Lonza performing better than feared
Published: Thursday, Jul 25th 2024, 12:10
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The 2024 financial year has so far gone exactly as predicted for pharmaceutical supplier Lonza: Following the loss of the Moderna order, sales are stagnating. However, contrary to expectations, the margin remains very robust.
Lonza had prepared itself for a transitional year following the end of the major vaccine order from Moderna. Although new orders were expected to fill the gap, Lonza explained at the beginning of the year that it would not be able to do more this year. The days of double-digit growth are therefore over for the time being.
In practice, Lonza's sales fell by 0.7 percent to 3.06 billion Swiss francs between January and June 2024, as the company announced on Thursday. Adjusted for currency effects, however, they would have risen by 1.8 percent and thus more strongly than analysts had expected.
This was mainly due to Lonza's "showpiece" - the production of active ingredients using biotechnology - which continues to thrive and grew by 7.3 percent. This "Biologics" division accounts for significantly more than half of sales.
However, Lonza's hard capsule business has remained a problem child since the end of the pandemic. Pharmaceutical customers in particular are still sitting on large stocks, which will first be reduced. This process is likely to continue until next spring, said CFO Philippe Deecke in a conference call on Thursday.
Lucrative Moderna order
Moderna's contract with Lonza not only generated a turnover of half a billion Swiss francs per year at its peak - it was also very lucrative. Its loss therefore also depressed profitability. Operating profit fell by 3.1 percent to 893 million francs in the first half of the year.
However, the margin only fell by 0.8 percentage points to 29.2% - analysts had expected a much sharper decline here too. According to Lonza, good demand for commercial services and a favorable product mix also helped.
At the end of the income statement, net profit amounted to CHF 330 million, compared to CHF 411 million in the previous year. Lonza explains the comparatively high decline of 20 percent with two non-cash one-off effects.
Applause from the stock market
Despite the strong half-year, Lonza confirmed its forecast for 2024, i.e. flat sales growth in local currency and a margin in the "high twenties". Anyone hoping for higher guidance was therefore disappointed.
Nonetheless, investors on the stock market are still taking a brave bite: shortly before midday, Lonza shares rose by a whopping 5.7 percent to 552.60 Swiss francs. With a gain of around 53 percent since January, the shares are the undisputed leaders of this year's SMI winners' list.
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