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Plummeting profits prompt Lonza to fire CEO

By Nick Taylor , 25-Jan-2012

Lonza has fired its CEO after a halving of net income prompted the board to find another leader for “the challenging years ahead”.

Rolf Soiron, chairman of Lonza, will lead the company until a new CEO is found. Soiron said the board decided to replace the CEO, Stefan Borgas, in the past 48 hours because in recent years the company has failed to meet expectations. Lonza expects difficulties to continue in the coming years.

In the challenging years ahead Lonza will enter a period of focus and improvement of return of capital. This led the board of director’s to the decision to initiate a change of CEO”, Soiron said.

Borgas was appointed CEO in 2004 and during his time in charge contended with the rise of low-cost ingredient suppliers in Asia. Lonza responded by strengthening its capabilities in complex, higher-margin areas of biopharmaceutical production but industry volatility has hindered its progress.

During today’s presentation of full year results Soiron listed seven headwinds Lonza faces. Costs related to the Swiss regulatory environment, raw material prices, weak pharma innovation and macroeconomic factors have dogged Lonza recently and all are expected to remain a threat.

A combination of these factors contributed to full year net income, after the $1.4bn (€1.1bn) Arch Chemicals acquisition, dropping 46 per cent. Including the contribution from Arch sales were flat after unfavourable foreign exchange rates wiped out double-digit revenue growth.

Custom manufacturing

Volatility in the biopharmaceutical sector has caused Lonza problems in recent years but the unit had some positives to report in fiscal 2011. After falling since 2006 capacity use at Lonza’s chemical plants ticked upwards, moving above 75 per cent, and its pipeline of projects continued to grow.

A similar trend was seen in biologics. Excluding the recently opened Singapore plant capacity use continued its rise from the lows of 2009 and the number of projects moved above 300.

Shares in Lonza were down more than 10 per cent after the results.

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