M&A

29 October, 2009

UPDATE 1-Lonza cuts full-year target, sees more volatility

* Now sees operating profit falling to 360-380 mln Sfr

* Drops mid-term target through 2013

(Adds details)

ZURICH, Oct 29 (Reuters) - Lonza (LONN.VX) cut its full year target and now expects its operating profit to fall to 360-380 million Swiss francs ($353-$373 million) in 2009 due to postponing and cancellation of orders.

The Swiss drugs industry supplier also dropped its mid-term target of average operating profit growth in the mid to high teens until 2013 and will announce a new outlook after the fourth quarter, a spokesman said on Thursday.

"This environment of high volatility is expected to continue for the next few years," it said in a statement.

Lonza has moved away from specialty chemicals to focus on higher-margin pharmaceutical ingredients, helping shield it from low cost competition from Asia which affects companies like Clariant (CLN.VX).

Last week it pulled a $460 million offer to acquire Canada's Patheon (PTI.TO), citing the cost and the opposition of majority shareholder JLL, and may now set its sights on other similar buys. [ID:nLK694742]

It had previously warned operating profit would not increase in 2009 after first half results were hit by customer destocking.

It now trades at about 14 times forecast 2010 earnings, a premium over large drugmakers like Novartis (NOVN.VX) and Roche (ROG.VX) and roughly in line with chemicals stocks like BASF (BASF.DE). (Reporting by Sam Cage)

Source: http://www.reuters.com