Lonza closes three sites as it moves small molecules production to China

Swiss specialist chemicals and biotech group Lonza is to close its production sites in Wokingham, UK; Conshohocken (Riverside), Pennsylvania, US; and Shawinigan, Quebec, Canada in a strategic move to produce small molecules in Asia.

The closure of the sites will take place in 2010 and 175 employees will lose their jobs. The action will cost Lonza approximately CHF140m (US$138m; Euro 95m; £85m). Seventy per cent of this is non-cash and 30% will include restructuring costs and severance packages for staff.

Chief finance officer Toraf Haag said Lonza would achieve a cost advantage of 10-20% by transferring small molecules production to its new plant at Nansha, China.

Lonza hopes the restructure will save CHF60-80m over the next two years. Haag said the company is on track to achieve an EBIT of CHF360-380m in 2009. Full results will be reported on 28 January.

He added that the closures would represent the majority of Lonza's restructuring costs for 2010.

The Riverside plant will cease activities in Q4 and all projects will be transferred to other Lonza operations.

The pilot scale plant for vitamin K3 activities in Shawinigan will end in March after the completion of full technical development of this technology. Lonza will evaluate further opportunities to provide K3 from another site in the future.

As part of the modernisation and streamlining initiative within the Lonza Bioscience supply chain, the offices and warehouse in Wokingham will be closed and the activities transferred to Verviers, Belgium.

Lonza chief executive Stefan Borgas said the re-engineering project was a "key element in our endeavour to bring Lonza back to a sustainable growth".

"We will continue to drive this project throughout the year and we will see many initiatives rising from it," he added.