Lonza Report Strong Net Profits

26/07/07 Lonza has said that it has delivered an increase of 57% in EBIT and 82% in net income, based upon continuing operations in the first half of 2007.

The first half performance was characterized by the effects of Lonza’s portfolio changes and solid developments in all businesses, with Biopharmaceuticals experiencing particularly strong growth. This elevated EBIT to CHF 204 million from CHF 130 million as compared to the first half of 2006, and led to a margin increase of 2.3 percentage points to 14.8% of sales. Along with the proactive measures that resulted in a low tax rate of 21.0%, the improved financial result led to an over-proportional increase in net income by 82.5% to CHF 146 million. As a result, gearing declined from 92% at the end of the first quarter to 87%. RONOA continued to improve from 11.0% in the first half of 2006 to 13.8%. Sales in the first half of 2007 amounted to CHF 1 374 million.

The projects designed to deliver sustainable, above-average, profitable growth, continue to be on or ahead of plan. Following the transformational changes to our portfolio implemented over the last year, 90% of Lonza’s sales now relate directly to the life-sciences. These changes are fully on track to create significant value and increase Lonza’s presence in high-margin, high-growth areas. In the short term, the priorities for 2007 are business delivery, integration of recently acquired assets and strategic reviews within the Organic Fine & Performance Chemicals division.

Organic Fine & Performance Chemicals posted a satisfactory performance in the first half of 2007. Sales increased by 6.0% to CHF 564 million, a third of which was due to raw material price increases. Price initiatives and volume growth more than offset raw material pressure, resulting in a 0.5 percentage point margin expansion to 14.0% of sales. EBIT thus increased by 9.7% to CHF 79 million.

Exclusive Synthesis & Biopharmaceuticals increased sales by 45.2% to CHF 642 million (CHF 442 million in the first half of 2006). The significant improvement in EBIT, which rose to CHF 117 million, from CHF 72 million a year ago, was driven by Biopharmaceuticals. EBIT margins increased from 16.3% of sales a year ago to 18.2% thanks to strong capacity utilization and new projects coming on stream.

Bioscience, Lonza’s new division is fully on track in its business plan in the first half of 2007, with strong margin delivery when excluding short-term integration costs. Integration activities are progressing on schedule, while global sourcing synergies and the first cross-selling opportunities have been realized. Based upon the designed strategy, the financial targets for the division have been enhanced.

Lonza said that all strategic growth projects that have been conveyed are entirely on track. With sound execution of its long-term plan, Lonza continues to drive aggressive growth initiatives in the form of strategic investments, organic growth projects and targeted acquisitions.