- Underlying business growth for 2011 on track
- Strong translation and transaction effect due to Swiss Franc leading to an expected weaker H1 performance
- Raw material price increases leading to significant margin pressure
- Cost savings program delivered on schedule
In the first quarter of 2011, Lonza delivered a solid sales performance with all areas benefitting from increased volumes and growing product pipelines. Capacity utilization was at a high level in Biological Custom Manufacturing and in Life Science Ingredients. However, we were impacted by the strong Swiss Franc and by rising raw material prices which put pressure on margins and as a result, our first half performance is expected to be weaker than last year. Overall, higher sales were only partially able to compensate for currency headwinds and rising raw material prices.
Stefan Borgas, CEO of Lonza comments: “I am pleased to say at the outset that all our employees and their family members in Japan are safe. More broadly, our underlying business performance has been in line with expectations. Capacity utilisation has been at good levels, our project pipelines are growing and we have delivered our cost savings programme fully and on schedule. I am pleased that all sectors showed higher sales volume, but our financial results continue to be impacted by the continued strength of the Swiss Franc and steep increases in raw material prices. Despite these external headwinds we maintain our outlook for 2011 EBIT growth at constant exchange rates.”
Life Science Ingredients delivered high sales volumes in all businesses. Capacity utilization remains high, however the pressure on margins has intensified. Rising raw material costs are starting to be compensated for with price increases in most business areas, taking place with a 3-4 month time delay.
Nutrition Ingredients showed strong vitamin B3 sales in Food, Pharma and Feed applications despite a difficult market environment. Carnipure™ sales volumes were above expectations while Carniking™ met targets. Sales of Meta™ remain below expectations due to existing customer inventories. Margins in nutrition ingredients came under significant pressure during the first quarter due to both higher raw material prices and our decision to defend our position in these growth markets.
Our Microbial Control business continued to grow in Asia, while the unit’s sales were stable in its traditional markets. Formulated products for the Hygiene market are starting to pick up speed due to the recent approvals for production in Nanjing and our business development activities in the Americas. In contrast, formulated product sales for oilfields and hygiene in EMEA were below forecast due to registration delays. Performance Intermediates had an increased demand for diketene and HCN derivatives. The agro business had a slow start, with sales only picking up towards the end of the quarter.
Our Custom Manufacturing business continued to grow its product pipeline in the first quarter. Amongst the 12 new deals that were signed in Biological Manufacturing were a development and manufacturing agreement with Athera and a commercial manufacturing deal signed with Enobia. The approval of Benlysta was another positive in the quarter.
Biological Manufacturing increased capacity utilization due to its broader product portfolio and customer inventories returning to more normal levels. Growth projects in Slough and Singapore are on track while our pipeline in emerging markets is increasing due to our business development activities.
Chemical Manufacturing had a slightly reduced capacity utilization due to delayed regulatory approvals and changes in product mix, as anticipated. The growth in our chemical manufacturing pipeline is progressing well with 10 new projects signed across all technology platforms. We also signed a number of peptide R&D and manufacturing agreements, however these will not offset the impact of the delayed approval of our most important peptide project. FDA approval was received for the new facility in Nansha, CN in March.
In Development Services, we have continued to sign new contracts and our GS Gene Expression System remains the industry standard.
Our Bioscience sector delivered higher sales and an improved project pipeline. Our growth projects in Walkersville and Singapore remain on track.
Research Solutions achieved higher sales in both the EU and Asia while the continuing delay of approval of federal research budgets impacted the business’s recovery in the US.
In cell biology, strong interest was seen for our new cell assay products and services. Therapeutic Cell Solutions also saw higher demand for development services in Cell Therapy. Media sales were stronger than in 2010.
In the Testing Solutions business, endotoxin sales were strong in Asia/Pac, India/Middle East and Latin America. The Moda pipeline continues to develop but sales are still below target.
Lonza is one of the world's leading suppliers to the pharmaceutical, healthcare and life science industries. Products and services span its customers’ needs from research to final product manufacture. It 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. In addition, Lonza is a leader in cell-based research, endotoxin detection and cell therapy manufacturing. Furthermore, the company is 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 2010, the company had sales of CHF 2.680 billion. Further information can be found at www.lonza.com.
For further Information:
Lonza Group Ltd
Tel +41 61 316 8798
Fax +41 61 316 9798
Tel +41 61 316 8540
Fax +41 61 316 9540
Tel +1 201 316 9413
Fax +1 201 696 3533