Lonza Group (LONN) H2 2023 earnings summary

Executive summary

• FY 2023 sales were CHF 6.717bn, up 10.9% CER; CORE EBITDA was CHF 1.999bn with a 29.8% margin.

• Biologics and Small Molecules growth was offset by softer Cell & Gene and Capsules & Health Ingredients results; H2 sales also benefited from the Moderna settlement.

• 2024 guidance calls for flat CER sales growth and a CORE EBITDA margin in the high 20s; 2024–2028 targets were confirmed.

Financial highlights

• FY sales were CHF 6.717bn, up 7.9% AER and 10.9% CER; CORE EBITDA was CHF 1.999bn, up 0.2%, with a 29.8% margin versus 32.1% in 2022.

• EBIT was CHF 880m, down 42.9%; net income was CHF 655m, down 46.2%; basic EPS was CHF 8.88 versus CHF 16.37 in 2022.

• Impairment and restructuring charges totaled CHF 489m; 2022 EBIT included CHF 199m of divestiture gains.

• Operational free cash flow was CHF 329m versus negative CHF 465m; CAPEX was CHF 1.682bn, or 25.0% of sales.

• FX reduced FY sales by CHF 0.2bn, with CHF 0.1bn impact in each half.

Outlook and guidance

• FY 2024 guidance is flat CER sales growth and a CORE EBITDA margin in the high 20s, reflecting underlying CDMO performance offset by the loss of ~CHF 500m of 2023 Moderna sales.

• No further Moderna business is anticipated in 2024; 2023 sales included above-average margins.

• 2024–2028 guidance: CER sales CAGR of 11–13%, CORE EBITDA margin of 32–34% and double-digit ROIC in 2028.

• CAPEX is expected at 25% of sales in 2024 and to decline to the mid-to-high teens as a percentage of sales by 2028.

• Net debt / CORE EBITDA guidance is 1.5–2.0x, with commitment to maintaining a BBB+ investment-grade rating.