‘Record breaking’ year for Lonza as company continues Capsugel integration

31-Jan-2018 - Last updated on 31-Jan-2018 at 13:21 GMT

iStock

Related tags Profit Lonza

Swiss pharmaceutical and nutritional ingredients player Lonza beat 2017 earnings expectations, but forecast a rise in operating profit margin this year that fell short of analysts’ hopes, knocking its shares.

Stocks in Lonza were more than 4% down this morning, despite the company reporting ‘record breaking’ full year results for 2017.

Full-year net profit for 2017 more than doubled to CHF 728 million, from CHF301 million in 2016 – with the company reporting strong sales and profits from recent acquisitions including its $5.5 billion takeover of Capsugel and $300 m deal for InterHealth Nutraceuticals.

Both of Lonza's segments – Pharma & Biotech and Specialty Ingredients – contributed to the record-breaking results with Pharma & Biotech generating an impressive CHF 2.1 bn in sales (an 18.9% growth over previous year) and Specialty Ingredients bringing in CHF 2.4 billion sales (5.2% sales growth).

Strong growth in Consumer Health and Nutrition was a key driver of wider growth in its Specialty Ingredients, said Lonza.

"Following the acquisition of Capsugel, we have successfully achieved our goals and even over-delivered," said Richard Ridinger, CEO of Lonza. "With such a rapid step-up in size – of our sales, employees and entities – we are now optimizing all of our processes and structures to ensure profitable growth continues well into the future."

Conservative outlook

Despite record-breaking full year results, shares in Lonza were down by more than 4% this morning after the company provided a lower-than-anticipated projection for 2018.

According to Reuters, the company’s profit outlook for 2018 came short of analysts’ expectations,

The financial publication quoted Peter Welford of Jefferies noting that Lonza’s core EBITDA margin growth goal is less than a third of his estimate – and half the consensus of others following the company.

“We note management has typically been conservative on profit aims, suggesting below the implied potential 4 percent cut to consensus EBITDA,” said Welford.

However, analysts at Baader Helvea suggested the cautious outlook could leave room for Lonza management to raise its goals over the course of the year, depending on how business develops.

“We believe there might be further upside for these targets in 2018,” wrote Helvea’s Laura López Pineda in a note to investors.