Lonza Group AG (LONN) Chief Executive Officer Richard Ridinger said his review of the Swiss drug- ingredient maker may lead to disposals and management changes as he forecast lower-than-expected 2013 earnings.
Lonza dropped as much as 6.6 percent, the steepest intraday decline in a year, and traded 4 percent lower at 53.1 Swiss francs at 10:45 a.m. in Zurich. Ridinger forecast growth in earnings before interest and taxes of about 10 percent this year to 369 million francs ($396 million), compared with an average estimate of 413 million francs in a Bloomberg survey of analysts.
There is a “near-term risk to profits,” as Lonza implements measures to improve efficiency, Peter Welford, an analyst at Jefferies said in a note to clients. “Our longer- term positive thesis is intact but it will take time for belief to allow stock outperformance.”
Lonza today announced the appointment of former Cognis CEO Antonio Trius to the board, highlighting a growing focus on additives for cosmetics and personal-care products. Restructuring moves would follow company’s purchase of Arch Chemicals for $1.35 billion and a push to widen margins to 20 percent by 2015.
Ridinger, who joined Basel-based Lonza in May after helping to integrate cosmetic-additives maker Cognis into BASF SE (BAS), has identified potential disposal “scenarios,” he told reporters on a call.
“We will give an update soon,” Ridinger said. “If we make changes it’s clear management has to be informed first.”
Sales increased 46 percent to 3.93 billion francs ($4.2 billion) last year, beating the average estimate of 3.87 billion francs based on 13 analysts’ predictions collated by Bloomberg. Earnings before interest, taxes, amortizations and depreciations totaled 640 million francs, compared with the average estimate of 656.4 million francs.
Nestle SA (NESN) executive Werner Bauer also joins Trius as a new appointment on the board. Richard Sykes and Gerhard Mayr will not stand for re-election at the next annual general meeting on April 9.
Today’s results are a test for Chairman Rolf Soiron to vindicate his decision to fire former chief Stefan Borgas a year ago for failing to deliver on promises. Soiron recruited Ridinger, a vice-president of care chemicals at BASF, in May to focus on improving returns on capital and productivity. Borgas was later hired as CEO of Israel Chemicals Ltd. (ICL)
Ridinger is working his way through a global review of the firm’s manufacturing business. The German-born executive has acted to stem losses from Lonza’s costly Swiss franc wage bill by cutting 400 jobs at a site in Visp, Switzerland which makes chemicals ranging from vitamins to snail-killing powder to keep the plant competitive.
Lonza expects further sales and Ebit growth for 2013 and will propose a cash dividend of 2.15 francs for 2012, the company said.
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