Lonza’s progress toward a fully market-driven business model

By Deanna Utroske

- Last updated on GMT

Lonza’s progress toward a fully market-driven business model
The specialty ingredients supplier, which counts the personal care and cosmetics industries among the markets it serves, has announced its latest financial performance results.

Lonza met its profit-margin improvement objective one year ahead of schedule. And, this past year “both of Lonza’s segments – Specialty Ingredients and Pharma&Biotech – delivered a solid performance despite currency headwinds and the performance of the Water Treatment business,”​ according the company’s press release.            

Measuring ingredients
The company’s specialty ingredients segment did well in 2014. Something CEO Richard Ridinger attributes to better productivity along the Lonza ingredients network in conjunction with improved market activities and strong demand, according to his remarks in this week’s call reviewing the company’s operational growth highlights for analysts and investors.

The underperforming water treatment business at Lonza affects the company’s wider endeavours, as water treatment operations support the specialty ingredients segment as well as pharma and biotech. So, it’s worth noting that a second year of higher than expected temperatures negatively affected the company’s water treatment business and by extension specialty ingredients.

Nonetheless, “Innovative approaches resulted in a noteworthy number of new product launches [in the specialty ingredients segment] driven by market demand and customers’ desire for technologically led, environmentally friendly and affordable solutions,” ​states the company’spress release.

Tallying currency
Lonza revenues grew by 3% in to 3.64 bn in reported currency, and companyprofit increased by 172% to CHF 237 m.

“The Swiss National Bank (SNBN)’s surprise decision last week to abandon the cap on the franc exchange rate has put added pressure on Lonza’s manufacturing site in Visp, Switzerland, where the company was founded. Products from Visp, which include aroma chemicals and health-food ingredients, compete globally,”​ explained Andrew Noel in his analysis​ for bloomberg.com.

As a result of currency variations, the company is reconsidering its financial outlook and has promised investors guidance for 2015 “at a later stage.”

Gauging efficiency
Lonza got its start in 1897 and now comprises over 40 development and manufacturing sites globally, with a staff of nearly 10,000. The acquisition in 2011 of microbial control company Arch Chemicals distributed Lonza’s assets more equally worldwide. Presently, the business is evolving further to align with modern investor-driver economic profit strategies.

“Chief Executive Officer Richard Ridinger, approaching his second anniversary in the role, is in the final stages of a three-year overhaul that’s included plant closures, disposals and other efficiency moves,” ​noted Noel.

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