Release Date: January 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lonza Group Ltd (LZAGF, Financial) reported strong revenue growth in its CDMO business, with growth in the low 10s, adjusted for the extraordinary high base in 2023.
- The company achieved an EBITDA margin of 29%, yielding CHF1.9 billion, with significant margin expansion in the core CDMO business.
- Lonza Group Ltd (LZAGF) executed an ambitious organic growth investment program, with CapEx around 22% of revenues, supporting future growth.
- Strong cash flow of CHF470 million was reported, essential for the company's growth trajectory.
- The company expects a stronger year in 2025, with CDMO business revenues approaching 20% growth and core EBITDA margin approaching 30%.
Negative Points
- The CHI business experienced a decline, with revenues and EBITDA margin expected to grow only in low to mid single digits.
- The capsules and health ingredients business faced market headwinds, resulting in a 6.6% decline in constant currency.
- The company faced a high base effect from 2023 due to COVID-related revenues, impacting overall growth figures.
- There was a slight decline in overall margins due to the high base in 2023 and market headwinds in the CHI business.
- The corporate segment experienced increased core EBITDA loss due to various factors, including lower hedging gains and pension adjustments.
Q & A Highlights
Q: How do you view the operational performance and margin for small molecules in 2025, considering capacity additions?
A: Wolfgang Wienand, CEO, stated that the small molecules business performed strongly in 2024 and is expected to continue this trend in 2025. It will contribute to both top-line growth and margin expansion, although specific divisional details won't be shared.
Q: Can you provide more color on the seasonality and contribution from mammalian ramp-up in H1 2025?
A: Wolfgang Wienand, CEO, mentioned that H2 is expected to be stronger than H1 in terms of both top line and core EBITDA. This is due to important assets in biologics and small molecules coming on stream in H1, with stronger contributions expected in H2.
Q: With big pharma cutting down on early-stage projects, how does Lonza view its exposure to preclinical and early-phase projects?
A: Wolfgang Wienand, CEO, noted that despite some big pharma companies reducing early-stage projects, Lonza sees a record high in the number of molecules in development. Increased biotech funding and strong incoming requests for proposals indicate no decline in opportunities for Lonza.
Q: Can you explain the increase in core EBITDA loss in the corporate segment?
A: Philippe Deecke, CFO, explained that the corporate segment is volatile, with fluctuations due to factors like hedging, pension adjustments, and power agreements. The increase is not indicative of a new base but rather reflects these variable elements.
Q: What is the size and interest level for the Vacaville facility contracts?
A: Wolfgang Wienand, CEO, shared that there is strong interest in the Vacaville facility, with regular customer visits and ongoing negotiations. The goal is to replace outgoing Roche business over the next few years, maintaining revenue levels while expanding margins.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
