Biotech business strong in Lonza's 2002

Swiss chemicals company the Lonza Group said today it topped the previous year's performance, with operating income, excluding non-recurring items, up from CHF413 million to CHF419 million (€286.5m).

The company attributed results to advances in the biotechnology businessand higher or stable results in the more traditional chemical activities.

Overall sales in 2002 were however flat, up 0.6 per cent to CHF2,536 million, on the prior year.

Lower demand from pharma customers in the exclusive synthesis business and increased competition from some new market entrants impacted on operating income, said Lonza.

Sales at the organic fine chemicals division were also flat, undoubtedly affected by a slowdown in all the major economies and higher raw material prices. Sales were CHF957 million, down 1.6 per cent on the prior year and up 1.6 per cent on a currency-adjusted basis. Operating income increased by 3.8 per cent to CHF166 million but the company did manage to boost operating margins to 17.3 per cent (16.4 per cent in 2001), despite the higher raw material costs which persisted throughout the year.

Lonza said there was strong demand for intermediates for pharma and agro applications, as well as for vitamins, with the Visp and Guangzhou, China manufacturing sites for nicotinates (B vitamin) at high capacity. Market prices for nicotinates recovered from an all-time low in the previous year.

The firm said the unit is focusing on developmentof non-cGMP intermediates for the life sciences industry. Arevamped multipurpose plant for non-cGMP intermediates was successfully put into operation and several new molecules were produced applying specific Lonza technologies.

Despite sluggish economic conditionsthroughout most of the world, sales were up at performance chemicals division, but sales in other areas, such as the group's polymer intermediates division, were down on theprevious year's levels, with lower operating income and margins.

Restructuring in other business units is expected to produce annual cost savings of CHF40 million, said Lonza, although postponing the planned divestiture of the polymerintermediates division increased the group's net debt position to CHF869 million compared with CHF 514 million at the end of 2001.

Capital expenditure in 2002 increased to CHF350 million, due to current biotechnology projects. The group announced today that it has invested CHF12 million in an extension to its Lonza Biotec unit in Kourim, Czech Republic, which makes active ingredients based on microbial fermentation.

The new plant, to be operational in the second half of 2003, will enable Lonza to cope with the increasing demand for these ingredients for the life sciences industry, said the firm.

Recovery at the exclusive synthesis businessand strong positions in biotechnology are thought to have brought improvements to the 2002 operating performance. Lonza confirmed its targets for 2005 announced in July last year.