Lonza reacts to market conditions

Related tags Chemical industry Lonza

Swiss intermediates and fine chemical company Lonza said today it
is to cut around 500 jobs mainly in Europe and the US as part of a
restructuring programme to reduce the negative effects of the
current economy on most of its business lines.

Swiss intermediates and fine chemical company Lonza said today it is to cut around 500 jobs mainly in Europe and the US as part of a restructuring programme to reduce the impact of the current economy.

The firm is revising its 2003 guidance as a result of the recent worsening market conditions in most of its business lines and expects to report first half operating earnings around 20 per cent lower than last year's levels.

The company-wide restructuring initiative is expected to bring significant improvement in the second half, although earnings are unlikely to exceed 2002 figures. Measures to improve efficiency and reduce overhead costs are expected to save around SF100 million over a 12 month period at acost of about SF50 million, said Lonza. Of the 500 jobs to be affected, 90 of these will be in Switzerland.

In Organic Fine Chemicals, Performance Chemicals and Polymer Intermediates, Lonza said it has been negatively impacted by higher rawmaterial prices and unfavourable exchange rates in the first four months. As aresult, it will be difficult to recover the profit shortfall during the remainder of theyear.

Lonza​ explained that the chemical custom manufacturing business (Lonza Exclusive Synthesis) has seen a continuation of the difficulties faced in 2002. Production overcapacities remain and the number of new product approvals did not increase significantly.

The mammalian cell culture fermentation business (Lonza Biologics) has beenimpacted by clinical trial failures of customer products, although Lonza also announced a long term manufacturing agreement with a large pharmaceutical company today, and construction of large scale build-out facilities in the US planned for mid 2004.

In addition to the restructuring efforts, Lonza has begun to redesign the businessmodel in custom manufacturing in order to increase its market penetration andcoverage.

The firm, which had salesof SF2.54 billion in 2002 and currently employs 6200 people worldwide, is also evaluating the expansion of its R&D offering by combining all technicalskills in the early clinical development phases (chemical, mammalian, microbial)into a global Technology Services business. This would lead to the integration of allthe cGMP production activities (chemical, mammalian, microbial) into a singleCustom Manufacturing business, designed to increase capabilities to acquirenew business and improve operating efficiencies. An additional SF50 million insavings have been targeted as a result of this consolidation, and will be fullyrealised by the end of 2004, said the group.

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