Investor FAQs (Frequently Asked Questions)
Financial Targets
In addition to the key goal to grow EBIT in the mid to high teens, Lonza’s management has set a series of financial guidelines and targets:
- Sustainable tax rate of around 16%
- Net working capital to sales ratio toward 25%
- Mid-term RONOA 15%
- Gearing structurally between 50% and 80% (in 2010 at 46%)
- Long-term debt greater than 50% of total debt
- Dividend payout ratio between 27% and 40%
- Project internal rates of return (IRR) of over 20%
- Acquisitions that are EPS and EVA accretive in the second year
- Capital expenditure below CHF 400 million
Lonza’s BBB- investment rating maintained post FY 2011 results
Following Lonza’s full-year 2011 results presentation on 25. January 2012 a number of the leading Swiss banks have re-evaluated Lonza’s investment rating. Following their analysis, the banks came to the conclusion that Lonza’s BBB / BBB- rating should be maintained. At the end of 2011 the Company’s net debt amounted to CHF 2647 million, giving a net debt-equity ratio of 1.12, as a result of the acquisition of Arch Chemicals in October 2011 which was entirely debt financed. During its 2011 Results Presentation, Lonza communicated that due to the free cash flow generation of the business it was targeting a net debt-equity ratio 0.95 by the end of 2012.This focus on reducing net debt is expected to continue for the next several years.
Dividends
The policy is to pay between 27% and 40% of net profit to shareholders in the form of dividends.
Currency Exposure
Despite having a strong exposure to the US Dollar in terms of sales (50%), Lonza has an extremely good natural hedge in that a majority (45%) of costs are also in US Dollar or Dollar-denominated currencies. In addition, Lonza also has some exposure to the Swiss Franc (20% of sales, 25% of costs), and the Euro (15% of sales, 20% of costs), whereas exposure to all other currencies represent less than 5% of sales. Translation represents 2/3 and transaction represents 1/3. Hedging policy / foreign exchange management policy and process:
- focus on natural hedge
- contract hedging
- central hedging
- partial, forward hedging of net exposure
WACC
Lonza uses an average WACC of 8,5% for the group, this figure varying then division by division depending on the anticipated volatility of the business.
Pension benefits
Defined benefit pension plans Lonza sponsors pension plans set up according to the regulations of the countries in which it operates. For pension accounting purposes, these plans are considered as defined benefit plans. During 2010, actuarial valuations were performed for all significant defined benefit plans using the Projected Unit Credit Valuation Method. The principal assumptions, expressed as a weighted average for Lonza, are the result of the underlying national economic conditions of the respective countries. |
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Actuarial assumptions
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2009
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2010
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%
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Discount rate
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3.7
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2.9
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Expected return on plan assets at 1 January
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4.5
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4.5
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Future salary increases
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2.1
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2.1
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Future pension increases
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0.2
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0.2
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Assumptions regarding future mortality are based on published statistics and mortality tables. The average life expectancy of an individual retiring at age 65 is 18 for males and 21 for females.
The overall expected long-term rate of return on assets is 4.5 % (2009:4.5%). The expected long-term rate of return is based on the portfolio as a whole and not on the sum of the returns on individual asset categories. The return is based exclusively on historical returns, without adjustments.
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The funded status of the defined benefit pension plans is as follows:
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2009
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2010
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million CHF
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|
| |
|
|
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Present value of unfunded obligations
|
18
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16
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Present value of funded obligations
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1 520
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1 592
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Total present value of obligations
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1 538
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1 608
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Fair value of plan assets
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( 1 408)
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( 1 409)
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Funded status (surplus) / deficit
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130
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199
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Unrecognized actuarial gains / (losses)
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( 169)
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( 257)
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Unrecognized past service (costs) / gains
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45
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39
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Net liability/ (asset) recognized in the balance sheet
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6
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(19)
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Assets of CHF 33 million (2009:CHF 11 million) and liabilities of CHF 14 million (2009:17 million) are included in the financial statements.
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Plan assets consist of the following:
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2009
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2010
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Equity securities
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314
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290
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Bonds
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363
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404
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Property occupied by the Group
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0
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0
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Property
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108
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121
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Cash
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623
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594
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Company's own ordinary shares
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0
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0
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Total fair value of plan assets
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1 408
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1 409
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How much does Lonza spend on Research and Development (R&D)?
Research and development costs include all primary costs directly related to this function as well as internal services and imputed depreciations. These costs are incurred for:
- development of new prodcuts and services
- improvement of existing products and services
- development of new production processes
- improvement of existing production processes
- cost for patents
- purchase price for product and process know-how as far as it has not been capitalized
The research and development costs amounted to CHF 141 million (2009: CHF 145 million) and represent the full range of R&D activity. However, the consolidated income statement discloses research and development costs of only CHF 99 million (2009: CHF 103 million), because of costs absorbed in "Cost of goods sold" by R&D products and services sold.
Where are Lonza shares traded?
Lonza shares are traded at the SIX Stock Exchange in Zurich, the home market for the Swiss Market Index (SMI).
What is the stock symbol?
The stock symbol for Lonza shares is LONN.
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How many shares does Lonza have issued?
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Registered shares
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2009
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2010
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|---|
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Number of shares issued
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52 920 140
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52 920 140
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Number of shares ranking for dividend
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52 233 782
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52 477 437
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Par value per share
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CHF
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1
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1
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Net income (equity holders of the parent))
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million CHF
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162
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291
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Diluted net income
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million CHF
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162
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291
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Ratios per security
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2009
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2010
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|---|
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Weighted average number of shares
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50 773 075
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52 410 459
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Diluted weighted average number of shares
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51 142 855
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52 636 859
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Basic earnings per share
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CHF
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3.19
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5.55
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Diluted earnings per share
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CHF
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3.17
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5.53
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What is Lonza doing to protect the environment?
Lonza is committed to generating sustainable added value. This is only possible if ecological, social as well as economic objectives are met. Our highest priorities are personal safety and environmentally sound processes and products. For more information, please visit our Environment, Safety & Health section.
What is Lonza position on corporate governance?
Lonza has implemented modern corporate governance structures to ensure accountability, responsibility and transparency throughout the Group and for its shareholders. Corporate governance reporting is in compliance with the guidelines of SWX Swiss Exchange. For more information, please refer to the section relating to Corporate Governance.
Where can I obtain more information?
You can reach our Investor Relations team via email under dirk.oehlers@lonza.com
or by calling +41 (0)61 316 85 40
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