Lonza reports strong H1 2017 performance, profitability in health and nutrition
26 Jul 2017 --- In the first half of 2017, Lonza continued on its strong growth path, with sales up 15.1 percent to CHF2.323 million (US$2.43 million) and CORE EBIT up 43.3 percent to CHF447 million in reported currency compared with financial results in Half-Year 2016. The success was driven by both the Pharma&Biotech and Specialty Ingredients segments. Consumer Health & Nutrition outperformed others within Specialty Ingredients, and other businesses improved profitability, too. Therefore, Lonza confirms its full-year 2017 guidance on a standalone basis, which was already upgraded with the Q1 2017 Qualitative Business Update in April 2017.
“Lonza’s continued growth shows the company’s strength and ability to shape the future along the healthcare continuum with our customer-oriented market approach, ongoing operational excellence and new innovative offerings,” says Richard Ridinger, CEO of Lonza. “The outstanding results in the first half of 2017 are fully consistent with our outlook for the full year.”
Specialty Ingredients Segment
The Specialty Ingredients segment experienced a good first half of 2017 with sales up 6.3 percent to CHF1,238 million and CORE EBIT up to CHF213 million, an increase of 9.8 percent compared with the same period last year. The CORE EBITDA margin in the first half of 2017 was 21.1 percent. Consumer Health & Nutrition added significantly to the increase in revenue and profitability. Within other Lonza Specialty Ingredients businesses, operational excellence programs resulted in efficiency gains and higher profitability compared with previous reporting periods. Business excellence through automation, streamlining, digitalization and the exploitation of synergies remains a cornerstone going forward.
Outlook Full-Year 2017
Lonza confirms the outlook for Full-Year 2017 on a Lonza-standalone basis, which was already upgraded with the Q1 2017 Qualitative Business Update in April 2017:
- Sales growth of high-single digit
- CORE EBITDA above CHF1 billion
- Double-digit CORE EBIT growth significantly above sales growth
- CORE RONOA above the 21.5 percent achieved in 2016
Lonza expects to continue its momentum in H2 2017; however, results will then be compared with an exceptionally strong H2 2016.
Based on that expectation, Lonza (including Capsugel) is announcing the following mid-term guidance until the end of 2022, on the occasion of Lonza’s 125th anniversary:
- Sales CHF7.5 billion
- CORE EBITDA margin 30 percent
- CORE RONOA 35 percent
After the successful closing of the acquisition of Capsugel on 5 July, the post-deal integration began immediately. Lonza confirms that the acquisition of Capsugel will capture new market opportunities and substantial top-line synergies identified at the time of signing with initial benefits from 2018 onward. The specific businesses of Capsugel will be integrated into Lonza’s segments along the healthcare continuum. Lonza confirms its positive outlook for Capsugel. Combined financial figures will be reported with the full-year results 2017 in January 2018.
Capsugel Financing
The Capsugel acquisition was financed through a combination of equity and debt instruments. An accelerated bookbuilding in February meant that 5 million new shares with gross proceeds of CHF865 million could be successfully placed. Lonza then offered a total of 16,548,612 newly issued shares by way of a discounted rights offering with gross proceeds in the amount of CHF2.26 billion, after the approval of shareholders, during the Annual General Meeting (AGM) on 25 April, 2017.
The balance of the acquisition price was financed through indebtedness including a US$1 billion term loan and US$1.5 billion bridge loan facilities provided by the assigned banks. The bridge is projected to be refinanced by traditional debt instruments within the next 18 months. Lonza already issued dual tranche CHF235 million straight bonds in July 2017. The bonds have a maturity of four and seven years respectively with coupons of 0.200 percent and 0.700 percent.
Lonza estimates a pro-forma net debt/CORE EBITDA ratio at the closing of the Capsugel acquisition on 5 July 2017 of 2.8x – a leverage level consistent with the previously communicated threshold of up to 3x net debt/CORE EBITDA. Further de-leveraging to approximately the net debt/CORE EBITDA level at the end of 2016 is expected to be achieved, as originally announced, by 2019.
Separately, Lonza also announced the launch of Ibex Solutions, an innovative new biological development and manufacturing concept, coupling flexibility in facility-build-out with fully tailored business models and leveraging Lonza's expertise and service network in Visp (CH). Construction began in June with a formal groundbreaking ceremony expected in the second half of 2017. Several hundred new positions are expected to be created.
