UPDATE 2-Lonza falls short on profits outlook

Thu Jan 24, 2013 5:15am EST

Related Topics

* FY EBIT 335 mln Sfr vs 329 mln market forecast

* FY sales rise 45.8 pct to 3.925 bln Sfr

* Reaffirms 2015 targets

* Dividend unchanged at 2.15 francs a share

* Share price down 4.8 pct (Adds market reaction, analyst's comment)

By Caroline Copley

ZURICH, Jan 24 (Reuters) - Swiss specialty chemicals and life sciences group Lonza reported a better than expected rise in profits on Thursday but dampened expectations of another big jump this year, taking the edge off a two-month rally in the share price.

The Basel-based firm, which also produces pharmaceutical ingredients for drugmakers such as GlaxoSmithKline, is now aiming for 10 percent growth in earnings before interest and tax (EBIT) in 2013, Chief Executive Richard Ridinger told reporters on a conference call.

This is far weaker than the average forecast given by analysts in a Reuters poll of EBIT growth of 21 percent for 2013 and the 28 percent jump in EBIT to 335 million Swiss francs ($361 million) achieved last year.

Sales last year jumped 46 percent, boosted by its $1.2 billion acquisition of biocides producer Arch Chemicals in 2011.

The shares, which had gained 25 percent since mid-November following the launch of a major cost-cutting and plant rationalisation plan, were trading down 4.8 percent by 1013 GMT at 52.65 francs, off an earlier session low of 51.65 francs.

"We will slightly revise our estimates and expect that consensus estimates for 2013 will have to be revised down by at least 10 percent," said Carla Baenziger, an analyst at Vontobel.

"2013 will be a transition year with a reducing of the number of production facilities globally."

TURN-AROUND

Lonza, which also makes the active ingredient used in anti-dandruff shampoos, believes it is well placed to benefit from pharmaceutical companies' efforts to make their manufacturing processes more efficient as they face patent expiries.

However, it has also been hit by volatility in that sector,

and sought to shield its margins by buying Arch in July, 2011, its biggest ever acquisition.

Excluding Arch EBIT rose 14.7 percent last year, at the top end of its 2012 target to grow profits by between 10 and 15 percent.

Ridinger who took over the helm last May after the ousting of his predecessor Stefan Borgas has led a review of the firm's structure and strategy.

Faced with low-cost competition, a strong Swiss franc and higher raw material prices, Lonza said last October it would cut 500 jobs, including 400 at its main plant in Switzerland.

On Thursday Ridinger had said the firm planned to slim down its manufacturing, make existing sites more competitive and carry out further structural changes in 2013, but declined to give any specific details when asked about possible divestments.

The group expects areas like the manufacturing of anti-body drug conjugates, which are increasingly being used as targeted therapies for cancer, and active ingredients for agrochemicals to drive growth this year.

Lonza reaffirmed its 2015 targets for mid single-digit percentage growth in annual sales and an EBIT margin of at least 20 percent, but held its dividend payment for 2012 unchanged at 2.15 francs per share. ($1 = 0.9287 Swiss francs) (Editing by Greg Mahlich)

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