Nutrition business driving Lonza’s first-quarter “solid” performance but Speciality Ingredients segment faces challenges

18 Apr 2019 --- Swiss multinational Lonza is continuing its positive momentum in its newly aligned segment, Lonza Pharma Biotech & Nutrition (LPBN), according to a first-quarter overview. However, the company’s recently created Specialty Ingredients (LSI) portfolio faced challenges with the business performing below expectations. Despite facing some continued headwinds in LSI, Lonza maintains its outlook for 2019 based on the strong performance of its core healthcare businesses.

Reporting an overall solid start to the year, Lonza Group CEO Marc Funk says the Q1 results demonstrate that Lonza has two segments operating in different markets and growing at varying paces; therefore, their performance and challenges should not be compared, he says.

“Our Pharma Biotech & Nutrition business has continued to outperform. We are investing to further accelerate growth in our core healthcare businesses. We are also constantly innovating with new offerings for our customers and their patients and consumers,” says Funk, who took over when ex-CEO Richard Ridinger unexpectedly resigned in January.

“In Specialty Ingredients, we are committed to mitigating measures and operational efficiencies to manage the headwinds in the sector and strengthen the segment performance. The most recent segment alignment will support us as we continue to capitalize on increased investment focus, synergies and productivity within the segments,” Funk continues. “The alignment is a priority to ensure we remain firmly on our growth trajectory.”

Funk still expects mid-to-high-single digit sales growth and a “sustained” core operating profit margin in 2019.

The newly formed Pharma Biotech & Nutrition segment combines the former Pharma & Biotech segment and Consumer Health & Nutrition, formerly part of the Consumer Health Division within LSI. These businesses share technologies and innovation insights in dosage form and delivery systems and apply them to pharmaceutical and nutritional offerings.

Lonza Q1 2019 Nutritional and Bioscience Products Overview
This shows a robust performance for nutritional ingredients, dosage forms and delivery solutions. There is ongoing momentum for Consumer Health & Nutrition hard capsules, strong sales in Europe, the Middle East and Africa (EMEA), Japan, Brazil, Mexico and Australia, with slightly softer sales in North America. 

Meanwhile, dosage form solutions performed above the previous year. Performance was driven by good demand in the US and Asia-Pacific (APAC), while there is a strong pipeline of new projects, notes the company. 

Lonza also says there is an expansion of premium science-backed ingredient, UC-II for joint health, as well as expansion into new markets, customer channels and regions. 

Speaking during a recent NutritionInsight webinar Dominik Mattern, Associate Director and Head of Business Development for Consumer Health & Nutrition at Lonza, offered his insights on new collagen ingredients and joint health solutions. 

“There is a growing global demand for bone and joint health ingredients, as consumers are increasingly aware of the preventive benefits of proper nutrition,” he explained at the time. 

Also, during the “Moving with the times: a new generation joint health solution for today’s consumer” webinar, Mattern hones in on Lonza’s UC-II ingredients, discussing the science behind the development of the ingredient along with its formulation and unique joint health properties. UC-II has the potential to meet the needs of a growing consumer base he says, which is seeking to maintain joint health. He also gives a first look at Lonza’s new generation of ready-to-market innovative dosage forms and formulations that address mobility concerns related to healthy aging.

Last month, Lonza launched a new phytoplankton ingredient coined Oceanix, which seeks to support athletic performance and recovery.

Supply chain disruptions
All LSI businesses faced continued raw material shortages and supply-chain disruptions caused by China’s Blue Sky environmental initiative and a major chemical plant explosion in China producing feedstock used across the LSI portfolio. 

The extent of the challenges across all LSI businesses were not foreseen in January 2019, says the company, and the implementation of additional cost-containment measures in Specialty Ingredients has started to mitigate the impact of supply-chain disruption and raw material input costs, says Lonza.

Following the disposal of its former Water Care business unit in February and to emphasize its strategic focus on growth in its core healthcare businesses, Lonza adjusted its Mid-Term Guidance. Lonza kept its 2019 outlook, foreseeing sales of CHF 7.1 billion (US$7 billion).