Lonza manages to pass inflation on to its customers

Lonza almost doubled its profit, to 498 million francs, during the first half of the 2022 financial year. The turnover of the producer of the active substance of the Moderna vaccine came close to 3 billion francs, up 17.3% over one year, communicated the Basel group of Valais origin.

In detail, the division Biologics of the company ranks first in terms of revenue (1.62 billion francs, up 26.6%). It continues to face sustained demand. The unit dealing with small molecules, on the other hand, recorded a decline in sales of 20.4% to 288 million francs. The management of the pharmaceutical subcontractor explains this poor performance by staggering large deliveries over time.

Preparing for Gas Shortages

The rise in production costs does not harm the company unduly. “We pass on the inflation of raw materials to customers, like all players in the sector,” said Philippe Deecke, director of finance, in a conference call.

In recent days, competitor Polypeptide had worried markets by saying cost increases could only be passed on with a lag. “We generally have a clause on inflation in our contracts”, specified the great treasurer of the German-speaking firm.

Another current factor of concern, energy costs also seem “under control”, thanks to supply contracts signed early in advance. Lonza has prepared for a shortage of natural gas by developing a “robust” emergency plan, added Pierre-Alain Ruffieux, general manager. “At most sites where we use natural gas, we can switch to fuel oil,” he said. The biggest challenge currently remains supply, according to the general manager.

For the rest of the operations, Lonza still expects for this year a growth in turnover between 10% and 15% and an improvement in the base margin, in line with the medium-term objectives for 2024.

Read again: The real men of “La Lonza”

500 new jobs in Valais

Lonza continued to engage heavily. It now employs 17,000 people, ie 1,000 more than a year ago. On the historic site of Visp in Valais, the Basel group has created 500 jobs. One in three Lonza employees now works in Switzerland, according to group director Pierre-Alain Ruffieux. The Visp plant is being expanded.

Most analysts gave the results a favorable reception. The figures are more or less in line with expectations, writes at Vontobel Sibylle Bischofberger. “Given its global leadership position, we see Lonza as a beneficiary of the trend towards outsourcing new drugs and vaccines,” she said.

In a very difficult context, Lonza has succeeded in increasing its turnover, notes Daniel Buchta, of the Cantonal Bank of Zurich (ZKB). The very high margin in the first half of 2021 could also almost be maintained, despite rising costs. Reported by the Bloomberg agency, a note from Jefferies, however, qualified this glowing concert, underlining the disappointing absence of an upward revision to the forecasts.

On the Swiss Stock Exchange, the company’s title opened higher, before moving into negative territory, as some investors may have decided to cash in their profits. In the middle of the afternoon, the Lonza share fell by 4.1% to 560.80 francs, the red lantern of the SMI index which gained 0.01%. A year ago, the share traded at 677 francs, galvanized by the partnership concluded with Moderna in 2020. Before the start of the pandemic, it was indeed “only” necessary to pay 417 francs to acquire one.

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