Lonza CFO Sees Disposals Helping Trim $2.5 Billion Debt
Lonza Group AG (LONN) is looking to portfolio adjustments alongside better cash generation, tighter capital expenditure controls and a global review of the Swiss drug-ingredient maker’s plants to whittle down $2.5 billion of debts over the next years, Finance Chief Toralf Haag said.
Lonza’s net debt spiralled from 1.1 billion francs ($1.2 billion) at the end of 2010 to over 2.6 billion francs a year later when it acquired water treatment chemicals-maker Arch Chemicals for $1.35 billion. Lonza will cut debts by about 200 million francs annually over the next years after cutting net debt 13 percent in 2012 to 2.3 billion francs, Haag said in an interview at Lonza’s annual general meeting in Basel.
“We are looking at all product or business portfolios across the company,” Haag said about portfolio adjustments, adding that the review includes units acquired from Arch Chemicals. Lonza agreed on the sale of its Performance Urethanes business, formerly part of Arch, to Monument Chemicals on Nov. 30. Haag says Lonza’s portfolio adjustments are still at the evaluation phase and there is no timeline for updating the market about decisions.
Lonza shares were up 0.2 percent as of 4:45 p.m. in Zurich after falling as much as 0.9 percent in earlier trading. More tham 182,000 shares changed hands or 57 percent of the three- month average.
The company, with a market value of 3.1 billion francs, will use three main criteria for deciding portfolio adjustments: growth expectations; margins based on earnings before interest, taxes, depreciation and amortization and also return on net operating assets, Haag said.
Lonza’s Chief Executive Officer Richard Ridinger is working his way through a global review of the firm’s manufacturing sites, as he seeks to make good on a share price which sank to an all-time low below 35 francs in June from above 150 francs in 2008.
The German-born executive has acted to stem losses from Lonza’s costly Swiss franc wage bill by eliminating about 400 jobs at a plant in Visp, Switzerland which makes chemicals ranging from vitamins to snail-killing powder.
The share price has gained 16.8 percent this year to 57.65 francs, buoyed by Ridinger’s efforts to streamline the manufacturing base. Lonza will give an update on its factory review in July at first-half results, Haag said.
Lonza Chairman Rolf Soiron recruited Ridinger, an executive vice-president of care chemicals at Cognis Holding GmbH who helped to integrate the company into BASF, in May. He fired former Chief Stefan Borgas for failing to deliver on promises. Borgas was later hired as CEO of Israel Chemicals Ltd. (ICL)
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