2022 was another year of strong performance for Lonza with CHF 6.2 billion sales (15.0% AER1; 15.1% CER2 sales growth) and CHF 2.0 billion CORE EBITDA, resulting in a margin of 32.1%. The sales growth was supported by strong momentum in the underlying business and a COVID-related sales peak which enhanced both sales and margin.
CORE EBITDA grew 19.8%, leading to a year-on-year margin improvement of 1.3ppts. This increase was driven by a combination of growth projects ramping-up and productivity improvements in the base business. However, the strong productivity and base profitability were offset by the residual impact of inflation. Our business model and proactive approach allows us to actively and effectively manage the impact of inflation through price increases in our product business and inflation clauses in our CDMO contracts. We are also working on procurement and supply chain initiatives to manage the rising costs of raw materials.
Throughout 2022, we continued our accelerated investment program to support future growth. For the Full Year, total capital expenditures (CAPEX) reached CHF 1.9 billion or 30% of sales, from which around 85% was deployed for growth projects. Our growth projects carry an attractive financial return profile and larger projects are de-risked by customer commitments, long-term contracts and strong pipeline.
Our return on invested capital (ROIC) remains strong at 11.4% (0.7% ppts increase vs prior year). This was driven by CORE EBITDA growth and partially offset by a 5ppts increase in our effective tax rate, which now stands at 15.9% - around the lower end of our guided range (16 to 18%).
In 2022, we delivered a negative free cash flow (FCF) before acquisitions of CHF 465 million, reflecting our strategy of high CAPEX investments but also a temporary increase in inventory to maintain supply continuity. Underlying cash generation remains solid, with strong 18% FCF conversion before growth CAPEX.
We intend to initiate the return of excess capital to shareholders through a share buyback of up to CHF 2 billion, based on our strong balance sheet and positive outlook. The share buyback will not impact our capability to invest, and we remain committed to maintaining our strong investment grade rating. We expect the buyback to commence in H1 2023 and be completed in H1 2025.
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In 2022, we delivered a solid financial performance in line with our guidance, despite a challenging macroeconomic environment characterized by supply chain challenges, and rising inflation and interest rates. Our net debt leverage of +/-0, enables us to fully maintain our investment and financing flexibility.
CAPEX reached 30% of sales in 2022 as we continued to invest in organic growth opportunities to secure our long-term success. We maintained a strong investment focus on Biologics, while ensuring a balance by providing funding to growth projects across all divisions. Our investment criteria remained unchanged, with an IRR threshold of between 15 and 20% and a ROIC at peak of 30% or more.
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Lonza provides the following Outlook for Full-Year 2023, assuming no unexpected adverse events:
Lonza confirms its Mid-Term Guidance 2024:
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Lonza continuing operations, excluding the Water Care business classified as discontinued operations
Lonza continuing operations excluding the Specialty Ingredients business, that was sold on 1 July 2021 and therefore reported as discontinued operations in 2021
CORE results for the Full-Year 2021 were restated to reflect the changes from the revised Alternative Performance Measures policy that was introduced on 1 January 2022
“Net debt”, “Net debt / CORE EBITDA” reflect total group including discontinued operations from 2018 to 2020 and continuing operations (excluding Lonza Specialty Ingredients business) from 2021 onwards
Lonza including Water Care business
| million CHF | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 1 | 2019 2 | 2020 2,3 | 2021 2 | 2022 |
|---|---|---|---|---|---|---|---|---|---|---|
| Sales | 3,584 | 3,640 | 3,803 | 4,132 | 4,548 | 5,542 | 4,207 | 4,508 | 5,409 | 6,223 |
| CORE EBITDA | 711 | 743 | 793 | 918 | 1,196 | 1,511 | 1,334 | 1,379 | 1,665 | 1,995 |
| Margin in % | 19.8 | 20.4 | 20.9 | 22.2 | 26.5 | 27.3 | 31.7 | 30.6 | 30.8 | 32.1 |
| EBITDA | 647 | 737 | 780 | 848 | 1,084 | 1,429 | 1,264 | 1,378 | 1,365 | 2,139 |
| Margin in % | 18.1 | 20.2 | 20.5 | 20.5 | 23.8 | 25.8 | 30.0 | 30.6 | 25.2 | 34.4 |
| Result from operating activities (EBIT) | 253 | 423 | 428 | 486 | 673 | 842 | 825 | 901 | 851 | 1,541 |
| Margin in % | 7.1 | 11.6 | 11.3 | 11.8 | 14.8 | 15.2 | 19.6 | 20.0 | 15.7 | 24.8 |
| ROIC in % 4 | n.a. | n.a. | n.a. | n.a. | 8.4 | 8.0 | 9.2 | 9.1 | 10.7 | 11.4 |
| CORE EPS (diluted) in CHF | 4.97 | 6.76 | 6.76 | 8.38 | 10.78 | 11.98 | 11.40 | 9.78 | 12.63 | 14.71 |
| EPS (diluted) in CHF | 1.67 | 4.54 | 5.26 | 5.69 | 9.70 | 8.77 | 8.68 | 9.77 | 9.05 | 16.34 |
| Operational free cash flow (bef. acquisitions) | 519 | 476 | 693 | 638 | 658 | 884 | 371 | 504 | 399 | (465) |
| Net debt / (net cash) 5 | 2,103 | 2,011 | 1,660 | 1,584 | 3,762 | 3,534 | 2,961 | 2,813 | (958) | (186) |
| Net debt / CORE EBITDA 5 | 2.96 | 2.70 | 2.09 | 1.73 | 2.70 | 2.28 | 1.83 | 1.66 | (0.53) | (0.1) |
| Number of employees (Full-Time Equivalent) 6 | 9,935 | 9,809 | 9,829 | 10,130 | 14,618 | 15,375 | 15,468 | 14,062 | 16,218 | 17,494 |
Lonza continuing operations, excluding the Water Care business classified as discontinued operations
Lonza continuing operations, excluding the Specialty Ingredients business classified as discontinued operations and disposed of effective 1, July 2021
CORE results for the Full-Year 2020 (CORE EBITDA, ROIC, CORE EPS) were restated to reflect the changes from the revised Alternative Performance Measures policy that was introduced on 1 January 2021
Refer to section “Alternative Performance Measures” of the Financial Report for more details on the calculation methodology
“Net debt”, “Net debt / CORE EBITDA” reflect total group including discontinued operations from 2013 to 2020 and continuing operations (excluding Lonza Specialty Ingredients business) from 2021 onwards
“Number of employees (Full-time Equivalent)” reflect total group (including discontinued operations) from 2013 to 2019 and continuing operations (excluding Lonza Specialty Ingredients business) from 2020 onwards
