Lonza Leans on Life Science

BASEL, Switzerland Lonza released its financial results for the first half of 2010, with sales at a similar level as seen in 2009, primarily attributed to a weak first quarter in the custom manufacturing businesses. However, The company saw a 25 percent increase in sales in the second quarter (2Q) aiding an increase in EBITDA and net profit. Cash flow also rose, growing 17 percent. There were volume sales increases in all businesses except agrochemicals.

Life Science, which includes nutrition ingredients, performance intermediates and microbial control, saw stabilized end-product demand. Further, strong sales volume compensated for increasing margin pressure. Life Science Ingredients sales overall grew by 5.9 percent to CHF 536 million (US$513.8 million) in the first half of 2010, while EBIT increased by 17.4 percent to CHF 81 million (US$77.7 million). Margins are increasingly coming under pressure due to higher raw material cost, unfavorable exchange rates and increased competitive activities. Lonza noted any pass-through of higher rates will only be possible over time.

In the Nutrition Ingredients portion of the Life Science segment, demand for nicotinates (vitamin B3) increased substantially in the first half of the year, driven by feed and food applications, accompanied by stable pricing. Sales and volumes for Carnipure (food- and pharmaceutical-grade L-carnitine) and Carniking (feed-grade L-carnitine) were above target. Carnipure was in high demand in the infant nutrition, pharma, dietary supplement and functional beverage markets in the United States. The new intermediates plant in Visp, Switzerland, came on-stream in June, producing new starting material for the Nansha, China, facility; that L-carnitine operation is expected to start production in the fourth quarter of 2010. Finally, demand for FiberAid and ResistAid (larch arabinogalactan products) met expectations during the first half of the year, as existing key customers experienced stronger demand for their products.

The company saw changes in senior management as well, with Lukas Utiger, previously chief operating officer (COO) of Lonza Life Science Ingredients, taking over as COO of Lonza Bioscience. Lonzas CEO Stefan Borgas is heading up the Life Science business until a new COO is appointed.