Lonza Group flies to Zurich, wants to divest Capsules & Health business and confirms guidance

(Il Sole 24 Ore Radiocor) - Lonza soars on the Zurich Stock Exchange, thanks to the confirmation of guidance and the intention to sell the Capsules & Health Ingredients division, announced on Capital Markets Day. The share price of the pharmaceutical chemicals group is by far the best in the Smi index.

Lonza announced that it intends to divest its 'Capsules & Health' (Chi) division in order to concentrate on its core business, the pharmaceutical subcontracting business (Cdmo). No timeline for the sale has been given. The company will withdraw from the Chi business 'at the appropriate time' and 'in the best interests of shareholders and stakeholders', according to the press release, ahead of a meeting with the financial community to present its new 'One Lonza' strategy under the direction of CEO Wolfgang Wienand, who has been in office since July.

The Chi division, which accounted for 17% of the group's turnover in the financial year 2023, was a 'solid cash generator, but even without Chi, Lonza's cash flow will continue to grow', assured cfo Philippe Deecke in a call with journalists. At the same time, Lonza would like to become more active on the acquisition front. The Basel-based group confirmed its forecast for the full year 2024. Sales should be stable at constant currencies and the Ebitda margin should be between 27 and 29%. "We expect the weakness of the Capsules & Health ingredient market in 2024 to be offset by the strong performance of the Cdmo business," the company explained.

For 2025, sales (excluding Chi) are expected to grow by 20%, including a contribution of about half a billion francs from the acquisition of the Vacaville site. The core Ebitda margin will approach 30%. For the period after 2025, Lonza expects sales growth of around 15% and Ebitda above sales growth. The forecasts are consistent with the previous medium-term outlook for 2028, the company said. Lonza then confirmed its dividend policy. The group is committed to maintaining or increasing the dividend per share from one year to the next, with a payout rate of between 35% and 45%.

As part of its 'One Lonza' strategy, the Basel-based company also unveiled a new organisational structure. Three 'business platforms' will replace the current four divisions. The new configuration is expected to be completed in the second quarter of 2025. Lonza's intention to exit the capsules and health ingredients business is not a surprise, as many investors had wondered whether this division would still be critical in the future, Jefferies analysts write in a note. The decision for some investors highlights the potential positive effect of focusing on the core organic business. For others, the move could increase volatility and reduce free cash flow generation. According to Jefferies, reinvestment priorities will be essential, especially as Lonza aims for a more balanced organic and inorganic growth strategy.