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Lonza cuts 2023 outlook on slower growth, lower customer demand
Global Banking & Finance Review®
Company
By Bartosz Dabrowski
(Reuters) – Swiss contract drug manufacturer Lonza cut its full-year outlook on Friday, citing slower than expected growth, driven by lower demand for its biotech ingredients.
It noted a decrease in customer demand for nutraceutical capsules and lower biotech funding, which impacted early-stage demand.
With rising interest rates in Lonza’s key markets including the United States, European Union and Switzerland, it is increasingly difficult for biotech companies to finance new projects.
For 2023, the Basel-based company expects mid-to-high single-digit constant exchange rate (CER) sales growth and a 28%-29% core earnings before interest, taxes, depreciation, amortisation and special items (EBITDA) margin in 2023.
It previously said it expects high single-digit CER sales growth and CORE EBITDA margin of 30%-31% in the full year.
The group also lowered its mid-term EBITDA margin target for 2024 to 31%-33% from 33-35% by 2024.
“Updated mid-term aims at 17 Oct CMD are now much needed to secure belief in the structural long-term growth story,” Jefferies said in a note to investors.
Lonza shares were down 8.5% as of 0740 GMT and were at the bottom of the Swiss blue-chip index.
The company reported core EBITDA of 922 million Swiss francs ($1.06 billion) for the first half of 2023, down 6.6% from a year earlier.
Sales of 3.1 billion Swiss francs were up 5.6% at constant exchange rates.
Lonza noted its 2022 first-half sales set a high base due to COVID-related sales.
As the COVID pandemic is no longer declared a global emergency, Lonza is temporarily adjusting to lower growth rates and margins as it is no longer selling high-margin active ingredients for vaccines.
($1 = 0.8662 Swiss francs)
(Reporting by Bartosz Dabrowski in Gdansk; editing by Friederike Heine and Jason Neely)
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company's operational performance and profitability.
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage of the amount borrowed or saved.
Customer demand refers to the desire of consumers to purchase goods or services at a given price and time.
Sales growth is the increase in sales revenue over a specific period, often expressed as a percentage.
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