June 3, 2019 / 1:38 PM / 3 months ago

Lonza carves out Specialty Ingredients business, shares rise

ZURICH (Reuters) - Lonza Group will carve out its Specialty Ingredients (LSI) business and cut around 130 jobs there as it reorganizes a division that has struggled, the Swiss group said on Monday.

LSI will get independent management with increased control over operations and costs but remain fully owned by Lonza after a process set to wrap up by mid-2020, it said.

Chief Executive Marc Funk told a call with analysts it was impossible to say whether the move was the final outcome of an accelerated review of the LSI portfolio announced this year.

Lonza has already divested its water care business and moved parts of LSI’s nutrition and Capsugel consumer business to the pharma & biotech segment.

Funk gave no specific guidance on whether the carve-out was a precursor toward selling the LSI business, saying only in response to a question: “(Are there) any long-term contracts that would inhibit us to do what we ambition to do? The answer is no.”

Lonza shares rose 4.2% by 1327 GMT.

“We are convinced that investors would favor a far reaching move, but the timeline until mid-2020 is rather long. The carve-out, however, is a clear indication in this direction,” Vontobel analyst Daniel Buchta, who rates the stock “buy”, wrote in a research note.

LSI, whose products include anti-microbials for paints, saw first-quarter sales stagnate.

It has blamed raw material shortages and supply-chain disruptions from a March chemical plant explosion in China that killed 62 people, as well as a Chinese anti-pollution campaign that crimped supplies.

Reporting by Michael Shields, editing by Riham Alkousaa

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