIT growth of at least 5% in constant exchange rates. The capital expenditure in 2015 is expected to remain below CHF 300 million.

About Lonza

Lonza is one of the world's leading and most-trusted suppliers to the Pharma&Biotech and Specialty Ingredient markets. It harness science and technology to create products that make people's and animals' lives healthier and that enhance the overall quality of life and well-being. Its products and services range from active pharmaceutical ingredients and stem-cell therapies to drinking water sanitizers, from industrial preservatives to microbial control solutions that combat dangerous viruses, bacteria and other pathogens, from the manufacture of vitamin B compounds and organic personal care ingredients to agricultural services and products.

Source: Lonza

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