Lonza Reports "Robust" Operating Performance in 2010

The company continued to benefit from pharmaceutical and biotechnology companies outsourcing more of their manufacturing and development activities.

1/26/2011 --- Lonza delivered a robust business performance in 2010, with sales and EBIT increasing 3.3% and 5.8% respectively at constant exchange rates.

The company continued to benefit from pharmaceutical and biotechnology companies outsourcing more of their manufacturing and development activities.

During the year, Lonza achieved a number of important successes. They improved capacity utilization, particularly in Biological Manufacturing in the second half of the year. The Microbial Control business generated strong growth. Lonza’s project pipeline was increased significantly through the signing of new contracts and multi-product deals, especially in Chemical and Biological Manufacturing and Cell Therapy. However, these operating positives were offset by slower pharmaceutical product approvals as a result of the more stringent regulatory environment, as well as rising raw material costs, which affected the profitability of our non-pharma businesses.

The appreciation of the Swiss franc against nearly all important trading currencies during 2010 led to a transactional and translational reduction of CHF 28 million in EBIT. In 2010, Lonza further improved its balance sheet structure and significantly increased free cash flow to CHF 336 million. As a result, gearing was reduced to 46%.

Outlook
•    EBIT growth at constant exchange rates will continue
•    Solid growth in 2011 especially in Biological Custom Manufacturing and Bioscience
•    Investment and R&D projects will deliver mid-term growth
•    On track to deliver 2013 incremental EBIT targets on a constant currency basis
•    The strength of the Swiss franc, erratic raw material pricing and less predictable regulatory approvals will continue to cause volatility
•    Significant free cash flow delivery will continue in 2011
•    Lonza’s increased financial flexibility will open up expansion opportunities in our life-science-focused value chain
•    Lonza’s Life Sciences strategy remains solid

The Board of Directors has revised the dividend policy with an increased pay-out ratio of up to 40% to reflect the Group’s positive outlook and cash generation. The Board proposes an increased cash dividend of CHF 2.15 per share for 2010.

The Lonza Board of Directors is proposing to elect Jean-Daniel Gerber as new member of the Lonza Board of Directors at the next annual general meeting on 12 April 2011. Jean-Daniel Gerber brings a broad range of experience to the Lonza Board having served in various positions for the Swiss government. Among others, he has been chairing the State Secretary for Economic Affairs (SECO) since 2004. From 1993 to 1997 he served as Executive Director and Dean (1997) of the Board of the World Bank Group. He will retire from Government service on 31 March 2011.

The Board of Directors will increase from six to seven members.