ANNUAL REPORT 2008 ANNUAL REPORT 2008 Constant process optimization In order to transform life science into new possibilities for customers, constant process optimization is per- formed at Lonza sites around the world and across the sectors. Joanne Recchia, Associate Director of Analyti- cal Development (front cover), Rajeev Vyas, Manager Methods Transfer and Validation – Quality Control (back cover left), Melva Allen, Payroll Manager (back cover, right), work at Lonza’s Microbial Biopharmaceu- ticals site in Hopkinton, MA (USA). They share ideas about a new process optimization project aimed at improving overall process yield. WorldReginfo - c4940b27-f880-4666-8316-b998a1c6b333 ANNual report AGENDA AND CONTACTS 125 Key Facts and Figures Legal domicile Forward-looking Statements Basel, Switzerland Forward-looking statements contained herein are Full-year results in a snapshot Sales progression Global headquarters qualified in their entirety as there are certain fac- Lonza Group Ltd tors that could cause results to differ materially million CHF Muenchensteinerstrasse 38 from those anticipated. Investors are cautioned Lonza’s mix of life-science products and services contributed CH-4002 Basel, Switzerland that all forward-looking statements involve risks 3500 to a balanced performance across its businesses. Tel +41 61 316 81 11 and uncertainty. In addition to those discussed 3000 Fax +41 61 316 91 11 above, among the factors that could cause actual www.lonza.com results to differ materially are the following: the Sales for the full year grew by 2.3 % to CHF 2 937 million 2500 timing and strength of new product offerings; (+10.4 % in local currencies, based on continuing operations 1). 2000 pricing strategies of competitors; the company’s Anticipated Key Reporting Dates ability to continue to receive adequate products Record EBIT of CHF 441 million 1500 from its vendors on acceptable terms, or at all, (+8 %; +12% on a comparable basis) 1000 Annual General Meeting for the and to continue to obtain sufficient financing to 2008 financial year meet its liquidity needs; and changes in the polit- 500 2 521 Net income grew by 39 % further strengthening the 2 182 2 914 2 870 2 937 8 April 2009, 10.30 am ical, social and regulatory framework in which the investment-grade balance sheet and supporting the ability 0 Congress Center Basel company operates or in economic or technologic- to generate further sustainable growth. MCH Swiss Exhibition (Basel) Ltd al trends or conditions, including currency fluctu- 2004 2005 2006 2007 2008 ations, inflation and consumer confidence, on a Half-year Report 2009 global, regional or national basis. Gearing remained stable at 76 % by year-end, despite the 22 July 2009 acquisition of amaxa and high capital expenditure. Full-year Report 2009 Contacts Approximately 80 % of Lonza’s total debt is financed on a 27 January 2010 long-term basis with fixed interest rates. For publications and further information Annual General Meeting for the please contact: EBIT and net income progression 2009 financial year 1 Excluding CHF 141 million of sales from Lonza Singapore Pte Ltd from million CHF 31 March 2010 Lonza Group Ltd 2007 figures (sold on 19 November 2007) Congress Center Basel Muenchensteinerstrasse 38 500 MCH Swiss Exhibition (Basel) Ltd CH-4002 Basel, Switzerland www.lonza.com 400 Dividend transfer to banks [email protected] As a rule, Lonza Group Ltd pays the dividend 91 419 Key figures Lonza 2007 2008 Change to its shareholders on the fourth business Investor Relations million CHF % 300 day following the Annual General Meeting. Tel +41 61 316 88 35 Fax +41 61 316 98 35 [email protected] 200 Sales 2 870 2 937 2.3 Listing and Security Information Media / Corporate Communications EBITDA 682 691 1.3 100 Stock exchange listing Tel +41 61 316 87 98 SIX Swiss Exchange Fax +41 61 316 97 98 EBIT 408 441 8.1 211 138 297 188 344 222 408 301 441 328 [email protected] 0 Stock exchange trading Profit for the period 301 419 39.2 2004 2005 2006 2007 2008 SWX Europe Share Register Cash flow before change in c/o Nimbus AG net working capital 562 530 (5.7) EBIT Common stock symbols P.O. Box Bloomberg LONN VX CH-8866 Ziegelbruecke, Switzerland Capital expenditures Net income Reuters LONZn.VX Tel +41 55 617 37 29 (net of customer financing) 533 420 (21.2) Book gain on the sale of the remaining stake Telekurs LONN Fax +41 55 617 37 28 in Polynt S.p.A. [email protected] Net debt 1 309 1 469 12.2 Security number Valor 001384101 Net debt-equity ratio 0.73 0.76 4.1 Note: 2008 net income shown with and without the book gain on the sale of the remaining stake in Polynt S.p.A. ISIN CH0013841017 Total equity 1 789 1 934 8.1 The Lonza Annual Report is printed on non- chlorine bleached, FSC-certified paper. Lonza in a nutshell Lonza is a leading supplier to the pharmaceutical, healthcare and life-science industry. Our products and services span customers’ needs from research to final product manufacture. Lonza is headquartered in Basel, Switzerland and is listed on Imprint the SIX Swiss Exchange. Production Corporate Communications, Lonza Group Ltd, Basel, Switzerland | All rights reserved | Editorial completion: March 2009 | Design: Lonza | Photography Thomas Andermatten, Brig, Switzerland | Werner Feldmann, Bodenheim, Germany | Michel Leroy, New York, NY, USA | C. Kurt Holter, Walkersville, MD, USA | SEM pictures Eye of science, o. meckes, n. ottawa, Reutlingen, Germany | Many Lonza employees have contributed other pictures | Lithography & Print Birkhäuser+GBC Ltd, Reinach, Switzerland Lonza Annual Report 2008 Lonza Annual Report 2008 WorldReginfo - c4940b27-f880-4666-8316-b998a1c6b333 Sales by division Share information 2007 2008 2008 CHF million CHF Ordinary dividend paid / declared per share 1.75 1.75 Basic earnings per share 6.33 8.81 1 196 Life Science Ingredients Diluted earnings per share 5.88 8.15 7 Exclusive Synthesis 222 Book value per share 37.61 40.47 Biopharmaceuticals Dividend payout ratio 1 % 28 25 757 Bioscience 755 Number of shares (par value CHF 1.00) 50 450 000 50 450 000 Other Share price (high / low) 137.40 / 106.20 158.30 / 83.95 Share price at year-end 137.40 97.55 Market capitalization (31 December) 6 932 4 921 1 Excluding book gain on the sale of the remaining stake in Polynt S.p.A. EBIT by division Share price development 2008 million CHF 160 140 163 Life Science Ingredients 4 5 3 Exclusive Synthesis & 19 120 2 Biopharmaceuticals 1 Bioscience 100 279 Lonza AGM 6 80 J F M A M J J A S O N D 1 Full-year 2007 results Profitability 2007 2008 2 Dividend payment % 3 First-quarter business update 4 Half-year 2008 results 5 Lonza 2008 investor event EBITDA 23.8 23.5 6 Third-quarter business update EBIT 14.2 15.0 Lonza AGM: Lonza Annual General Meeting RONOA 14.1 13.8 Lonza Annual Report 2008 WorldReginfo - c4940b27-f880-4666-8316-b998a1c6b333 WorldReginfo - c4940b27-f880-4666-8316-b998a1c6b333 LONZA ANNUAL RepORT 2008 5 LETTER TO SHAREHOLDERS 9 FINANCIAL RepORT 9 Consolidated Financial Statements 10 Consolidated Balance Sheet 11 Consolidated Income Statement 12 Consolidated Cash Flow Statement 13 Consolidated Statement of Changes in Equity 14 Notes to the Consolidated Financial Statements 79 Report of the Statutory Auditor 81 Financial Statements OF LONZA GroUP LTD 82 Balance Sheet – Holding 83 Income Statement – Holding 84 Notes to the Financial Statements – Holding 86 Proposal of the Board of Directors 87 Report of the Statutory Auditor 88 Investor Information 90 Statement of Value Added 91 Free Cash Flow 93 ReMUNERATION RepORT 94 Compensation Philosophy 95 Description of Compensation Plans 101 Compensation of the Board of Directors 103 Compensation of the Management Committee 105 Share Ownership and Options for the Board of Directors and Management Committee 107 CORPORATE GOVERNANCE 108 Group Structure and Shareholders 110 Capital Structure 112 Board of Directors 118 Management Committee 121 Compensation, Shareholdings and Loans 121 Shareholders’ Participation Rights 122 Changes of Control and Defense Measures 122 Auditors 124 Information and Key Reporting Dates 125 AgeNDA AND CONTACts The Lonza Annual Report 2008 consists of the following two parts: Activity Report and Annual Report, which includes the Financial Report, the Remuneration Report and Corporate Governance. These publications are accessible on the Internet at www.lonza.com. The Annual Report is also available in German. The English version prevails. In this report “Lonza” and “the Group” refer to the whole group of Lonza companies, “Lonza Group Ltd” refers to Lonza Holding. The Annual Report of Lonza Group Ltd follows the guidelines issued by the OECD for multinational corporations. Lonza Annual Report 2008 WorldReginfo - c4940b27-f880-4666-8316-b998a1c6b333 4 LETTER TO SHAREHOLDERS AnnUAL Report Lonza Annual Report 2008 WorldReginfo - c4940b27-f880-4666-8316-b998a1c6b333 AnnUal Report LETTER TO SHAREHOLDERS 5 Dear Shareholders, Customers, Employees and Friends of Lonza, Overview Lonza’s mix of life-science products and services contributed to a balanced perfor- mance across its businesses. Sales for the full year grew by 2.3 % to CHF 2 937 million (+10.4 % in local currencies, based on continuing operations 1). Cost and efficiency improvements achieved through operational excellence programs counteracted most of the significant negative currency effects and the raw material and customer financing headwinds. EBIT grew by 12 % on a com- parable basis to a record CHF 441 million. Along with a low underlying tax rate, the book gain recorded on the sale of the remaining stake in Polynt S.p.A. led to an increase in net income of 39.2 % to CHF 419 million. Gearing remained stable at 76 % by year-end, despite the acquisition of amaxa and high capital expenditure.