Lonza Business Performance on Track
*Good performance in Specialty Ingredients market segment with slow start
in the Pharma&Biotech market segment as anticipated
*Successful pricing of a CHF 300 million straight bond at favorable
*New market focused organization taking shape
*VispChallenge project on track; head count reduction in implementation
*Project for reduction of site and administration complexity started and on
*Swords, Ireland site to be closed in the second quarter of 2013
*CAPEX below last year levels
Basel, Switzerland, 25 April 2013 - In the first quarter 2013, Lonza's
business performance was solid and in line with expectations. While the
Specialty Ingredients market segment showed a good performance, the
Pharma&Biotech market segment had a slow start as anticipated. Growth in
project pipelines demonstrates Lonza's leading market positions. Strong cost
controls and process improvements continue across the organization. Also,
performance for 2013 will be geared towards a stronger second half-year 2013.
Lonza reiterates its 2013 EBIT guidance growth of approximately 10%.
Richard Ridinger, CEO Lonza, said "Earlier this year, we announced significant
changes to our organization; aligning ourselves directly with markets we
serve. I am pleased to report the newly focused organization is taking hold
while delivering on our first quarter results. At the same time, we are
working broadly to assess the performance and efficiencies across of our
operations as well as administrative functions and we are making good
progress; I am pleased with the results so far. Our first quarter results are
in line with the expectations we have set out."
Pharma&Biotech Market Segment
The Pharma&Biotech market segment saw a good pipeline development across all
technologies. As expected the segment had a lower capacity utilization in the
first quarter of the year due to higher product changeover because of new
project introductions as well as project delays at customers. Based on
contracts and negotiations there will be a continuous ramping-up of the entire
network in the quarters ahead.
Various long-term supply agreements for small molecule products were signed
during the first quarter 2013 and the expansion of antibody drug conjugate
plant in Visp is on track. Biological Manufacturing saw good pipeline
development. The resolving of the Hopkinton, MA (USA) manufacturing issues
remains a key priority and we are working diligently to address the
manufacturing and process issues. The pipeline for cell and viral was strong
with high number of new product candidates and for new clients. Lonza's
Singapore cell therapy facility is on-line and the first GMP lots of cell
therapy products were produced.
Custom Development services saw good overall demand in the first quarter.
Lonza's XS Microbial Technologies(TM) was a catalyst for new projects in the
first quarter. There was high demand for development and scale-up services
using proprietary micro-reactor / continuous flow technology (MRT).
The Media business had good sales and Cell Biology continued to perform
strongly, supported by introduction of new products. The long-term
collaboration with Sartorius is on track. Sequestration in the U.S. impacts
academic and governmental sales and in Europe, Research and Testing businesses
suffer from deteriorated economic situation. Testing Solutions is on target
with strong growth in Asia-Pacific.
Specialty Ingredients Market Segment
The Specialty Ingredients market segment had a good start into 2013 with
decent overall market demand in most areas. All growth projects are on track.
The Personal Care market experienced good overall market demand. Preservative
and Specialty Ingredients sales are tracking slightly ahead of target. We
introduced new and innovative products for anti-aging, anti-acne active and a
natural preservative providing a broad spectrum antimicrobial effect in
cosmetic products along with fragrance enhancement.
In Hygiene, there was solid performance in primary markets (Europe and USA)
and sales were in line with budget and with improved margins. In response to
the Influenza virus Type A, Lonza is able to offer a wide range of
disinfectant grade products effective against these types of viruses. There is
increasing interest for our disinfecting wipes against hospital acquired
infections. Nutrition Ingredients experienced good overall market demand.
Niacin had market demand as expected with pricing remaining at a low level.
Lonza experienced high utilization of its Agro assets and a good visibility
with orders throughout the end of 2013. Sales with Meta(TM) were strong in the
first quarter in preparation for spring season in home and garden. The
capacity expansion project for a multipurpose plant in Visp (CH) is on track
for start-up at the end of the fourth quarter.
In Water, Lonza had a good start in Europe due to positive timing of sales;
this was counterbalanced by a slow start to the US season due to poor weather
in March. The industrial, commercial and municipal markets continue to gain
customer interest with new installations of our Pulsar Feeder.
The Wood offerings experienced a better first quarter compared to prior year
especially in the North American housing market, while the wood protection
market holding firm in EU despite ongoing poor market conditions. In
Industrial Chemicals, High Performance Materials from the electronics sector
saw strong demand. HCN derivatives had overall sales above target, while
diketene derivatives experienced strong demand but price pressure from
competition in China and India.
Closure of Swords: The Swords (IE) site has experienced a low capacity
utilization for some time with no foreseeable change to this trend. That is
why we came to the decision to close this site to optimize the production
network as intended in our global manufacturing footprint review. Beginning of
March Lonza informed its 32 employees and 11 contracted staff at the Swords
facility about the closure of the site. Swords was part of the legacy Arch
Chemicals Inc. business which was acquired by Lonza in October 2011 and
manufactures biocides, for example marine anti-fouling paints and metal
working fluids, since 1966. In consultation with local employee
representatives and authorities, Lonza will put in place a severance package
which will treat all employees in a fair and transparent manner. The Swords
plant is expected to cease its activities in June 2013. Lonza will transfer
all products manufactured in Swords in close alignment with all customers to
other operations within Lonza's global network, mainly to its plants in
Rochester, NY (USA) and Suzhou (CN). With our two larger well established
sites in Rochester and Suzhou global demand can be met effectively in the
years to come.
The VispChallenge initiative is well underway with a diligent implementation
of the different measures. We are confident that the number of required
lay-offs will be well below the initially communicated magnitude of one third
of a total of 400 positions.
As announced at the last third quarter update Lonza initiated also a review of
the Corporate Functions structure to optimize and adapt corporate service
offerings and to realize sustainable improvements and savings. This program
will lead to a reduction of 100 positions worldwide over 24 months of which 60
positions have already been implemented and is an important step into the
streamlining of our administrative footprint.
In summary, overall results for the first quarter as well as Lonza's
reorganization and improvement projects are on track. Lonza has a solid
financial situation with pricing of a straight bond at favorable conditions.
Looking forward, it is expected that the second half of 2013 will be stronger
than the first half of 2013 and Lonza reiterates its 2013 EBIT guidance growth
of approximately 10%.
Lonza is one of the world's leading suppliers to the pharmaceutical,
healthcare and life science industries. Products and services span its
customers' needs from research to final product manufacture. It is the global
leader in the production and support of chemical and biological active
pharmaceutical ingredients. Biopharmaceuticals are one of the key growth
drivers of the pharmaceutical and biotechnology industries. Lonza has strong
capabilities in large and small molecules, peptides, amino acids and niche
bioproducts which play an important role in the development of novel medicines
and healthcare products. Lonza is also the world leader in microbial control
providing innovative, chemistry-based and related solutions to destroy or to
selectively inhibit the growth of harmful microorganisms. Its activities
encompass the areas of water treatment, personal care, health and hygiene,
industrial preservation, materials protection, and wood treatment. In
addition, Lonza is a leader in cell-based research, endotoxin detection and
cell therapy manufacturing. Furthermore, the company is a leading provider of
value chemical and biotech ingredients to the nutrition and agro markets.
Lonza is headquartered in Basel, Switzerland and is listed on the SIX Swiss
Exchange and secondary listed on the Singapore Exchange Securities Trading
Limited ("SGX-ST"). In 2012, the company had sales of CHF 3.925 billion.
Further information can be found at www.lonza.com.
Lonza Group Ltd Lonza Group Ltd Lonza Group Ltd
Head of Corporate Communications Investor Relations Media Relations
Dominik Werner Dirk Oehlers Melanie Disa
Tel +41 61 316 8798 Tel +41 61 316 8540 Tel +1 201 316 9413
Fax +41 61 316 9798 Fax +41 61 316 9540 Fax +1 201 696 3533
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