Lonza says 2012 growth was solid, but more restructuring due
pharmafile | January 29, 2013 | News story | Manufacturing and Production | Arch, CMO, Lonza
Swiss contract manufacturing organisation (CMO) and ingredients supplier Lonza posted a 46% increase in revenues to 3.93 billion francs last year – boosted by its acquisition of Arch Chemicals in 2011.
Growth in the underlying business was less impressive, however, and investors reacted by driving down Lonza’s share price by more than 3% on the day the results were announced.
The company’s 2013 earnings forecast of a 10% increase in earnings before interest and taxes (EBIT) failed to meet analyst expectations of 20%-plus, while chief executive Richard Ridinger also warned of ‘structural changes’ as “return on capital invested … remains unsatisfactory”.
Reductions in its manufacturing network, efficiency drives at current plants and divestments may be on the cards, according to analysts, although Lonza is staying tight-lipped about the details for now, saying only this would involve a “move from a product-oriented to a market-oriented organisation”.
The custom manufacturing division continued to underperform thanks to its exposure to what Lonza has described in the past as the ‘volatile’ biopharma market, but managed a small increase in revenues to 1.32 billion francs from 1.297 billion francs in 2011 thanks to advantageous currency factors.
The business shrank 7% in volume and price terms, while operating profit fell nearly 18% to 323 million francs.
“I am unsatisfied with the EBIT performance of our custom manufacturing division, although we experienced an intact market demand,” said Ridinger.
Lonza has been trying to remodel the custom manufacturing unit to offer high-value services in peptides, cytotoxics, antibody drug conjugates (ADC), highly-active pharmaceutical ingredients
(HAPI) and microreactor technologies (MRT), and said it made significant progress on this in 2012.
An ADC plant in Visp, Switzerland, was approved by the FDA last year and Lonza gave the go-ahead recently to a second expansion phase due to come online in 2014. The company has also added five HAPI suites to the Visp facility and boosted peptide production capacity at its Braine L’Alleud site in Belgium.
Overall, Ridinger said he was pleased by Lonza’s overall performance in 2012.
“We were able to generate a significant free cash flow, reduce the net debt by 13%, and meet our financial guidance by delivering an EBIT growth of 15 per cent”, he said.
Phil Taylor
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