Stocks

New Lonza CEO gets nasty surprise as China woes hit supply

Reuters

ZURICH, April 18 () - Lonza's freshly minted Chief Executive Marc Funk stuck to his full-year targets on Thursday despite unanticipated supply problems after a deadly Chinese explosion that required new cost-control measures at the Swiss drug ingredients maker.

Funk, a Lonza biotech boss who took over when ex-CEO Richard Ridinger unexpectedly resigned in January, still expects mid-to-high-single digit sales growth and a "sustained" core operating profit margin in 2019. The pharmaceuticals and nutrition unit had positive momentum in the first quarter, Lonza said.

Still, Lonza's specialty ingredients division, whose products include anti-microbials for paints, saw Q1 sales stagnate. The company blamed raw material shortages and supply-chain disruptions from the March 21 chemical plant explosion in Yancheng, China, that killed 62 people, as well as a Chinese anti-pollution campaign that has crimped supplies.

Baader Helvea analysts said specialty ingredients' performance trailed expectations, but suggested investors focus on the pharmaceuticals unit's growth on which Lonza has staked its future, including by building a new Swiss factory whose 2020 capacity is 100 percent booked.

"This, together with a strong development in the consumer

health business and further portfolio optimisation measures, are the most important news for Lonza's investment case," said Baader Helvea's Laura Lopez Pineda, who has a "buy" rating.

Its shares were indicated marginally lower in pre-market activity.


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