Lonza profit up by half but fails to impress

Lonza is riding into the future with high hopes Keystone

Specialty chemicals group Lonza says its net profit for 2004 rose by more than a half to SFr138 million ($115.59 million), at the lower end of expectations.

The company, based in Basel, reported a slight drop in sales from SFr2.242 billion to SFr2.182 billion, a decline of 2.7 per cent.

But it commented that turnover should increase this year.

“The board of directors expects sales growth and a solid improvement in earnings in 2005 in line with our short-term, two-year operating income targets of between SFr300 million and SFr400 million,” Lonza said in a statement.

Last year’s result had been severely affected by special after-tax costs of SFr107 million.

The company reported that operating profit rose by almost a third last year (+28.8 per cent) to SFr212 million – below analysts’ forecasts – as the weak dollar, high raw materials prices and a delay in deliveries ate into income.

No restructuring

The Lonza statement ruled out a restructuring of operations, something that had been widely expected in the market.

Instead, the company said it would concentrate on its life sciences market, where it already earns 60 per cent of its income.

“Fundamental restructuring is not required,” Lonza stated, although it added that it aimed to build up business in the healthcare, nutrition, personal care, hygiene and agricultural markets.

Analyst Bernd Pomrehn at Bank Sarasin commented that the 2004 numbers were lower than the forecasts, and said the outlook was “kind of fuzzy”.

“People were hoping they would make a move to sell their polymer intermediates but there is no sign of that either,” he said.

In a related development, Lonza announced that Sergio Marchionne would quit as chairman of the board this spring. Rolf Soiron has been named for approval by the shareholders’ annual meeting to replace him.

swissinfo with agencies

Key facts

Lonza supplies biotechnology products to the pharmaceutical and agrochemical industries.
The company will propose a dividend of SFr1.30 per share, the same as for the 2003 financial year.

In brief

Lonza :

Net profit 2004 – SFr138 million (+51.6%)

Sales 2004 – SFr2.182 billion (-2.7%)

Operating profit 2004 – SFr212 million (up from SFr139 million)

Sergio Marchionne is to step down as chairman in spring. Rolf Soiron from Basel University has been proposed to succeed Marchionne, who is now at Fiat in Italy.