Lonza's poor nutrition margins persist in FY2005

By staff reporter

- Last updated on GMT

Related tags: Niacin

Swiss chemicals group Lonza has reported a 38.8 percent increase in
operating income in 2005, but margins for its nutritional products
have been eroded by high costs.

The organic fine and performance chemicals unit reported sales of CHF 892 million (€575.8 million) for the 12 month period - 5 per cent up on 2004's CHF 852 million (€549.9 million). Operating income was also up, by 2 per cent, to CHF 127 million (€81.9 million). However the division's operating margins slightly decreased from 14.6 to 14.2 per cent.

Nicotinates (vitamin B3) played a part in this, with margins "at an unsatisfactory level"​ due to high raw material and energy costs - despite an increase in market prices. In October Lonza announced that niacin and niacinamide prices would rise by between 10-12 per cent from January 1 2006. The announcement only concerned feed-grade products but it was expected that food-use vitamins would be affected in the near future.

Nonetheless niacinamide sales for food and pharmaceutical use, as well as for animal feed, were strong, and in Q3 the company's new niacinamide plant in Nansha, China, went on stream.

There has also been interesting activity relating to other nutritional products - and it seems more is to come.

In December the group acquired Nutrinova's DHA (docosahexaenoic acid) business, including all of its know-how, patents and registrations in major markets including the US, Europe, Australia and New Zealand - a move said to be the first step in the unit's strategy of expanding into niche markets.

As well as "expand[ing the company's] portfolio of nutrition businesses...with a health ingredient already well recognized by educated consumer groups"​, this could prove a shrewd investment. The omega-3 market is forecast by Frost & Sullivan to grow at rates of 8 per cent on average to 2010.

It added that the DHA business is 'synergistic' with the current L-Carnitine and niacin lines and will further strengthen the existing distribution channels worldwide.

Going forward, some new developments in the field of nutrition are expected to emerge from the pipeline: 26 projects are underway involving new intermediaries for applications in a number of industries, including food, and a further 13 projects are looking to improve existing products and develop new technologies for L-Carnitine and niacin, fatty amines, fatty esters, biocides.

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