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Lonza Delivers Solid 2023 Performance With 10.9% Cer Sales Growth and 29.8% Core EBITDA Margin

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Lonza has reported sales of CHF 6.7 billion, sales growth of 7.9% AER2 (10.9%1 CER), and CHF 2 billion CORE EBITDA, resulting in a margin of 29.8%. The solid financial results were driven by the Biologics and Small Molecules divisions, with a softer performance in Cell & Gene and Capsules & Health Ingredients.

Albert M. Baehny, Chairman of the Board of Directors and CEO ad interim, Lonza, commented: “In 2023, we delivered a robust financial performance. This is testament to our strong business fundamentals, and our capability to capture value in the CDMO market, alongside the skill and dedication of our colleague community. Despite macroeconomic challenges, we continue to see high levels of demand for our offerings, which are designed to meet our customers’ complex needs. We continued to pursue our ambitious growth program in areas of sustained market growth, while maintaining a healthy balance sheet, supported by solid free cash flow. These positive indicators confirm our long-term strategic direction.”

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Lonza continued to extend its broad and diverse customer portfolio in 2023, providing a strong foundation to support its continued growth momentum. Approximately 130 new CDMO customers were secured in 2023, and approximately 350 new programs were signed.

Lonza continued to execute its investment strategy to support future growth, with CAPEX at CHF 1.7 billion (25% of sales). New CAPEX projects announced in 2023 included an antibody-drug conjugate (ADC) commercial filling line at its facility in Stein (CH) for a dedicated customer, and a growth project to facilitate a significant capacity increase for Bioconjugates at its Visp (CH) site.

Lonza continued to make progress on its ESG commitments in 2023, with a comprehensive climate plan to cut Scope 1 and 2 emissions3 by more than 40% by the end of 2030. Lonza signed two major Power Purchase Agreements (PPAs) to support its ambition to source all electricity from renewable sources by 2025, where available. Collectively, the agreements will decarbonize Lonza’s Scope 2 electricity emissions across Switzerland, the European Union, and China.

In the context of current market dynamics, the business confirmed plans to optimize its global Biologics network by decommissioning its small-scale manufacturing facilities in Guangzhou (CN) and Hayward (US). The phased closures are expected to begin in Q1 2024 and complete in Q1 2025. The Biologics division will retain a commercial sales organization in China. Lonza reported related impairment losses of CHF 183 million, combined with restructuring-related costs of CHF 50 million.

Lonza provided its Outlook 2024 at flat CER sales growth and a CORE EBITDA margin in the high twenties. This reflects continued strong underlying CDMO business performance, offset by the growth headwind from around CHF 500 million in Moderna sales and related termination impacts in 2023. In 2024, Lonza plans to maintain CAPEX at 25% of sales. Lonza also confirmed its Mid-Term Guidance 2024 - 2028.

Lonza's Board of Directors is proposing a 14% dividend increase from CHF 3.50 to CHF 4.00 per share. Subject to approval at the upcoming Annual General Meeting, 50% of the dividend will be paid out of the capital contribution reserve and will therefore be free from Swiss withholding tax.

Based on its strong balance sheet and positive outlook, Lonza continues to return excess capital to shareholders through a share buyback of up to CHF 2 billion. As of 31 December 2023, approximately CHF 1 billion of shares have been acquired. It is anticipated that the full buyback program will be completed in H1 2025.

Divisional Overview

  • The Biologics division reported continued solid sales growth of 17.6%1 compared to Full-Year 2022, and a softer CORE EBITDA margin of 34.8% influenced by lower early-stage demand, new project ramp up and portfolio mix.
  • Small Molecules reported strong sales growth of 11.2%1 and a CORE EBITDA margin of 31.4%, driven by the division’s continued portfolio shift towards complex and high value small molecules, alongside strong operational execution and product mix.
  • Cell & Gene reported sales growth of 6.6%1, due to early-stage funding constraints. The division reported a CORE EBITDA margin of 9.2%, impacted by adverse market conditions, delays in clinical trials and operational challenges.
  • Capsules & Health Ingredients reported sales of -2.4%1, as a result of post-pandemic nutraceutical demand reduction and customer inventory destocking. The division reported a CORE EBITDA margin of 28.2%, with softer performance due to higher raw materials costs and exchange rates.