Lonza 2009 results hit by global economic downturn

By Simon Pitman

- Last updated on GMT

Swiss ingredients supplier Lonza reported a significant drop in its sales during 2009, as all of its business divisions were hard hit by lower demand worldwide.

The company which specialises in preservatives for the personal care markets, as well as a variety of ingredients for the pharmaceutical and food industries, reported that overall sales fell by 8.4 per cent, from CHF2.93bn (€1.99bn) to CHF2.69bn).

Profits were also hard hit, with net profit after charges falling 62.1 per cent, from CHF419m to CHF159, while the EBITDA margin after charges fell by 22.3 per cent.

Lower demand for life science ingredients

The company said that the decline in demand was particularly underlined by a significant reduction in large-scale biopharmaceutical projects and lower demand in life science ingredients.

Lonza reacted to the tougher marketing conditions by implementing a restructuring programme, which in turn also impacted the net profits figure.

The restructuring programme included changes to chemical manufacturing, merging chemical research and development into one platform, increasing flexibility of biopharmaceutical manufacturing and combining sales and business resources.

Strategic projects to ensure future growth

The company says it is also concentrating on a number of strategic projects aimed at growing the business, including the opening of a new microbial control formulations plant in Nanjing, China as well as a new customer manufacturing facility in Nansha, China.

In the company’s life science ingredients division, which supplies anti-microbial ingredients to the personal care category, sales were down 13.3 per cent to CHF1.04bn.

These results were hampered by a slowdown in the company’s anti-microbial control business, underlined by the fact that demand in the Europe and US markets fell by 25 per cent.

H1N1 outbreak boosted anti-microbials

However, the company did point out that there had been a significant recovery in the performance in the microbial area as demand for hygiene products picked up on the back of concerns over the H1N1 flu outbreak.

The company’s custom manufacturing operations were not hit so hard as the life science ingredients division, with sales falling 6.2 per cent to CHF1.42bn.

Looking ahead to the 2010, the company says that its cash flow situation should improve as the benefits of its restructuring programme kick in.

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