Lonza profits slide as exchange rates bite
pharmafile | August 9, 2011 | News story | Manufacturing and Production |Â Â CMO, LonzaÂ
A strong Swiss franc has pegged back first-half profits at fine chemical and contract manufacturer Lonza, although the company said revenues and operating income improved 5% at constant exchange rates.
Sales came in at CHF 1.19 billion ($1.55bn), down 8% in reported currencies, but this concealed underlying strength helped by increased capacity utilisation in Lonza’s biological custom manufacturing business.
Operating profit fell 14% to CHF 265 million, impacted by high raw materials costs, although Lonza said that ongoing restructuring efforts would help profitability improve in the latter half of the year.
Among the measures in play are increased working hours at its Swiss plants, plus the upcoming $1.2 billion acquisition of biocide specialist Arch Chemicals that will reduce Lonza’s reliance on the biopharmaceutical sector.
Lonza’s contract manufacturing growth has been pegged back in recent years by a low rate of new product approvals, overcapacity in pharma companies’ in-house manufacturing networks and cost-cutting by drugmakers.
Custom manufacturing sales were CHF 568 million in the first half, down 14%, but were “stable” at constant exchange rates, according to Lonza.
“Robust contract signing increases long-term capacity utilisation [while] order placements from existing customers ensure a stronger second half”, it said.
Profitability at Lonza’s traditional chemical manufacturing operations were impacted by product mix, although rising demand for highly active pharmaceutical ingredients (HAPI) offset that weakness. Capacity utilisation is running at around 75%, slightly up on 2010 levels, said Lonza.
Biologics manufacturing was helped by Lonza’s new Singapore facility coming online, and capacity utilisation is now running at around 85%
“Looking forward, our pipeline looks promising, our capacity utilisation is improving and our growth projects are moving forward”, commented Lonza chief executive Stefan Borgas.
“I am particularly excited by the opportunities that our newly focused strategy will allow us to capitalise on, not least the offer for Arch which is proceeding to plan and we expect to complete later this year”.
Phil Taylor
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