Lonza plagued by supply problems after China plant explosion

Lonza's businesses have been affected by supply chain issues in China that its new CEO is working to overcome. (Lonza)

An explosion at a chemical plant in China that killed 62 people not only exposed weaknesses in China’s safety oversight but it also exposed weaknesses in the global ingredient supply chain. The disruption from the blast has exacerbated shortages for Swiss pharma and chemical supplier Lonza.

In a “qualitative look” at its first-quarter results, which included almost no financial figures, Lonza’s new CEO Marc Funk said the company’s CDMO business is rolling along nicely, powered by biologics projects. The disruption from explosion in China, however, contributed to “headwinds” for the company’s specialty ingredient business.

Funk said all of its ingredient businesses face “raw material shortages and supply-chain disruptions” from China’s efforts to clean up chemical pollution in the country as well as by “a major chemical plant explosion in China.” He said the company is taking additional “cost containment” steps to overcome those headwinds.

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RELATED: 10 killed in explosion at Chinese pharma plant

Funk, who had been running the pharma and biotech business, was named Lonza Group CEO in January after Richard Ridinger unexpectedly retired.

Despite the supply chain disruptions, Funk said Lonza's pharmaceutical businesses will help the company deliver solid results for the year. It maintained an earlier 2019 financial projection for mid- to high-single-digit sales growth and a high core EBITDA margin level. In the midterm, it expects sales of CHF 7.1 billion ($7 billion).

The explosion Funk referred to occurred March 21 in Yancheng, China, Reuters reports, highlighting one of the challenges China has with its massive and sprawling chemical and ingredient supply industry. Punctuating those issues was a fire Monday at Qilu Tianhe Huishi Pharmaceutical Co. facility in eastern Shandong province that left 10 workers dead from smoke inhalation, the state news agency Xinhua reported. A dozen rescue workers also were hurt in the fire, which was ignited by sparks from a pipe being welded under the plant.  

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