Lonza predicts growth despite strong Swiss franc in 2015

By Gareth Macdonald

- Last updated on GMT

Lonza expects growth despite franc in 2015
Lonza expects growth despite franc in 2015
Lonza has predicted that revenues and profits will grow in 2015 despite the strong franc, citing pharma portfolio optimization and demand for outsourced manufacturing services.

The Swiss life sciences supplier made the prediction in a delayed business update this week, forecasting that its core EBIT will increase 5% from the CHF475m ($497m) it earned in 2014 “as a result of portfolio optimizations and further operational productivity improvements.”

Lonza said it plans to continue to realign its pharma and biotechnology business models to satisfy customers’ future needs, reduce capital intensity and reduce volatility.

A spokeswoman told us this would include "adaptations to our biologics plant [in Visp] to accommodate the needs of different customers​."

Last year Lonza's realignment process saw it close its recombinant proteins, DNA therapeutics and vaccines plant in Hopkinton, Massachusetts​ and transfer operations to its facility in Visp, Switzerland.

The transfer was part of an ongoing effort to make Visp​ more profitable in the face of increased competition and the strength of the franc against other currencies.

Strong franc

This need intensified in January this year when the Swiss National Bank (SNB) discontinued the CHF1.20 per Euro exchange rate peg​ in a move that sent the franc soaring against both the US dollar and the Euro​ and saw Lonza share price plummet temporarily.

At the time Lonza told us “The minimum exchange rate was an important measure for Visp to be competitive” ​and confirmed it would delay its 2015 forecast until the full impact became apparent.

As it turned out the franc’s surge was not all bad.

A few weeks after the SNB’s surprise move Lonza CEO Richard Ridiger told investors during a conference call​ that the strong franc would make raw materials cheaper moving forward.

He was similarly upbeat in the latest business update, commenting that: “Our first-quarter results demonstrate that we are well positioned to deliver on our 2015 targets. We’re expecting positive performance and further growth throughout the rest of the year and in the foreseeable future.

Our solid business plans in our well-defined markets and associated clear strategic direction allow us also to provide a positive mid-term outlook until 2018​.”

Ridiger predicted and sales growth in low to mid-single digits on average per year until 2018, explaining that growth will come from new technologies, further productivity improvements and Lonza’s expanded global reach.

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