Lonza ups full year outlook as Capsugel integration starts to boost business

25 Jul 2018 --- Lonza has updated its outlook for the full year after reporting 8.2 percent organic (like-for-like) sales growth, double-digit organic CORE EBITDA and CORE EBIT growth during the first half of 2018. The company attributes growth to the successful integration of Capsugel and “buoyant demand” from pharmaceutical and biotech clients for products including viruses for gene therapy.

One year after the closing of the Capsugel acquisition, sales amounted to CHF3.1 billion (US$3.12 billion) for the first half of 2018. The company reports that its margins further improved, resulting in a CORE EBITDA margin of 26 percent and a CORE EBIT margin of 20.3 percent. Based on these results, Lonza upgraded its sales outlook for the full year to mid- to high-single-digit growth on a comparable basis. 

Lonza’s 2016 acquisition of Capsugel for US$5.5 billion boosted the company’s portfolio by adding pill capsules to its existing pharmaceuticals ingredients business, expanding its range of services for drug companies and nutrition makers beyond the ingredients and production services that it has traditionally supplied.

On a segment level, Lonza Pharma & Biotech contributed significantly to the company’s H1 2018 performance with 14.7 percent organic sales growth and a 33.1 percent CORE EBITDA margin. Within Lonza’s Specialty Ingredients segment, Lonza reports that its newly formed Consumer Health division performed “extremely well,” driven by robust momentum for nutritional ingredients and supplement delivery forms.

Specialty Ingredients Segment
Specialty Ingredients delivered strong results for the businesses along the healthcare continuum but was negatively impacted by the soft performance in more mature, cyclical parts of the portfolio like basic materials and intermediates. The segment reported CHF 1.5 billion sales for the Half-Year 2018 (increase of 2.5 percent pro-forma, 19.7 percent sales growth on a reported basis), with a 21.1 percent CORE EBITDA margin. 

As of January 1, 2018, the Specialty Ingredients segment began operating in three distinct units: a Consumer Health division (including the former Capsugel consumer health and nutrition business), a Consumer & Resources Protection division and a Water Care business unit.

The newly formed Consumer Health division organically grew 7.6 percent in sales to CHF 536 million for the Half-Year 2018 (86.1 percent growth on a reported basis). CORE EBITDA amounted to CHF 153 million, a 24.4 percent increase like-for-like (150.8 percent growth on a reported basis) with an outstanding 28.5 percent CORE EBITDA margin. 

In particular, the consumer health and nutrition businesses reported outstanding sales momentum as expected through strengthened global reach of the combined sales force; and they continued to build a robust launch pipeline of synergistic offerings. 

“The strong organic sales growth and margin improvements – particularly in our businesses along the healthcare continuum – helped us achieve a positive half-year 2018 result, which is why we are updating our outlook for the full year,” says Richard Ridinger, CEO of Lonza. “We look back at a successful first year after acquiring Capsugel and see that integration is progressing better than planned, operational and commercial synergies are starting to materialize and healthcare continuum offerings are becoming even stronger.” 

“An important part of the successful integration into the Lonza family has been the valuable contribution of Guido Driesen, Capsugel's former CEO, who helped bring together a strong organization. With integration progressing so well, he is winding down his activities. We are thankful that Guido is prepared to support us even further with his expertise in other projects globally as needed,” Ridinger adds.