UBS downgrades Swiss Lonza’s share rating to ‘Neutral’ from ‘Buy’

27 January 2012 11:41  [Source: ICIS news]

LONDON (ICIS)--UBS has downgraded Lonza’s share rating to “Neutral” from “Buy” on lower-than-expected 2011 results, the Swiss investment bank said on Friday.

UBS said it cut the Swiss biopharmaceutical firm’s rating because the company reported very low profitability for its life sciences ingredients and microbial control segments, which it believes will continue into 2012.

“We believe the major disappointment came from the life science ingredients business, which is facing increasing competition, in particular from the Asiatic niacin competition,” the bank said.

“We understand that the recent increased competition in the niacin market has created significant pressure on both pricing and margins, and management does not expect a quick recovery.”

The bank said Lonza could not manage to pass on the latest raw material price increases to customers.

“By management’s own admission, they have to adapt their offer to the new market, and continuous margin pressure is expected,” it added.

The bank lowered the company’s target share price to Swiss franc (Swfr) 55 ($59.8, €45.5) from Swfr80, it said.

On Wednesday, Lonza reported a 45.8% year-on-year fall in its net income to Swfr154m for full-year 2011, weighed by the strength of the Swiss franc and higher raw material prices.

The company initiated a change of leadership, replacing long-standing CEO Stefan Borgas, following the announcement of its 2011 financial results.

At 10:47 London time on Friday, Lonza’s shares on the London Stock Exchange were trading at Swfr51.55 – up by 0.19% from the previous close.

($1 = Swfr0.92, €1 = Swfr1.21)

Read Paul Hodges’ Chemicals and the Economy blog


By: Leigh Stringer
+44 208 652 3214



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