Lonza Continues to Make Measurable Progress in Its Transformation

January 21,2015

Lonza Continues to Make Measurable Progress in Its Transformation

  • Lonza delivered expected CORE EBIT growth of 11% in constant exchange rates (+9% in reported currency), supported by both the Specialty Ingredients and Pharma&Biotech segments
  • Revenues grew by 3% in constant exchange rates (+1.6% in reported currency) to CHF 3.64 billion in reported currency
  • Lonza’s 2014 CORE EBITDA margin of 20.4% exceeded original guidance given in 2012 for 2015, one year ahead of schedule
  • CORE RONOA increased from 12.3% to 14.3% in 2014
  • Operational free cash flow remained high at CHF 476 million
  • Profit for the period increased by 172% to CHF 237 million
  • The full impact of the recent decision of the Swiss National Bank is still to be determined as volatility continues in the financial markets
  • Lonza’s Board of Directors is proposing an increased dividend to CHF 2.50 per share for 2014  

Basel, Switzerland, 21 January 2015 – In 2014 Lonza delivered expected CORE EBIT growth of 11% in constant exchange rates (CER) (+9% in reported currency), compared with 2013. Lonza’s overall results confirm the updated guidance communicated during the third-quarter update. Both of Lonza’s segments – Specialty Ingredients and Pharma&Biotech – delivered a solid performance despite currency headwinds and the performance of the Water Treatment business.  

Most of the individual businesses performed according to expectations. Unfavorable weather conditions in the Water Treatment business had a negative impact on revenues for the second consecutive year, as well as time-consuming, complex tech transfers and validations/qualifications in Pharma&Biotech businesses and portfolio optimizations, e.g. the impact of Hopkinton, MA (USA) shutdown.  

“For the third consecutive year, our full-year results demonstrate that we’re making good progress in transforming Lonza. Thanks to the efforts of our employees and managers, we will continue our journey from a product-focused organization into a market-driven one,” said Richard Ridinger, CEO of Lonza. “Our focus on quality and operational improvements produced positive results in 2014. We are also proud that during our ongoing transformation, we have achieved the best safety results in our company’s history.”  

Specialty Ingredients Segment
In 2014 Lonza’s Specialty Ingredients segment delivered a solid financial performance with substantially improved profitability, more active portfolio management and marketing efforts, and more innovation. Innovative approaches resulted in a noteworthy number of new product launches driven by market demand and customers’ desire for technologically led, environmentally friendly and affordable solutions.  

CORE EBIT for Specialty Ingredients grew by 13.0% in CER (+7.1% in reported currency). All businesses met financial expectations except Water Treatment, which was substantially affected by unfavorable weather conditions. Consumer Care delivered solid results based on growing market demand and innovation. Excellent performance of the Agro Ingredients business was based on rising demand, new product launches and innovation. Industrial Solutions performed better than planned based on solid demand for new products introduced in 2014. Wood Protection delivered strong results coming from improved residential and industrial segments.  

Pharma&Biotech Segment
Lonza’s Pharma&Biotech segment experienced strong CORE EBIT growth of 15.2% in CER (+18.4% in reported currency) as efforts continued to refocus portfolios on higher-margin products and projects.  

Custom Manufacturing, mainly the biopharma activities, benefited from solid outsourcing and dual-sourcing trends in the marketplace. Market interest and demand in new technologies – particularly for antibody drug conjugates (ADCs), cell therapy and viral therapy – continued in 2014. Lonza was able to accommodate manufacturing demand across technologies. These factors resulted in additional contracts for commercial and clinical-stage products. In addition, our Bioscience Solutions business developed well with product offerings to the pharma, biotech and research industries.  

All 34 regulatory audits and 169 customer inspections were successfully completed; the significantly increased numbers over last year reflect the current substantially larger product pipeline and the more stringent regulatory environment in the pharmaceutical industry.  

Financial Summary

  • CORE EBIT grew by 11% in CER (+9% in reported currency)
  • Lonza’s 2014 CORE EBITDA margin of 20.4% exceeded original guidance given in 2012 for 2015, one year ahead of schedule
  • CORE RONOA increased to 14.3% compared with 12.3% in 2013
  • Sales increased by 3% in CER (1.6% in reported currency) to CHF 3.64 billion
  • Profit for the period increased by 172% to CHF 237 million
  • CORE EPS increased to CHF 6.79, an increase of 36%
  • Capital expenditure was CHF 180 million compared with CHF 210 million in 2013
  • Operational free cash flow remained high with CHF 476 million
  • Net debt reduction to CHF 2.0 billion resulted in a net debt/EBITDA ratio of 2.7x and a debt/equity ratio of 0.94x    

Outlook
The transformation of Lonza will continue in 2015 as planned and previously announced. In 2015 Lonza will continue to focus on improving operational efficiency with a stronger focus on embedding quality and balancing the portfolio with a more favorable product mix of higher-margin products and services. Lonza is well positioned for further measurable positive development in 2015.  

Underlying business performance leads us to be confident we will grow sales and profits in 2015. However, due to the recent and unexpected volatility in financial and currency markets, Lonza has decided to re-evaluate its outlook and to provide guidance for 2015 at a later stage. Lonza continues to have a positive outlook for the future as it is well positioned in its markets. Also Lonza has achieved a substantially better natural hedge with the Euro and U.S. dollar since the acquisition of Arch and a more balanced spread of investments globally.  

Mid-term guidance until the end of 2018 will be provided during the first quarter 2015 qualitative update on 28 April 2015.  

Because of continued strong cash flow development and further improvement of our balance sheet, the Board of Directors is proposing to increase the dividend after four consecutive years of stable dividend payments to CHF 2.50 per share.  

Further details about the Full-Year Report 2014 can be found on http://www.lonza.com/about-lonza/investor-relations/investor-information.aspx.    

About Lonza
Lonza is one of the world’s leading and most-trusted suppliers to the pharmaceutical, biotech and specialty ingredients markets. We harness science and technology to create products that support safer and healthier living and that enhance the overall quality of life. Not only are we a custom manufacturer and developer, Lonza also offers services and products ranging from active pharmaceutical ingredients and stem-cell therapies to drinking water sanitizers, from the vitamin B compounds and organic personal care ingredients to agricultural products, and from industrial preservatives to microbial control solutions that combat dangerous viruses, bacteria and other pathogens.  

Founded in 1897 in the Swiss Alps, Lonza today is a well-respected global company with more than 40 major manufacturing and R&D facilities and approximately 9,800 full-time employees worldwide. The company generated sales of CHF 3.64 billion in 2014 and is organized into two market-focused segments: Pharma&Biotech and Specialty Ingredients. Further information can be found at www.lonza.com.    

 

 

Additional Information and Disclaimer
Lonza Group Ltd is headquartered in Basel, Switzerland, and is listed on the SIX Swiss Exchange and secondary listed on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Lonza Group Ltd is not subject to the SGX-ST’s continuing listing requirements. Lonza Group Ltd is subject to the listing rules of the SIX Swiss Exchange, which does not have specific requirements equivalent to the listing rules of the SGX-ST for interested person transactions, acquisition and realizations and delisting.  

Certain matters discussed in this news release may constitute forward-looking statements. These statements are based on current expectations and estimates of Lonza Group Ltd, although Lonza Group Ltd can give no assurance that these expectations and estimates will be achieved. Investors are cautioned that all forward-looking statements involve risks and uncertainty and are qualified in their entirety. The actual results may differ materially in the future from the forward-looking statements included in this presentation due to various factors. Furthermore, except as otherwise required by law, Lonza Group Ltd disclaims any intention or obligation to update the statements contained in this presentation.  

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