Lonza revamp comes too late for first-half figures

- Last updated on GMT

Related tags: Lonza

The difficulties facing Lonza came into clear focus today as the
company published its half-year results, with sales down across its
custom manufacturing, organic chemicals and polymers businesses.

The difficulties facing Lonza came into clear focus today as the company published its half-year results, with sales down across its custom manufacturing, organic chemicals and polymers businesses.

Overall, sales fell 10.4 per cent to CHF 1.157 billion (€749m) while operating income slid 19.4 per cent to CHF 157 million, not including CHF 52 million in charges relating to an ongoing restructuring exercise.

A revamp of the group's Exclusive Synthesis business, covering advanced intermediates and active ingredients, is now saving Lonza CHF 40 million a year, according to the company. However, a company-wide effort​ started in May to improve efficiency and reduce operating costs came too late to have a significant impact on the first-half figures, although savings of CHF 100 million should be realised over the next 12 months.

The Exclusive Synthesis business experienced delays in product approvals and de-stocking by Lonza's customers, while the group's biotechnology operations, Lonza Biologics and Lonza Biotec, were affected by delays and failures of customer products late in clinical development. Overall sales in these businesses fell 12.9 per cent to CHF 420 million, with operating income down 13.3 per cent to CHF 85 million and margins down slightly to 20.2 per cent.

Biotechnology was particularly hit by excess capacity in Lonza's 2,000L and 5,000L reactors, at a time when the group has unveiled a major investment in a 60,000L expansion at its Portsmouth facility in the USA. However, almost 90 per cent of the latter capacity is accounted for by long-term orders, and the company is confident that capacity in its smaller reactors will be refilled by 2004. In the meantime, "take or pay contractual payments will offset most of the profit shortfall in 2003,"​ said the company in its interim statement.

As part of its restructuring exercise, Lonza has already said that it intends to combine all its current Good Manufacturing Practice-based businesses (Exclusive Synthesis, Biologics and Biotec) into a single division called Lonza Custom Manufacturing, in order to increase its capability to acquire new business and improve operating efficiencies.

Lonza's traditional activities - organic fine chemicals, performance chemicals and polymer intermediates - were hit by higher raw material and energy prices, as well as unfavourable exchange rates. Sales of organic and performance chemicals (now operating under the Lonza Organic Chemicals banner) fell 11.0 per cent to CHF 438 million, while operating margins also decreased from 18.5 to 17.4 per cent. Polymer intermediates' sales of CHF 298 million were 5.4 per cent down and operating margins were slashed to 6.4 per cent from over 10 per cent.

Related news

Show more

Related products

show more

Facilities: Riverview, MI USA

Facilities: Riverview, MI USA

Piramal Pharma Solutions | 26-Jul-2021 | Insight Guide

The Piramal Pharma Solutions facility in Riverview, MI, USA can support your Drug Substance (API) needs. The site has extensive experience in safely delivering...

Facilities: Morpeth, UK

Facilities: Morpeth, UK

Piramal Pharma Solutions | 26-Jul-2021 | Insight Guide

The Piramal Pharma Solutions facility in Morpeth, UK offers Active Pharmaceutical Ingredients (APIs) and oral solid drug product development, clinical...

Integrated Solutions for Accelerated Time to Market

Integrated Solutions for Accelerated Time to Market

Piramal Pharma Solutions | 08-Jun-2021 | Technical / White Paper

Facing capacity constraints? Lock in your program now! With 14 sites around the world providing diverse services ranging from discovery to drug substance...

Lactium, your ally to manage day to day stress

Lactium, your ally to manage day to day stress

Ingredia | 27-Aug-2020 | Product Presentation

Stress has been called the ‘health epidemic of the 21st century’ by the World Health Organization. Increasingly, consumers are looking for safe, reliable...

Related suppliers

Follow us

Products

View more

Webinars