Lonza sticks to targets despite weaker first quarter
Published: Tuesday, May 14th 2024, 10:40
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Lonza got off to a somewhat slower start in 2024. However, the pharmaceutical contract manufacturer is confident that it will catch up with the leaders, especially as the important growth projects are also progressing according to plan.
Business was weaker in the first three months of the year, Lonza announced on Tuesday. However, the situation will "normalize" in the first half of the year. The company then expects "solid" sales in the second half of the year, as many batches will then be completed for customers.
No more corona stores
In recent years, coronavirus has brought the company high revenues. The Moderna contract had flushed around half a billion Swiss francs into Lonza's coffers in 2023. This income will now be lost.
At the same time, the sharp rise in interest rates since the end of the pandemic is making it increasingly difficult for biotech companies to finance new projects. Customers of pharmaceutical suppliers are therefore having to cut back and focus their projects.
Lonza reported on Tuesday that demand for services for early-stage development projects remained weak. This is despite initial signs of a recovery in biotech financing.
At the same time, consumers' wallets are no longer so loose. Lonza is feeling the effects of this in the area of capsules for dietary supplements, where demand in Western markets has been weaker. And the Nutraceutical division reported a lower margin despite improved demand.
Showpiece "Biologics" well on its way
On the positive side, Lonza was able to report that the Biologics division has seen "good" momentum, with continued customer demand for products that have already been approved. The production of active ingredients using biotechnology agents accounts for more than half of Lonza's sales.
At the same time, the most important growth projects are also progressing as planned, emphasized Lonza. A large-scale plant in Visp VS is expected to go into operation in the fourth quarter of 2024 and construction work on a plant for commercial pharmaceuticals in Stein AG is also on track.
Targets confirmed
Lonza is preparing for a year of transition after the end of the pandemic: The company expects sales to remain stable in 2024 and continues to forecast an operating profit margin in the "high 20 percent range".
This is because Lonza can make up for the lack of income from Moderna with new projects in the current year - but nothing more. And the order from the Americans was very lucrative, so its loss is temporarily weighing on profitability.
The medium-term sales guidance, which has just been increased with the purchase of a large production facility from Roche, has been confirmed: From 2024 to 2028, Lonza aims to achieve average annual growth in local currencies of 12 to 15 percent and the margin should rise to the 32 to 34 percent range.
On the stock exchange, Lonza shares were at the bottom of the SMI ranking, down 2.8 percent. According to analysts, the interim report brought few surprises overall. For this reason, profits are now being taken in the shares that had previously performed very well.
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