Lonza profit falls on cancellations, restructuring

Swiss drugs industry supplier Lonza said 2010 profit should meet last year's level even though its business will remain unstable and customers are increasingly cost conscious. Lonza, hit by drugmakers cutting inventories, posted a 62 per cent drop in full-year net profit to 159m Swiss francs ($152m) on Thursday, hit by restructuring costs and order cancellations. Profit was forecast at 150m francs. "It looks like the worst may be over for the company," Wegelin analysts said in a note. "Patient investors may use the current share price as a welcome entry chance." The company has moved away from specialty chemicals to focus on higher-margin pharmaceutical ingredients, aiming to protect itself against low-cost competition that has hit companies like Clariant. But business was still unstable and Lonza expected to cut capital expenditure from an original target of 500m francs to less than 400m in 2010. It trades at about 12 times forecast 2011 earnings, in line with the most richly valued big drugmaker Roche and a premium to others like Novartis as well as chemical companies like Clariant. Lonza proposed a dividend of 1.75 francs, ahead of a forecast for 1.61 francs in a Reuters poll.