It is a challenge to summarize in a few words all that we have achieved, and the extraordinary global developments that have redefined our working lives. It would have been a feat simply to have weathered the storm of the COVID-19 pandemic, but our achievements go far above and beyond the obvious and the ordinary. I have shared a snapshot of our endeavors and achievements below.
Financial Performance
We are looking back at another successful year. Lonza (with Specialty Ingredients reported as discontinued operations) achieved CHF 4.5 billion in sales, CHF 1.4 billion in CORE EBITDA, and CHF 1.1 billion in CORE EBIT for the full-year 2020. We delivered on our guidance with 12.0% sales growth in constant currency (7.2% in reported currency).
These strong results reflect the continued positive momentum of the pharma and biotech business. Lonza’s Pharma Biotech & Nutrition (LPBN) business achieved 12.2% sales growth in constant currency (7.3% in reported currency) and a 32.1% CORE EBITDA margin. We saw a strong performance across our LPBN businesses, with Biologics remaining a primary driver of growth. We invested around 20% of sales in CAPEX in 2020 to continue to expand the asset footprint supporting our double-digit sales growth and ROIC increase for the future.
Lonza’s Specialty Ingredients (LSI) 1 business also reported a strong performance, with 3.4% sales growth alongside an improved CORE EBITDA margin, reported at 20.3% 2.
Alongside this strong performance, we have also worked to establish a stronger cash position, by successfully placing our inaugural Eurobond with a value of EUR 500 million in April. This was further supported by our issuance of a CHF 150 million straight-bond in August. During the uncertainty related to the business impact of the COVID-19 pandemic, we maintained our dialogue with investors at an unscheduled Q1 business update. Alongside this, we provided a more comprehensive overview and appraisal of our new business structure at our October Investor Update. These events were scheduled in addition to our usual reporting processes and events.
1 Specialty Ingredients Business (excluding Corporate/carve-out and divestiture costs directly attributable to LSI)
2 Sales and CORE EBITDA margin in constant exchange rate (CER)
Our Contribution through the COVID-19 Pandemic
In a year where the world experienced unprecedented levels of uncertainty, we have shown the collective confidence and resolve to meet unforeseen challenges and grasp unexpected opportunities. Our office-based employees have risen to the personal and professional challenges of home-working, while our lab and manufacturing employees have adapted to maintain operations through new professional practices, including new work shifts and social distancing measures.
Both segments of our business have worked tirelessly in the fight against the COVID-19 pandemic. Our LPBN segment has continued to develop and manufacture a large number of life-saving treatments. These enable our customers to protect their most vulnerable patients, whose needs have never been greater. Meanwhile, the LSI segment has continued to focus on delivering microbial control solutions, which have played a significant role in containing the spread of the virus.
As well as establishing our position as a provider of essential products and services, our colleagues in LPBN have also worked with customers to deliver a direct contribution to controlling the COVID-19 pandemic. Our partnership with Moderna on the COVID-19 Vaccine has placed us in the global spotlight as a company at the forefront of efforts to control the pandemic. Alongside this critical program, we are also working to support a broad range of customers developing treatments and therapies related to COVID-19, including AstraZeneca, Altimmune and Humanigen. Our colleagues in LSI have been similarly industrious in the efforts to control the spread of the virus, with 16 Lonza disinfectant ingredients securing EPA approval for hard surface use against COVID-19.
Redefining our Structure and Focus
While managing the unprecedented uncertainties in our operating environment, we have also worked to redefine and harmonize our business and structure. At a Group level, we have completed the LSI carve-out and made the decision to commence a divestment process. In February 2021, we entered into a definitive agreement with Bain Capital and Cinven to acquire the LSI business and operations for an enterprise value of CHF 4.2 billion. The transaction is anticipated to close in H2 2021. Bain Capital and Cinven have shown they understand the value of the experience and expertise of our Specialty Ingredients employees. They presented the most compelling industrial strategy and vision for the business, and are also keen to prioritize R&D and innovation, as well as to invest in existing facilities to unlock the potential of the business.
As the divestment of LSI continues to gather momentum, we have redoubled our focus on our LPBN business, which will become the future Lonza. We have worked to harmonize the business structure into four clear divisions and five functions. Financial reporting will be updated to include divisional performance in the future. Alongside this, effective 1 April 2021, three new members (Claude Dartiguelongue, Gordon Bates and Jean-Christophe Hyvert) have been appointed to Lonza’s Executive Committee to reflect the new structure of the business and ensure divisional representation. These initiatives will help us to sharpen our focus as we progress towards a new identity as a single business, operating as a preferred global partner to the healthcare industry.
Accelerating Growth in LPBN
Our ambitious strategic growth plans have also continued to maintain momentum with a number of new investments approved, and a wide range of new facilities either ramping up or coming on line. We have commenced landmark work in developing mRNA facilities in Portsmouth (USA) and Visp (CH). We have expanded our Drug Product Services activity and are ramping up a Fill and Finish site in Stein (CH). We have expanded our capsule manufacturing capacity by 10 billion capsules annually and opened a new facility for antibody-drug conjugates payload manufacturing in Visp. We expanded our highly potent drug product development and manufacturing capabilities in Tampa (USA), as well as our particle engineering and drug product capabilities in Bend (USA). We qualified the Cocoon® Platform towards clinical and commercial readiness and saw the first patient treated with an autologous CAR-T therapy, manufactured using the Cocoon® Platform. Inevitably this list only provides a snapshot of activities, and many other important developments and expansion plans are in development or on the horizon.
Nurturing our Culture and Leadership
We have further enhanced our approach to Diversity and Inclusion by establishing a Global Taskforce. The Taskforce has already taken significant steps towards creating an ambassador community across our global site network, to represent the global group and address local issues. In the coming year, this body will work to ensure that we constructively challenge ourselves to tackle emerging issues, such as unconscious bias and hidden diversity. It will help us to ensure that all differences of view, characteristic, perspective, preference and belief are fully endorsed, embraced and valued by our business.
To support and guide us as we work to embed improved Diversity and Inclusion practices, we have been pleased to welcome a new group of female leaders into the business at all levels. Claude Dartiguelongue joined as Head of Capsules & Health Ingredients in January, Caroline Barth joined as Group CHRO in May, and Antje Gerber was appointed to the Head of LSI in July. All these leaders have already proved to be huge assets to our business, by bringing fresh perspectives and helping us to look critically at our existing practices and assumptions. From a cultural perspective, we have worked to redefine a set of cultural values. These will help us guide and galvanize our employee behaviors, as well as enabling company leaders to adopt and exhibit role model behaviors.
Our Commitment to Sustainability
We remain committed to achieving industry best practice in sustainability. Our activities to deliver a sustainable business throughout 2020 are detailed in our designated Sustainability report, which forms a companion document to this 2020 Annual Report.
We recognize the importance of sustainability as an essential component of our long-term strategy. This is an ethical imperative for our own business. It is also important to ensure we are aligned with the expectations of our customers, investors and employees.
As a company with 123 years of industrial history, in recent years we have actively tackled a number of legacy issues and successfully implemented solutions. During 2020 we informed the public of nitrous oxide emissions caused by niacin production at our Visp (CH) site. While these emissions are not subject to regulatory requirements, we have invested in a catalyst, which will reduce these emissions by up to 98%. This will be operational from 2021.
Outlook
As we look towards 2021, we are cautiously optimistic about our performance. We have proved to be robust and resilient to challenges during 2020 and we remain positive that we will continue to manage any new challenges in the months to come. In this context, our 2021 Outlook anticipates low double-digit CER sales growth, driven by sustained strong momentum across our businesses. We expect this to translate into a CORE EBITDA margin improvement that aligns to our 2023 Mid-Term Guidance trajectory.
Looking to the longer term, we reconfirm our 2023 Mid-Term Guidance at double-digit sales growth per year driven by Biologics, Small Molecules and Cell & Gene Technologies. We anticipate a CORE EBITDA margin of around 33% to 35%, accompanied by double-digit ROIC driven by growth and margin expansion.
Thanks to our Colleagues and Leaders
On behalf of the business, I would like to take this chance to thank Albert Baehny and his leadership team for their tireless and fastidious work across the course of the year. In his role as CEO ad interim until November 2020, Albert has galvanized and led the business through a period of unprecedented external uncertainty alongside a time of extensive internal transformation. He has handed over a business with a simplified structural design that is ready and eager to capitalize on the opportunities of the coming year.
More widely, I would like to extend my thanks to all our stakeholders, our customers, shareholders and suppliers, who have supported the Lonza business in 2020. Most importantly, I would like to take a moment to recognize the exceptional contributions of our global community of more than 16,000 employees. Their resolve, determination and fortitude has allowed us to grow and flourish during a year of unprecedented disruption and doubt. Their consistent and concerted efforts have enabled us to achieve our financial targets for the Group, while setting a foundation to deliver long-term advantage. I am proud and grateful for their achievements and look forward to working with them on the next stage of our journey in 2021.
Pierre-Alain Ruffieux
Chief Executive Officer (CEO)
