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Lonza Faces Profit Dip and Leadership Shift in 2023

  • By The Swiss Times
  • 26 January 2024

Lonza navigates a challenging financial year with reduced profits and a significant change in its Board of Directors, as Albert Baehny steps down.

Lonza Faces Profit Dip and Leadership Shift in 2023

In 2023, Lonza, a significant player in pharmaceutical contract manufacturing, experienced a slowdown in its growth trajectory compared to previous years, coupled with a substantial profit dip. This shift is mainly attributed to the waning stages of the coronavirus pandemic, which impacted the company’s financial performance significantly.

Lonza announced a 7.9% increase in sales, reaching 6.72 billion Swiss francs. However, the growth was higher at 10.9% when adjusted for currency effects. This growth rate is notably slower than the company’s performance in past years, consistently seeing robust double-digit increases.

A significant contributor to Lonza’s revenue in recent years has been the contract with Moderna for the COVID-19 vaccine’s active ingredient, bringing in about half a billion Swiss francs. This revenue stream included a 200 million Swiss franc “termination fee” following the conclusion of the collaboration with the American firm.

The pandemic’s end has impacted Lonza beyond the vaccine contract. The company observed a decline in the demand for capsules used in dietary supplements, a trend reflecting the global health situation’s normalization.

Moreover, the current economic environment, characterized by rising interest rates, has affected research-based companies, reducing demand for Lonza’s services and products, mainly from biotech start-ups and the nutritional supplements sector.

Despite these challenges, Lonza’s operating profit, after adjusting for value adjustments and restructuring costs, saw a marginal increase of 0.2% to CHF 2.00 billion. However, this growth did not translate proportionally to the bottom line, with net profit halving CHF 655 million.

This decrease is primarily due to significant costs related to the planned closure of sites in Guangzhou, China, and Hayward, USA, totaling CHF 50 million in restructuring and CHF 183 million in impairment losses.
Shareholders, however, can expect a silver lining with a proposed 50-centime increase in the dividend, amounting to CHF 4.00 per share.

A significant change is also on the horizon for Lonza’s leadership. Albert Baehny, Chairman of the Board of Directors, announced his departure after a seven-year tenure. Jean-Marc Huët, a former CFO of Unilever and current Chairman of Heineken is set to be proposed as his successor at the Annual General Meeting. Huët, who has strong ties to Switzerland, is expected to lead Lonza into its next phase, following Baehny’s pivotal role in transforming the company from its chemical industry roots to a leader in contract manufacturing.

During Baehny’s leadership, the company witnessed significant CEO turnover, with the role changing hands multiple times in just five years. Baehny, 71, will continue to serve as the interim CEO until a permanent successor is appointed.

©Keystone/SDA

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