Lonza ceo quits after profits slump

26 January 2004 00:01  [Source: ICB]

A victim of appalling market conditions in custom manufacturing, Markus Gemuend will step down as chief executive officer (ceo) at Lonza after the company drastically cut its profit expectations for this year and reported a 28% slump to SF302m (€193m/$239m) in 2003 operating income.

The Swiss fine chemicals group has also decided not to sell its polymer intermediates business as planned in 2004 ‘given the cash and earnings dilutive impact of divestitures and the efforts required during this rebasing period’.

Lonza said Gemuend felt that ‘a different type of leadership’ was needed following the impact of market developments on the group’s fortunes last year. Its chairman Sergio Marchionne said it needed ‘to rebase both its operations and expectations’ in the wake of the poor results. Gemuend will remain in place until a successor is appointed.

Commentators suggest Gemuend did not restructure the company deeply enough in a market plagued with overcapacity caused by a lack of new drug approvals, customer destocking and fierce competition from Asia.

Earnings before interest and tax plunged 54% to SF139m after SF158m of non-recurring charges, including a SF100m non-cash charge for decommissioning fine chemicals assets in the US and Europe. It suffered major declines in earnings from all three major divisions.

Lonza warned that market conditions in the exclusive synthesis unit are expected to remain tough throughout 2004, although the outlook for biotechnology remains positive. Better market conditions are already being experienced in organic, fine and performance chemicals, said Lonza, although the weak dollar and high oil prices will continue to dampen the recovery. Polymer intermediates are also affected by the dollar’s decline and higher feedstock costs, although demand is expected to recover to normal levels this year.

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