January 26, 2011 / 6:25 AM / 9 years ago

UPDATE 2-Lonza ups dividend, sees solid 2011 growth

* Ups dividend to 2.15 Sfr vs 1.75 Sfr

* FY net profit 284 mln Sfr vs 279 mln forecast

* FY sales 2.68 bln Sfr vs 2.73 bln Sfr forecast

* CEO sees company on track to achieve 2013 growth targets

* Shares up 1.9 pct

(Adds details, CEO quotes, share indication)

By Martin de Sa’Pinto

ZURICH, Jan 26 (Reuters) - Swiss drugs industry supplier Lonza Group AG LONN.VX raised its 2010 dividend and offered a robust outlook for this year, helped by its microbial control unit.

Lonza, which has moved away from specialty chemicals to focus on higher-margin pharmaceutical ingredients, on Wednesday raised its payout to 2.15 Sfr per share from 1.75 Sfr in 2009.

It also strengthened its dividend policy, raising its payout ratio to up to 40 percent to reflect the positive outlook and expectations of strong free cash flow.

Chief Executive Stefan Borgas said the microbial control unit, which makes products used in areas including personal care, hygiene and water treatment, would continue to lead growth in 2011.

“We will again produce significant free cash flow in 2011 and financial flexibility will continue to increase, which allows us to take steps to strengthen our bioscience chain,” Lonza Chief Executive Stefan Borgas said on a conference call on Wednesday.

“We have an increasing pipeline of promising products and have signed a lot of new contracts in 2010. We can plan ahead quite a number of years now because of new, signed contracts,” Borgas added.

Shares in Lonza were 2 percent higher at 0837 GMT.

The company, which is battling currency headwinds as well as drug approval delays, met 2010 forecasts with a 79 percent rise in full-year net profit.

Net profit rose to 284 million Swiss francs ($299.9 million) and free operating cash flow soared as better capacity utilisation helped offset the negative impact of the strong Swiss franc and high raw material prices.

Borgas said the company had achieved 75 percent of its targeted savings in 2010, and expected to complete its cost-cutting programme in 2011.

Borgas said the unpredictability of regulators in approving new drugs would also continue to impact the business.

Even so, he said, the company’s earnings before interest and tax would continue to grow, driven by the biologics and bioscience divisions, while investments in research and development would deliver growth in the mid term, keeping the company on track to reach 2013 targets.

(Editing by Erica Billingham)

$1=.9469 Swiss Franc

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