One of the major market trends in 2020 was the significantly increased need for disinfectants, leading to a sudden, sky-rocketing demand for actives and formulated solutions in spring, following the outbreak of the COVID-19 pandemic. At the same time, personal health and well-being, as well as efficient home care, remained a key priority for consumers, who also continued to move forward towards increasingly environmentally friendly and sustainable products. Markets like vitamins and intermediates were also facing stronger demand, while the uncertainty stemming from the pandemic has deeply affected some industrial markets such as the aerospace and the electronics sectors.
Moreover, regulatory scenarios are becoming increasingly complex, with a growing need for local adaptations. Smaller companies in particular are experiencing greater challenges as they work to keep their licenses in line with more stringent regulations in their individual jurisdictions. Our leading position in Microbial Control enables us to address and meet market challenges and offer solutions, which protect our customers’ brands.
The Lonza Specialty Ingredients (LSI) segment comprises Microbial Control Solutions (MCS) and Specialty Chemical Services (SCS) offerings.
In MCS, we are a leading supplier of biocides, preservatives, complementary technologies and fully formulated, registered and safe solutions. We offer these in a wide range of consumer and industrial markets, including hygiene, as well as in wood applications and crop protection. Our regulatory expertise and extensive data packages allow us to support customers globally with solutions that are compliant with all applicable standards and, in many cases, support their “license to operate”.
Our SCS business provides solutions for composite materials and processing additives in technically demanding industries. We also offer performance intermediates and chemicals for many industrial applications, including agricultural intermediates, food and feed ingredients, cosmetics, and custom development and manufacturing for non-current good manufacturing practice (non-cGMP) products.
In July 2020, the Board of Directors decided to divest the LSI segment via a sale process, which was initiated in H2 2020. The LSI business has proven its value as a highly profitable specialty chemicals business with a leading position across a range of attractive end-markets. It has also demonstrated resilience in the challenging market conditions arising from the COVID-19 pandemic.
Lonza Specialty Ingredients
The COVID-19 pandemic has presented LSI with both an opportunity and a unique challenge, as demand for disinfectants skyrocketed with the increased global focus on good hygiene practices. The business successfully ramped up production in record time to address additional needs. Overall, the entire LSI portfolio demonstrated a sound resilience to COVID-19.
We have also been through a period of significant transformation within the business, finalizing a new organizational structure that is aligned to growth in the key markets for microbial control and specialty chemical services. Alongside these structural developments, we have completed a carve-out of LSI from Lonza. This has allowed the Board of Directors to make the decision to divest the LSI business.
As we make progress with this divestment, we are also working to accelerate our growth momentum, while also leveraging our strong regulatory expertise, our leadership in microbial control solutions and our niche growth in Specialty Chemical Services. All while maintaining good profitability in more mature businesses.
Importantly, we have worked to develop our values (performance, collaboration, passion and care) around which we will focus our organizational development and product offerings.
On 8 February 2021, we have entered into a definitive agreement with Bain Capital and Cinven to acquire Lonza’s Specialty Ingredients business and operations for an enterprise value of CHF 4.2 billion. Both Bain Capital and Cinven have strong experience in the industrials sector and an established track record of successful investments in portfolio companies. The two private equity bidders showed strong and sustained interest since the beginning of the official sale process, thereby confirming that they are the best home for the business and the right transaction partner for Lonza. Smooth transition for employees and customers is a priority for both seller and buyers. The transaction is anticipated to close in H2 2021.
With offices in 32 countries across five continents and 2,684 employees (full-time equivalent), we take care of our customers and their regional or local requirements.
In 2020, Lonza Specialty Ingredients (LSI) largely maintained business continuity through the pandemic, with some minor headwinds caused by demand fluctuations. Despite these challenges, LSI 1 delivered a solid performance, with 3.4% sales growth alongside an improved CORE EBITDA margin, reported at 20.3% 2. This was supported by sustained high demand for Microbial Control Solutions, arising from global efforts to control the COVID-19 pandemic. Over the course of 2020, the LSI business continued to show resilience across the top and bottom lines, supported by a market orientated organization and a strategic focus on efficiency.
Specialty Ingredients Business (excluding Corporate/carve-out and divestiture costs directly attributable to LSI)
Sales growth and CORE EBITDA margin at a constant exchange rate (CER)
|Million CHF||2020||2019 (Restated) 2||Change in %|
|Margin in %||19.2||16.7|
|CORE result from operating activities (EBIT)||263||201||30.8|
|Margin in %||15.7||11.7|
For both 2019 and 2020, Specialty Ingredients reported as discontinued operations includes certain corporate costs directly attributable to LSI together with carve-out/ divestiture related costs
The year 2019 was restated to reflect the classification of the Specialty Ingredients business as discontinued operations. Carve-out and divestiture costs related to Specialty Ingredients (CHF 19 million), which were previously reported in Corporate in 2019, have been reclassified to discontinued operations