Profits halved, dividends increased: Lonza closed two factories and laid off hundreds of people

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Lonza increased its sales by 7.9 percent to 6.72 billion francs, the company announced on Friday. When adjusted for exchange rate effects, it was plus 10.9 percent. In previous years, Lonza had achieved significant double-digit growth thanks to an order for the active ingredient in Moderna’s corona vaccine.

However, Moderna no longer orders from Lonza. As compensation for the early termination of the very lucrative contract, Lonza received from the Americans a “termination fee” of around 200 million francs, according to earlier information.

Margin is falling

At the same time, the rising interest rate environment is slowing down many research companies and consumers are being cautious. Lonza senses this in the demand for services from biotech startups as well as the demand for capsules for nutritional supplements.

As a result, operating profit (underlying EBITDA), adjusted for impairment and restructuring costs, increased by “only” 0.2 percent to 2.00 billion francs. The relevant margin decreased by 2.3 points to 29.8 percent.

Factory closures that have a negative impact on profits

Net profit at the end of the income statement remained at 655 million francs, after 1.22 billion francs in the previous year. The planned closure of the Guangzhou (CN) and Hayward (USA) plants will result in high costs. Impairment of 183 million francs and restructuring costs of 50 million. The phased closure of the two facilities will begin this spring and is expected to be completed by early 2025.

There will be 218 layoffs in Hayward, with layoffs planned for early February. The pharmaceutical supplier says the local business with combined and integrated clinical-commercial offerings offers only limited growth opportunities.

Investments in Visp continue

But at the Visp VS location, Lonza plans to expand its business with bioconjugation, in which molecules bond together. The ingredients of the Moderna vaccine were also produced at Visp.

Shareholders will still benefit from a 50 cents higher dividend of 4.00 francs per share.

Lonza continues to forecast operating margin and flat sales development “in the high 20 percent range” for the 2024 “transitional year.” Lonza aims to grow by 11 to 13 percent in local currency in the coming years and achieve margins in the range of 32 to 34 percent. (SDA/smt)

Source :Blick