* H1 net profit 140 mln Sfr vs 127 mln Sfr in poll
* Sales rise 7 pct to 1.8 bln Sfr, matching estimates
* Core EBIT 241 mln Sfr vs 232 mln Sfr in poll
* Group reaffirms full-year EBIT and sales goals
* Shares up 5.8 pct
(Recasts with share price, adds analyst)
By Joshua Franklin
ZURICH, July 24 Shares in Switzerland's Lonza
surged on Thursday after the group's first-half net
profit more than trebled, benefiting from increased outsourcing
of production by drugmakers.
The speciality chemicals maker and life sciences group is in
the middle of a restructuring that has included plant closures
and job cuts to improve productivity and profitability as it
sharpens its focus on the pharmaceuticals and biotech market.
Lonza's pharma and biotech unit, producer of the
antibody-drug conjugate used in Roche's breast cancer
drug Kadcyla, posted an 11 percent revenue increase and 15
percent rise in operating profit.
The company said that production at the division's factories
was at budgeted levels and is forecast to improve. Besides
antibody-drug conjugates, Lonza said it expects increasing
demand for it to produce ingredients for cell and viral
The group's net profit in the first half was 140 million
Swiss francs ($155.14 million), compared with 41 million francs
in the same period last year and a consensus forecast of 127
million francs in a Reuters poll of analysts..
By 1058 GMT Lonza shares had climbed by 5.8 percent, the
biggest daily gain since September, outperforming a European
healthcare sector index that was up by about 0.3
One Zurich-based trader said investors were attracted by the
group's better-than-expected profitability after disappointing
earnings in the past year had led many to cut their holdings in
The results have also raised hopes that the company could
exceed its current full-year guidance, one broker said.
The group reiterated its target for an increase of about 10
percent in core earnings (EBIT) for 2014, with revenue growth of
about 5 percent. The company also said that capital expenditure
would remain well below 300 million francs.
Lonza said the future order book in its mammalian cell
culture business, which produces ingredients for some medicines,
had improved substantially in the first half of the year.
Vontobel analyst Carla Baenziger said much of the demand is
likely to come from Singapore and could help to lift full-year
results above the company's current guidance.
"We believe that thanks to the situation in Singapore pharma
and biotech should even be stronger in the second half of the
year and hence believe that management is very cautious with its
guidance," Baenziger, who has a "buy" rating on the stock, wrote
in a note.
Overall group sales rose 7 percent in the first half to 1.8
billion francs, in line with analyst expectations. Core earnings
were up 13.1 percent at 241 million francs, against an average
analysts' forecast of 232 million francs.
($1 = 0.9024 Swiss Francs)
(Additional reporting by Rupert Pretterklieber; Editing by
Pravin Char and David Goodman)