Swiss chemicals firm and contract manufacturer Lonza fulfilled its promise of stronger financial results in the first half of 2005, with profits coming in at the lower end of the forecast range, but still on target, reports Phil Taylor.
The group reported a rise in earnings before interest and taxes (EBIT) of CHF 135 million (€86m), 26.2 per cent higher than in the first half of 2004, while sales rose 12.6 per cent to CHF 1.22 billion, driven by a marked improvement in its biopharmaceuticals business.
The chemicals group said it had successfully implemented the first part of its business strategy announced in January and was on track to reach the CHF 300-400 million EBIT target by the end of 2006, which would represent a growth rate of 20 per cent a year.
Lonza 's custom manufacturing activities increased sales by 32.8 per cent to CHF 429 million, while EBIT rose 82.8 per cent to CHF 53 million.
As noted this performance was driven by the firm's biopharmaceutical activities; one quarter of sales and profits in Lonza's large-scale plant in Portsmouth, New Hampshire, were realised with the first-half results. A higher level of use of Lonza's 2000 and 5000 litre bioreactors also contributed to the increase.
On the chemical pharmaceutical side, Lonza's Exclusive Synthesis business continued the recovery of the last two years despite a persistently difficult market environment, with slightly higher capacity utilisation. Lonza has an ongoing program of intensive R&D activities.
On strategic issues, Lonza said it will enter the large-scale microbial biopharmaceuticals business on the basis of a long-term cooperation agreement with UCB, with two planned 15,000 litre reactors in Visp to be co-financed by the Belgian chemicals and pharmaceuticals group.
The Biopharma Services business was also strengthened with the approval of a 500 litre mammalian production line in Slough, UK, and the start of began construction of a large scale peptide plant in Visp for the Exclusive Synthesis division. However, net working capital is still not satisfactory and capital expenditure levels are below plan, Lonza said.
Meanwhile, Lonza's Organic Fine Chemicals & Performance Chemicals business generated sales of CHF 434 million, 2.3 per cent lower than in the first half of 2004, with EBIT flat at CHF 66 million.
Polymer Intermediates saw a healthy improvement over the first half of 2004, with sales of CHF 361 million, up 12.8 per cent, partially offset by high raw material costs. EBIT for this division rose more than 26 per cent to CHF 24 million.