2023 was a year of challenge and change, both in the world and at Lonza. We have seen high interest rates, persistent inflation, supply chain disruptions, wars in Ukraine and the Middle East, growing geopolitical tensions, and the continuing challenges of climate change. However, corporate investments remained solid, harnessing innovation and technology to address the challenges of the future.
Over the course of 2023, Lonza continued to pursue its ambitious growth trajectory in a dynamic macroeconomic environment. Our Capital Markets Day in October provided us with a timely opportunity to reset expectations, set out our strategy, and confirm our future growth plans.
As we look to the future, we see high potential in the healthcare industry, with strong market growth, a robust pipeline of new drugs, the continuous search for new modalities, and new administration methods. Within our business, we have delivered on existing customer commitments and signed a series of new landmark contracts. We have also maintained our sustained organic growth levels – supported by bolt-on acquisitions – to set the stage for long-term success.
Our business is built on attractive and robust fundamentals, and I am confident that we are well-placed to drive success in 2024 and the years to come for our customers and shareholders.
In 2023, Lonza reported sales of CHF 6.7 billion, sales growth of 7.9% AER (10.9% CER) and CHF 2 billion CORE EBITDA, resulting in a margin of 29.8%. These solid financial results were driven by the Biologics and Small Molecules divisions, with a softer performance in Cell & Gene and Capsules & Health Ingredients.
The year brought several opportunities for direct engagement with our investor community. In addition to our Half-Year and Full-Year updates, we conducted quarterly qualitative financial updates to increase shareholders' visibility throughout the financial year.
In May, we hosted the first in-person Lonza Annual General Meeting (AGM) since before the pandemic, close to our global headquarters in Basel (CH). Our Capital Markets Day in October, which we hosted at our Visp (CH) site, provided a further opportunity for connection with our investors. Here, we shared a detailed update on our strategic priorities, provided an updated Mid-Term Guidance for 2024 to 2028, and guided the market on our post-pandemic business outlook.
Our investment strategy focuses on areas of sustained customer demand and market growth to capture opportunities with attractive margins and decreased risk. In 2023, CAPEX was 25% of sales as we invested to facilitate growth and maintenance projects that will strengthen our long-term offering.
In January 2023, we celebrated the groundbreaking of our large-scale commercial drug product (DP) facility in Stein (CH). In February, we completed an expansion of our conjugation facility in Visp (CH), adding development and manufacturing capacity for our bioconjugates business. In March, we completed our cGMP DP manufacturing line in Visp (CH), which can now support customers with clinical and commercial manufacturing capabilities. Then, in June, we announced a strategic collaboration with Vertex to co-invest in a dedicated facility for manufacturing Vertex’s Type 1 Diabetes (T1D) cell therapy candidates at our Portsmouth (US) site, for which construction is already underway.
At the end of 2023, we were executing more than 20 large ongoing growth projects across our network, each representing investments of CHF 50 million or more. Our investment portfolio is expected to return at least twice the cost of capital once complete. Our governance structure ensures that each project is completed to precise budgets and timelines, as well as meeting strict IRR and ROIC1 thresholds. This disciplined approach brings us confidence in our future value-creation potential.
Our colleagues are the heart of our business and our global people strategy is designed to enable our colleagues to come, stay and grow at Lonza.
In 2023, more than 2,000 new colleagues joined Lonza. In joining our colleague community, this strong and highly capable group brought new skills and expertise to create sustainable value for our business and stakeholders. We improved the onboarding experience in 2023 with the launch of a digital onboarding tool to support all new employees globally.
Talent retention remained a key focus in 2023, and we offered expanded opportunities to support internal career development, personal growth and professional learning. As a result, we increased the percentage of positions filled with internal candidates in 2023, supporting business continuity. We also achieved a year-on-year decrease in voluntary turnover, trending in line with the industry standard.
Sustainable value creation is an ethical, social and commercial imperative for our business and supports us in fulfilling our purpose of enabling a healthier world. Our leadership team and global colleague community have a shared commitment to corporate social responsibility.
We marked several sustainability milestones in 2023, including the development of a comprehensive climate plan to reduce Scope 1 and 2 emissions2 by more than 40% by the end of 2030. We submitted this plan to the Science Based Targets initiative (SBTi), alongside a letter of commitment.
We also signed two major Power Purchase Agreements (PPAs) to support our ambition to source all electricity from renewable sources by 2025, where available. Collectively, the agreements will decarbonize Lonza’s Scope 2 electricity emissions across Switzerland, the European Union, and China. Together, these agreements underline our long-term commitment to sustainable business practice.
The Board of Directors continued to work closely with the Executive Committee (EC) throughout 2023 to set and guide the overarching strategic direction of the group business. The EC oversaw strategy implementation and supported the activities of divisions, functions and the global business service organization. Both the EC and Board have taken steps during 2023 to ensure the company strategy remains focused on serving customer needs while creating long-term value for our business and our stakeholders.
It has been my privilege to lead the group business in 2023 as both Chairman of the Board of Directors and CEO ad interim. After seven years as a Board member and six years as Chairman, I have decided not to stand for re-election at the AGM in May 2024. I am very pleased that Jean-Marc Huët is nominated to succeed me as Chairman, and I share the Board’s confidence in his capability to support Lonza’s continued success in a constantly changing market environment.
Following a robust hiring process to identify a permanent successor to the CEO role, the Board is delighted to have appointed Wolfgang Wienand as CEO. A seasoned leader with a strong and established track record of success in the CDMO industry, Wolfgang Wienand will bring a wealth of knowledge and experience to Lonza, complemented by his deep scientific and strategic expertise. To ensure continuity and a seamless transition, I will continue to serve as CEO ad interim until Wolfgang commences his tenure.
In the meantime, I extend my thanks to our colleagues across the global network for their hard work and dedication. I continue to be inspired by their energy, creativity and commitment to enable a healthier world, and I look forward to seeing what our people will achieve together in the coming years.
Chairman of the Board of Directors and CEO ad interim
Internal Rates of Return (IRR) and Return on Invested Capital (ROIC).
Scope 1 includes direct GHG emissions from sources owned or controlled by Lonza.
Scope 2 encompasses GHG emissions from purchased electricity and steam.
