Half-Year 2009 Results

July 22,2009 Basel, Switzerland

Half-Year 2009 Results

Sales of CHF 1 329 million were down by 9 % compared to last year, driven principally by the order pattern for Custom Manufacturing and simultaneous plant start-ups in the first half – majority of Lonza’s markets remain resilient

EBIT of CHF 163 million follows lower sales development and cost for simultaneous plant start-ups; EBIT development in the first half of the year slightly better than budgeted

Stronger EBIT contribution expected for the second semester – growth projects on track

Full conversion of convertible bond sustainably strengthens balance sheet structure

Basel, 22 July 2009 – Lonza Group Ltd (SIX: LONN) today announced its financial results for the first half of 2009 ended on 30 June 2009.

Highlights

  • Results driven by the nature of the Custom Manufacturing business and a slowdown in parts of Life Science Ingredients:
    • Sales down 9.2% to CHF 1 329 million
    • EBITDA down 15.3% to CHF 300 million
    • Over-proportional EBIT decline on higher depreciation charges
    • Net profit down 32.9% to CHF 118 million on a comparable basis1
    • RONOA down to 9.2% at H109 from 13.8% for FY08
    • Net cash provided by operating activities increased to CHF 164 million
      • Cash flows temporarily affected by an inventory run-up in Custom Manufacturing ahead of an anticipated strong second half, backed by customer orders
      • Solid financing situation increasing strategic flexibility
        • Successful launch of CHF 300 million bond in May 2009 at attractive conditions
        • Full conversion into equity of the outstanding convertible bond brings gearing down from 76% at the end of 2008 to 52%

         

        Excluding the CHF 91 million book gain realized in 2008 on the sale of the remaining stake in Polynt S.p.A.

         

        Overview

        The nature of Lonza’s Custom Manufacturing business model, along with a slowdown in parts of Life Science Ingredients, led to a weaker performance in the first half of 2009. Group sales were down by 9.2 % to CHF 1 329 million. Cost and efficiency improvements, along with lower raw material prices, partly compensated for lower capacity utilization levels, limiting the decline in EBITDA to 15.3 % (CHF 300 million). Higher depreciation charges stemming from the start-up of new projects resulted in a disproportionate decline in EBIT of 30.6 % to CHF 163 million. Net profit declined on a comparable basis1 by 32.9 % to CHF 118 million. Cash flow was temporarily impacted by an inventory run-up in Custom Manufacturing ahead of an anticipated stronger second half, backed by customer orders. The full conversion into equity of the four-year CHF 430 million convertible bond helped reduce gearing from 76 % at the end of 2008 to 52 %. In addition, the successful placing of a CHF 300 million straight bond with a coupon of 3.75 % maturing in 2013 ensures long-term financing of the announced growth projects on attractive terms. Both contribute to further strengthening Lonza’s balance sheet and increasing financial flexibility. The projects to deliver sustainable, above-average, profitable growth continue to be on or ahead of schedule. The healthy increase in the project pipelines raises confidence of an optimal utilization of these new assets in the mid term.

         

        Outlook

        All strategic projects are on track. With sound execution of its long-term plan, Lonza continues to drive growth initiatives in the form of strategic investments and organic growth projects. Significantly strengthened project pipelines and the extension of the custom manufacturing business model to multiple product contracts demonstrate a deeper integration with customers. The recently signed agreements to develop a number of biopharmaceutical pipelines represent a new strategic initiative for the development of our Group. The increased financial flexibility enables us to evaluate specific expansions possibilities in our Life Science focused value chain.

        Based on visibility of contracts, projects and economic conditions, Lonza expects:

          • EBIT growth in the mid to high teens on average until 2013.
          • Project pipeline fully aligned to support growth expectations – 80% of capacity expansion committed today.

         

        Excluding CHF 141 million of sales of Lonza Singapore Pte Ltd from 2007 figures (sold on 19 November 2007)

        For more detailed information, please refer to the Half-Year Report 2009 published today.

         

        About Lonza

        Lonza is one of the world's leading suppliers to the pharmaceutical, healthcare and life science industries. Its products and services span its customers’ needs from research to final product manufacture. Lonza is the global leader in the production and support of active pharmaceutical ingredients both chemically as well as biotechnologically. 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 a leader in cell-based research, endotoxin detection and cell therapy manufacturing. Lonza is also a leading provider of value chemical and biotech ingredients to the nutrition, hygiene, preservation, agro and personal care markets.

        Lonza is headquartered in Basel, Switzerland and is listed on the SIX Swiss Exchange. In 2008, Lonza had sales of CHF 2.937 billion. Further information can be found at www.lonza.com.

         

        For further Information

        Lonza Group Ltd
        Head Corporate Communications
        Michael Frizberg
        Tel +41 61 316 8624
        Fax +41 61 316 9624
        michael.frizberg@lonza.com

        Lonza Group Ltd
        Media Relations
        Dominik Werner
        Tel +41 61 316 8798
        Fax +41 61 316 9798
        dominik.werner@lonza.com

        Lonza Group Ltd
        Investor Relations
        Alexandre Pasini
        Tel +41 61 316 8835

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