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January 26, 2004
Volume 82, Number 4
CENEAR 82 4 p. 13
ISSN 0009-2347


Repercussions include resignation of CEO and plant closings


The company calls it "a major setback in Lonza's 2003 performance." Early last year, the firm expected an upturn in the second half of 2003 that would bolster its earnings for the year. The upturn didn't materialize, and full-year earnings dropped 33.3% to $160 million as sales fell 11.6% to $1.81 billion, based on current exchange rates. The earnings figure does not include an $80 million charge the company has taken for decommissioning fine chemicals plants in the U.S. and Europe.

In the wake of the downturn, Lonza Chief Executive Markus Gemuend is resigning, effective as soon as a successor is found. Although Gemuend has not commented, a company statement says, "Gemuend feels that, given the market developments, a different type of leadership is required to move the group forward."

The company's three major divisions all took part in the downturn. "Our custom manufacturing facilities remained at low levels of activity for most of the year," according to the company, as its exclusive synthesis unit was negatively impacted by a low rate of drug approvals, continued destocking of inventories, and overcapacity at custom manufacturers and within the pharmaceutical industry. Low demand and high prices for energy and raw materials hit Lonza's organic and fine chemicals and polymer intermediates units.

For 2004, the company says: "The combination of all the negative factors which have come to bear on the performance of Lonza for 2003 requires that the company take a cautious view of its earnings guidance. As a result, the board of directors feels comfortable setting minimum levels of expected returns." The company predicts operating income--sales minus operating expenses--of about $180 million this year, which would be down from operating income of about $240 million in 2003.


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