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Lonza hints at manufacturing cuts

By Dan Stanton , 31-Jan-2013
Last updated the 31-Jan-2013 at 14:12 GMT

Lonza says it will “move from a product-oriented to a market-oriented organisation” suggesting a restructuring of its manufacturing division is on the cards.

The Swiss firm reported that its end of year sales were up 45.8 percent on 2011 to 3.9bn CHF ($4.25bn), which was deemed to be a better than expected result by analysts who mostly attributed it to the acquisition of Arch Chemicals .

However, despite increasing 15 per cent, earnings before interest and tax (EBIT) fell short of Lonza's total in 2011, which CEO Richard Ridinger said was due to the firm's increased spending.

He praised the Life Science Ingredients and Bioscience divisions, but said he was “unsatisfied with the EBIT performance of our Custom Manufacturing division.”

Melanie Disa, Media Relations for Lonza, told Outsourcing-Pharma.com that Ridinger’s comments were due to the ramp-up costs of its new facilities in Singapore and quality related expenses in the Hopkinton, Massachusetts facility, both of which negatively impacted performance.

Disa added that “demand in Custom Manufacturing and Development Services was steady, resulting in good capacity utilization and the outsourcing trend is considered to be solid.”

Outlook

Ridinger told shareholders that Lonza plans to streamline its manufacturing operations and improve on its efficiency with various structural changes of which details were not given.

He told shareholders that it intends to adjust its “manufacturing footprint” in moving from a product to a market orientated organization.

According to Disa, Lonza’s manufacturing strategy is currently in the beginning stages of a transformational year. She said: "We will conduct a review of our global footprint to ensure best practices and productivity improvements are identified and implemented throughout the organization.”

Disa did not offer comment regarding whether any facilities would be off-loaded and if there would be any loss of jobs. 

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