Richard Ridinger: Ladies and gentlemen, good morning and good afternoon. Thank you all for joining our conference call on Lonza’s Full Year Results for 2018. Today, we have two main topics to discuss, our full year 2018 results and the upcoming CEO transition. Together with me in the room are Rodolfo Savitzky, our Chief Financial Officer, who’s here to answer your financial questions as well as members of the Investor Relations and Corporate Communications team. And our special guest today is Marc Funk, our incoming CEO, who is currently the Chief Operating Officer of Pharma & Biotech.

I’d like to start by introducing him as my successor. Marc joined longtime 2009 and has been an integral part of the entire company since that time. From 2009 to 2014, when he took over as Pharma & Biotech COO, he served as Lonza’s Group General Counsel and Board Secretary. You will be hearing from and about Marc, shortly, but let’s get started with our agenda today. First, I’ll take a look at our overall business and our segment specific highlights.

Rodolfo will then present the financial results. Marc will focus on the future and cover our outlook for 2019. Finally, I’ll wrap up with a few personal comments and then move on to the Q&A session. So as you read in today’s news release on our 2018 results, we’ve once again had a great-year, especially for our businesses along the Healthcare Continuum. Today is my seventh full year results, and I’m pleased to say that each consecutive one has been better than the last.

This year we delivered sales of CHF 5.5 billion at a record level of profitability. Let’s dig into some of the other highlights now on Slide 4. Just mentioned, we delivered a remarkable 9% organic sales growth with 27.3% CORE EBITDA margin, a 100 basis points improvement during the year. All our numbers, by the way, are reported for continuing operations excluding Water Care. Pharma & Biotech contributed significantly to these excellent results with 14% sales growth and margins up 260 basis points.

The Consumer Health division also performed strongly with positive momentum in 2018. I’ll talk about Capsugel in a moment, but I first want to point out that by keeping sharp focus on executing our Healthcare Continuum strategy, we have become more resilient and independent from the cyclical parts of our business. Positive one by the way, and it was many years ago. We are much less exposed to those volatile trends than in the past as you can see from our strong results overall. However, we have a completely immune to those influences, so the challenging environment for cyclical parts of the portfolio did have a negative impact on the business.

We certainly are continuing to implement countermeasures to improve the performance. With the announced divestment of Water Care plan for later in this quarter one, we have dealt with a seasonality fluctuating part of our portfolio. And now we are dealing with a cyclical part with robust improvement and risk mitigation measures underway. The next slide demonstrates the fact that our major investments and divestments are progressing as expected. Some of the highlights of 2018 you see here include facility openings, plant expansions, technology advances and strategic growth initiatives.

One personal highlight for me was our Capital Markets Day that we clearly outlined our continued growth trajectory and ambitions, and we had a chance to meet many of you in person. Slide 6 shows you a few examples of the successful integration of innovative Capsugel product into our overall portfolio. We have introduced new offerings to the market such as naturally color capsules or clean-label vegan and vegetarian capsules. Throughout the first full year with Capsugel as a part of our Lonza family, we have benefited from its performance and synergies. It has not only brought growth, but profitable growth.

I am pleased to say that we swiftly integrated all operations and functions and we have found that the company cultures are closely aligned. We are definitely delivering our strategy to grow sustainably along the Healthcare Continuum. Capsugel added to this organic growth in the businesses where it was integrated specifically in Pharma & Biotech and in Consumer Health with its specialty ingredient. I think you will agree that not many such large informative acquisitions are so clearly and quickly accretive for shareholders. I’m now going to hand the microphone over to Rodolfo, our CFO to give us some more details about the 2018 financial highlights.

Rodolfo?

Rodolfo Savitzky: Thanks, Richard. Welcome also from my side, ladies and gentlemen. I’ll talk on Slide 8. First a few notes, all the Lonza numbers presented here exclude Water Care, as that will be our business composition going forward. From 2017 numbers are also pro-forma, which means they include Capsugel from January 1, 2017, for comparison purposes.

This approach allow us to calculate our organic growth, which is Lonza’s focus. I think you will agree that our 9% sales and 12% CORE EBITDA organic growth figures underscore our ability to deliver on our strategy. We had an excellent CORE EBITDA margin of 27.3%, so again, we delivered on our commitment to achieve our 100 basis points margin improvement on a reported basis. We achieved this margin improvement for Lonza both with and without Water Care. Of course, the Water Care divestment is margin accretive by 180 basis points.

CORE RONOA is at 31%, and is another proof of Lonza’s positive returns on its organic investments. ROIC remained at 8% as a result of a more normalized tax rate in 2018. Let’s take a look now at the next slide to see how our segments performed. The key Pharma & Biotech figures are CHF 3.1 billion sales for 2018, which is an outstanding 14% organic sales growth. CORE EBITDA amounted to CHF 1 billion, a pro-forma increase of 23.6% versus prior year.

And that was with the 32.8% CORE EBITDA margin, an improvement of 260 basis points on a like-for-like basis. That figure is clearly above our goal to reach a 30% plus margin for this segment. As you can see in the graph, this segment has continuously improved CORE EBITDA margin, leveraging the existing asset base and benefiting from our commercial and operational excellence initiatives. The drivers here are the biologics businesses, in particular, but also the combined Lonza Capsugel small-molecule offerings. Now as Richard already explained, Specialty Ingredients faced some headwinds in 2018 for its cyclically exposed businesses, but also in some commodities such as vitamin B3, putting pressure on margins.

However, despite the negative sale development in some of our cyclical businesses like vitamin B3 and good protection, the Specialty Ingredients segment grew by 3.4%. The key drivers of this growth included nutritional offerings, our personal institutional hygiene solutions in Consumer Health and our specialty businesses in consumer and resources protection. Overall, the Specialty Ingredients segment has also continuously improved its CORE EBITDA margin over the years. While 2017 includes the positive impact of Capsugel, it also reflects a record high margin for some of the cyclical businesses like vitamin B3 or marine antifouling, which distorts the trend. On Slide 10, you see more numbers for Lonza including discontinued operations, as the Water Care divestiture will only close in Q1 of this year.

So we have continued to make further progress on deleveraging and on a clear path to achieve a net debt to CORE EBITDA level below 2% by the end of 2019 and return to the levels of 2015. The proceeds of the Water Care divestment will be used partly for that deleveraging as well as investing in growth. I’m sure you’ve noted that two weeks ago, we announced the initiation of a public credit rating with a Standard & Poor’s. The S&P rating provided Lonza with a BBB+ and stable outlook, which confirms our attractive financial profile. We are committed to maintaining an investment grade rating in order to support our financing strategy.

So from the financial side, it is a positive story for the overall company. And with that overview, I’ll hand back over to Richard to provide further insights into the businesses.

Richard Ridinger: Thanks, Rodolfo. We don’t need to do another deep dive into the Pharma & Biotech numbers. But further details are available on Slide 12.

Let me just point out that the segment reported pro-forma double-digit sales growth and a 260 basis points margin improvement. And that result represents a significant performance improvement for three consecutive years now. And by the way, another responsibility of the incoming CEO. As we discussed at Lonza’s Capital Market Day in September, the team achieved those results while investing in technology to advances, demand-driven capacity expansions and targeted R&D and innovation for continued growth in the future, especially, but not only, in Biologics. Next couple of slides cover the successes of the Pharma & Biotech businesses.

On Slide 13, it’s clear how well the Biologics business has performed, both in Clinical Development and Manufacturing and in Commercial Manufacturing. In 2018, Lonza worked on 305 clinical and 25 commercial large molecule programs. And we see continued high demand. Ibex in Visp will surely add to our capabilities to meet demand as well as our other investments. One of the highlights in quarter four was announced that we are establishing the Biologics footprint in China as we see growth potential in this market.

Throughout the year, we have also further invested innovation and R&D. For example, in October, we acquired a controlling state of Octane Biotech to further develop the Cocoon autologous technology in cell and gene therapy. Our small-molecules business is also contributed to the strong Pharma & Biotech results. Here I want to point out that Lonza is now able to provide our customers a broad range of offerings along the entire pharma value chain, in fact, substance end now also in drug product. Our Consumables and Research Tools business is also making progress and sees continued demand.

Moving now to Specialty Ingredients on Slide 16. Again, I don’t need to dive into these numbers, but I do want to point out that Consumer Health and Material Protection were top performers in that Specialty Ingredients’ portfolio. The next slide shows you the results by division in Specialty Ingredients. You will see we have increased transparency in 2018 and disclosed the Consumer Health and Consumer & Resources Protection parts of the Specialty Ingredients segment. Of particular note, our Consumer Health results that showed the positive momentum we are making with our healthcare businesses.

The 27.3% CORE EBITDA margin for Consumer Health is a good start in its first year. I think you’ll agree. Here on Slide 18, you can see the breadth of our customer base, many of them small and midsized companies. Lonza’s integrated offerings in the nutritional space are exactly what our customers need as they look for a company that will act as their partner, not just as their supplier. For example, now that Capsugel is fully integrated, we can provide innovative offerings in clean-label specialty polymers and bioavailability solutions.

Strong combinations is Lonza’s proprietary ingredients. The next slide shows how path of Consumer & Resources Protection performed robustly, particularly our specialties. Microbial control, as a platform, was strong and Lonza is market leader there. We’ve already mentioned the headwinds, but again, I’ll point out that peak cyclical parts are under review and countermeasures in place. Already in 2018, as an example, pack integrated raw-materials and assets from our agro ingredients and as we purpose them for pharma intermediates.

First bullet point on Slide 20 is a remainder of the decision announced in the 1st of November, 2018 to divest the Water Care business to platinum equity. That strategic move allows us to focus even more on the Healthcare Continuum. Water Care continued to make operational improvements to further grow the business and developed further new technologies throughout 2018. Based on headwinds, however, like late seasonal start in North America and Europe entire transportation cost. While Water Care continues its restructuring and business model redesign, the outlook for the business in 2019 is positive.

I’m now going to hand the microphone over to Marc Funk, who will talk to us about what the future looks like for Lonza in the short and long-term. But first, let me say a few words about my successor. Marc has accompanied me during my entire journey in different jobs and scopes of responsibility. Almost five years ago now, I proposed him as the Head of Lonza’s Pharma & Biotech segment, a good decision for Lonza. He has continued to be a testament to the depth of leadership talent in our company.

With Marc as my successor in leading Lonza, I’m deeply convinced, he can bring Lonza fresh perspectives that will drive our strategy of growing along the Healthcare Continuum. I have full trust that Marc – with Marc, we will continue the Lonza success story. Now over to Marc.

Marc Funk: Thank you, Richard. Let me also acknowledge how much I enjoyed working with you over the last years.

And I will start with Slide 22. But first I’d like to make a couple of personal comments too. I’m looking forward to meet many of you in my new role. I’ve already met some of you at past Capital Market Days and on road shows conferences. I hope to be able to continue our conversation as I plan to go on my road show soon.

We’ll be reaching out to you shortly to set that up. Now let’s begin by looking our mid-term guidance on Slide 22. I’ll remind you that after completing the divestment of Water Care, we will provide an adjusted mid-term guidance to account further Water Care disposal. Our goal was and is to reinvest part of the proceeds of the Water Care disposal into the Healthcare Continuum with expected higher return to deliver more shareholder value. Until closing of the transaction, and the subsequent adjustment, we’ll simply confirm the mid-term guidance including the Water Care business unit.

Sales are CHF 7.5 billion, CORE EBITDA margin 30%, CORE RONOA 35%, double-digit ROIC. We can also confirm the growth trajectory by business that we have outlined at our September Capital Market Day. Pharma & Biotech high single digit growth with a sustain 30%-plus CORE EBITDA margin. Specialty Ingredients’ Consumer Health division mid to high single digit sales growth with a margin progression from high 20’s to above 30%. Specialty Ingredients’ Consumer & Resources Protection division, low-to-mid-single digit sales growth with a margin progression from high teens to around 25%.

And the reminder that the mid-term guidance 2022 is based on the following; the present business composition for Lonza including the Water Care business unit, the present macro-economic environment, current visibility and constant exchange rates. Turning now to our outlook for 2019, which will contribute to achieving our mid-term guidance. As we will continue focus on the thorough execution of our growth investments. We fully expect 2019 to be an unprecedented investment year. Our outlook is based on Lonza continuing operations, excluding Water Care, the present macro-economic environment, current visibility and constant exchange rates.

Based on these assumptions, our outlook for 2019, includes achieving mid-to-high single digit sales growth, confirming a sustained high CORE EBITDA margin level. While we are continuing to invest in innovation and growth especially in the biologic businesses, we won’t neglect our initiatives to improve our operational and commercial excellence programs. We also continue to implement counter measures for the cyclicality exposed businesses. We will give an update on the outlook with Q1 Qualitative Business Update 2019. In addition, we will further accelerate the review of our current assets and portfolio to continue strengthening Lonza’s position along the Healthcare Continuum.

An update on the review will be provided. I’ll turn the microphone back over to you now, Richard.

Richard Ridinger: Thank you, Marc. Let’s wrap up with a look back at the last seven years on Slide 24 and 25. We have exceeded in those years guidance across all metrics.

And our continuing operations have grown steadily and created value for our company and our shareholders. I think demonstrated particularly in our sales in the CORE EPS segments. I’m humbled and pleased by the results of the last seven years as you’ll see on Slide 25. Our strategic financial and operational turnaround has yielded 486% total shareholder return in between of 2012 and of 2018. As you can see from the upward trajectory of the share price over the years.

Some of U.S. investors could even take advantage of that remarkable growth. You will also see here phases of our development. We began by focusing on restructuring, reorganization, operational efficiency and market orientation. in the first year.

We announced our strategy and optimized our portfolio in the next phase. Then we began executing on our strategy and I have to say, I’m modestly proud about how well the strategy has turned out. As we outlined in the Capital Markets Day, we have invested and divested and sharpened our portfolio. So Lonza is all lined up for future success. With this smooth handover during the next month, two things will remain the same.

Our clear strategic direction and our successful execution. Lonza is a good company and we’ll remain a good company. We expect ongoing positive momentum across for our already high margins. Incoming CEO, will give you more specific details during the first half of the year. Now, I would like to share some final personal thoughts.

As analyst and investors you have watched patiently for most part for a turnaround in growth over the years. You have supported us even when we encountered bumps, along that upward path. You have been following us and sometimes even challenging us on the path and that partnership with you as analysts and investors has spurred us even further forward. And with your support, we did make great progress and moved much further forward as the chart indicates. For seven years, I have enjoyed meeting you personally on roadshows and investor events, and it’s been a pleasure to take part in many helpful and thoughtful working discussions.

I enjoyed, I really enjoyed working with you. I wish each and everyone of you success in your future too. And so ladies and gentlemen, I’m sure you have many questions, that’s why we are here to answer them. Who would like to begin?

Operator: The first question from the phone comes from the line of Daniel Buchta from Vontobel. Please go ahead sir.

Daniel Buchta: Yes. Thank you very much for taking my three questions. And before, well, of course, thank you, Richard, for your efforts and I mean, I think one can clearly say you’ve done a great job in that regard, turning around the company. So the first question actually I would like to ask you on the change. Can you share a bit more of the background on this, I would say, a bit surprising decision, and why is this going to happen now? And related to that, why is it going to happen so quickly? I mean, you will leave Lonza basically by the end of April, and why aren’t you staying for a year, or at least joining then – even the supervisory board? I mean, you had just one change in the supervisory board.

So I’m a bit surprised about that. Then the second question. I mean, you mentioned for the outlook 2019 that you have several growth and investments coming up. Obviously, this is the case. But to my view, most of them, you had already this year like Ibex to Singapore, expansion Houston, maybe you can quantify a little bit really these growth-related investments in 2019 you’re seeing? And also clarify a little bit why the strong underlying fundamentals in Pharma & Biotech, but also the portfolio transformation you were highlighting in Specialty Ingredients, why this is not enough to, I don’t know, I’m at least show higher margins in 2019, as you say only you want to sustain high margins? And then the third and last question quickly, I mean, you say you want to reinvest parts of the Water Care proceeds for further portfolio transformation.

Can you give the indication on what size we can expect that to be and in which areas? Thank you very much.

Richard Ridinger: So let me start a little bit on the comment – on the question of the change. I think, of course, a few of my beliefs, especially when it comes to a change, which we have now – that’s the change to an internal successor, who is fully aware of everything what works. Who has been, I would say, extremely successful in their most, I think, the dynamic part of the Company’s portfolio. I think here, it is my strong belief that between announcement, not only to the external, also to the internal world, it’s important that it’s a fast handover.

Because if you want to have a smooth transition, you should minimize and this is my strong belief. I have seen many of that examples. You should minimize the uncertainty for people because then they do not know to whom they should look. And that’s why I think it was also my request to make finally a fast handover, which basically, of course, deal with the announcement, I will be in-charge until end of February, then Marc will take over. I’m still available, but I think the difference between an external successor and internal successor is really an internal successor who has been the whole time with me has taken important responsibilities.

Here, I don’t see any problem and Marc and myself have worked so long together that you can take the smooth hand over as guaranteed. And that’s also why we – why it’s announced in this way because we have to make sure that our people are not losing any focus in this period. So from my perspective, reflecting the time, I had an onset just to remind a tenure of seven years as the CEO is far above the average of your being CEO, so I think I’m almost a veteran in this sense. What is important you need to set yourself a few targets. And I – of course, I came with – to the company and some of you still know, it was in a quite miserable situation.

And I said I want to turn it around operationally, financially and strategically. And of course, I want to see these also being in place. And what I said before, I think we’ve achieved those goals, which means I think this is a platform for writing the next page of the Lonza book. Now the question is always when is the right timing. And you do know personally, I don’t like CEOs who are holding on that job just to be the CEO.

It’s important that you find the right time and you handover the torch while the outgoing and the incoming CEO are at full speed. And this is I think has some reflection. It was clear to me. I think this is the right time after the seven years, and I think I’m modestly proud of what has been achieved, and I’m fully convinced but as before that with the Marc Funk as the best successor I can imagine at this moment in time for this company. I think this will be extremely flawless.

And as I can – you can imagine, I’m also investor, I think I’m quite relaxed in what’s going to happen in 2019. So this was why it was done in this way. I’m not a supporter of 9 months or 12 months handover period because this can really stop momentum of companies. May be if it has had to be an external one, it’s a different story. But here we are not – we are talking about a real insider, who has been instrumental in the success of the last years.

Now we need to have two others, I think, the outlook 2019, who is taking this?

Rodolfo Savitzky: Well, the question was what about the investments in 2019? And here we have to remind ourselves. We have said already at the capital update, 2019 will be an unprecedented year in terms of investments. And here we said at that time the CapEx will be 10% to 12% of sales. Of course, now with the reporting of continuing operations that translates into 11% to 13% of sales, but the point is we – many of the initiatives that have been announced, the meaningful part of the investments will start happen in 2019. Then the question I have gotten in a roadshow early this year was, is these investment mainly CapEx? And the answer is yes, of course, it is mainly CapEx.

But of course, we have to acknowledge that there is some optics that comes within this. And so when we think of 2019, there’s two dimensions. These investments, which are absolutely critical for growth. We have talked about the very high [indiscernible] these investments. Rate of return, we expect already to see positive impact in our numbers in 21 or 22.

And then the other dimension is a headwinds in TRP. And here we were a little bit disappointed that in the sense that we were expecting the headwinds to abate in the second half of 2018, that didn’t happen. So conservatively we’re saying for 2019 at this stage, we say, let’s take a prudent of this position and let’s assume we can stabilize the business at this point in time. And this is the main explanation for the guidance. Then, there was a final question, Richard?

Richard Ridinger: Investment in Water Care.

Rodolfo Savitzky: Yes.

Richard Ridinger: I think we always said, I think we definitely we’ll put a part in deleveraging and the part is really the gross investments. The name of the game is we take of non-core business the gains and reinvest in the Healthcare Continuum. And this is what we are going to do this year. Of course, it’s still some time to go.

Hopefully, we will finalize the closing in quarter one. I think all signs are positive that this can happen. But as usual, it’s more in the hands of authorities and in our hands, but still I don’t see a red flag at this moment in time.

Daniel Buchta: Okay. Thank you very much.

And Richard to you especially all the best and thanks for your efforts.

Richard Ridinger: Thank you, too.

Operator: The next question from the phone comes from the line of Dominic Leone with Credit Suisse. Please go ahead.

Jo Walton: Hello, it’s actually Jo Walton from Credit Suisse.

Hey, I’m afraid I’m going to go back to the margins and the level of investment. And just how conservative we might see the stable margin comment for this year. I think as you’re well aware looking at the consensus expectations, number of investors were expecting to see some margin improvement, not on a linear basis to 2022, but at least some progress as we are moving towards that 2022. And you appear to be happy with those expectations until really very recently. So I wonder if I could just push you a little bit more on what you had expected to improve, but has not yet improved? And how confident you are the way that we should really see this as a low-ball number and you Marc in particular now that you will be responsible for delivering it would hope to be able to do better than this.

And can I specifically ask how much Capsugel – of the Capsugel synergies have already been taken in 2018? And how much more is available to come through in 2019, which, obviously, to some extent, will offset the extra investments that you’re talking about? Thank you.

Richard Ridinger: I think we have a little bit too, I think it was a long question, maybe we little bit slice it. I think the synergies in 20 – in Capsugel. Let’s start from the back and then we come back to the guidance. So if you go back, I think we achieved what we wanted to achieve in 2018.

Of course, we are progressing as we speak. I think we are – it’s going – it will go as planned. What as – what we said before, of course, maybe 2019, we still have a clue, but then of course the integrated business. And then it’s a terrific decision, if it’s synergy or is it already the combined business, which is moving forward. So I think as the years move on, it will become more and more difficult.

So now, for – I think coming back again to the margin guidance and the investments. Before maybe Marc goes in, let me make a comment as an outgoing CEO. The guidance is a one, which has been given right now. And I think it’s absolutely – we’re starting from a very good and high level. Now there is an incoming CEO.

I think from my perspective, and I really want, I think, you to understand how I see it. He starts officially, also, he knows of course the company, but officially he starts comes March 1, and we should give him the 100 days. And you can be sure and Marc will comment. He will talk to you about what he thinks going forward. And this is why you see an announcement during the first half of 2019.

He will tell you at one moment in time, what he thinks about that’s going forward. If my colleagues want to add anything?

Marc Funk: Thank you, Richard. Yes, I do confirm that the margin is sustainable. Meaning that in January 2019, we are quite confident that the way we’re seeing the projections, it’s definitely not going to be lower, but I hear the world you were hoping more at this stage. At this time, we have to look at on one side certain opportunities, but also a certain sense of responsibility to also look at certain headwinds that today are still not totally clear.

That puts into a situation where the qualifier of sustainable is the best adjective that we can find today.

Jo Walton: Thank you.

Richard Ridinger: You’re welcome.

Operator: The next question from the phone comes from the line of Patrick Wood from Bank of America Merrill Lynch. Please go ahead.

Patrick Wood: Perfect. Thank you very much. I have two if I may, please. The first is on the raw materials and prices escalators in your contract. It’ll be helpful if you could help us understand the typical time lag that generally in very general terms exists between the raw materials move and when you get some of that back in pricing? That’s the first question.

And the second, I’m afraid I’m going to be boring and also off going to margin structure, you were obviously saying that a lot of the payback from the investment comes in 2021, which makes sense, takes time to printings on the stream and get the returns, totally understand that. Does that mean we should be also thinking about 2020 as a year of OpEx investment in a similar way to 2019, or I’m misunderstanding this? Thank you.

Richard Ridinger: Let me take raw material part. There are two things. What is a normal, I think, as I worked 25 years in this kind of business.

Normally, I think you have – depending on which contracts you have, also in the major strong businesses you have sometimes, contracts, which fix for a quarter or six months, or sometimes, nine months price of the product with the customer. Normally you have a time lag to – somewhere in between three to nine months. It depends on the mix of the contracts. And a little bit of flavor to last year and the headwinds we had, I think it was not only in the contract, it was also – and you might have heard it in other parts of the industry, the other hand, we were just, I think, disruptions in the supply chains of many key raw materials also for some performance plans although, based, A, from the Chinese blue-sky policy, there is a some districts in some provinces of China, the whole manufacturing was shut down. And if then some key ingredients are running out of supply, I think, you feeling a little bit in especially antimicrobial business.

And this is what happened in the second half, was a little bit disappointing. But when we said we are taking action, yes, we are taking action. And I give you one example of the actions. We will start as much as we can to insult critical sentences again, because we still have the capabilities on the Chemical side to do. And I think – but this is an industry I have talked a lot in the industry is a industry phenomena for 2018.

And now actions need to be taken, they are underway, but I think, within the next recent months the management will see that we are at the part of updating us we where we go. So it’s a first, I think I hope I could answer your first questions on the materials and the situations. And now, the other question was about the investments and how we’ll do in 2020.

Rodolfo Savitzky: So in the investments, let me remind you. We – as Marc mentioned in his presentation, we definitely stick by our mid-term guidance, that’s an important starting point.

We will restate this as soon as the quarter divestment process, we will restated or we will adjusted for the Water Care business. And what that means is we have a clear reference point for 2022. We have also said it’s not going to be a hockey stick. And what we need to understand is, yes, of course, the investments will continue. Even the some of the investments we’re talking about, they’re not just for one year, it’s a multi-year investment, but we have many different trends happening at the same time.

When there was a Capital Market Day, I talk about many of the productivity programs we have here in enabling functions. We continue with productivity programs in manufacturing. And of course, the expectation is that over time, there will be a recovery of margins in the consumer resources protection business. So as I said, in summary, there are many different dimensions to the margin progression, that’s the first thing I would like to emphasize. Second, the mid-term guidance stands, and then of course, we will not give at this stage a guidance for 2020, I mean this is not the point.

But I think with my comments, you can more or less understand that we expect a reasonable progression towards our 2022 targets.

Patrick Wood: Thank you for taking my questions.

Operator: The next question from the phone comes from the line of Markus Gola with MainFirst. Please go ahead sir.

Markus Gola: Yes.

Hi and thanks for taking my question. First one would be follow-up on the investments, Rodolfo. So the question is the absolute amount of the OpEx for these investment projects. Will it be higher in 2019 or in 2020? And my second question is related to the 2022 targets. Assuming that you still have investments in 2020, and also given that you have confirmed your mid-term guidance on the margin, which adjusted for water is roughly 31.5%, that would imply that you need a significant acceleration of, yes, someone 150 basis points margin expansion in 2021 and 2022.

So how confident are you to achieve that? And where is the significant acceleration coming from? And finally, my third question is on the accelerated assets revision. Does that mean that contrary to the statements on the Capital Markets Day that Coatings and Composites, as well as the wood business on the review again? Thank you.

Richard Ridinger: Again there’s a few – there are several dimensions to your question. Let me start again pointing to the mid-term guidance, because at this stage is what we can clearly communicate. When you think of the different businesses and the margin progression that we expect, again, keeping in mind that we had some significant headwinds in 2018.

While it’s true that, for example, in Consumer & Resources Protection 2017 base was artificially high. It was a year where the cyclical businesses were at all-time records. You have to keep in mind that we had a correction of roughly 500 basis points in – now for this business in particular, we said the expectations that would definitely cross the 20% margin, and ideally, get close to the 25% margin. So this gives you a reference. Consumer Health, likewise it’s at 27%, and we said we would like to cross the 30% margin.

And we will get there to a combination of the portfolio productivity programs, and we are confident behind these numbers. So to your question, what we see when we do our internal planning, it’s a reasonable live path to where we want to end considering the developments that we expect across the different business. So this would be the first point of the question. The second one you said, will the OpEx to be higher or lower? Well typically, OpEx tends to increase as you get closer to triggering the start of operations around investments. But again, we need to see these now as a – one single variable.

At the same time the scale of the business is growing, our base business is becoming a much bigger. That’s the operating leverage that you get in a business that is growing at a 9% level, like you did, is significant. And again, don’t underestimate efficiencies in programs like we’re doing with outsourcing, I’d say, offshoring many of our services and so forth. So it would be absolutely and completely wrong to say, okay, because the OpEx will be higher as you progress in building up the investment, that translate into a certain conclusion on the margin. This is absolutely not the case.

We continue to accelerate our operating leverage, which means growing our sales ahead of our costs. And in addition, we continue with our efficiency programs, and we stand by our projections, Marc said that very clearly in his presentation, by each of the different units and then this is how we get to the mid-term guidance.

Markus Gola: Okay, and on the asset revision?

Richard Ridinger: Excuse me?

Marc Funk: On the Healthcare Continuum, this is something that we see that in the current year and in the near future. We’ll have to look at what are the review of the different portfolio. But at this stage, it would be premature to go any further.

Markus Gola: Okay, very clear. Thank you.

Operator: The next question comes from James Quigley with J.P. Morgan. Please go ahead.

James Quigley: Thank you for taking my questions. Only a couple of left from me. Looking into the Pharma & Biotech division, you mentioned there’s 305 you’re working on, that was 290 programs last year and 190 the year before. So just look at significant slowdown in the number of chemical programs you are working on. And what’s the – is the bottleneck their capacity wise from your point of view? Or is there more around the wider market in the clinical stage? And then on 2019, the range on the top line is mid-to-high, what needs to happen to get to the higher end of that guidance? And then on Consumer & Resources Protection, you mentioned the significant margin decline and 2019 also looks challenging as we head into that – into this year.

So is the 25% guidance is that aspirational target? Or how achievable is that target given the [indiscernible] in that division? Thank you very much.

Rodolfo Savitzky: May be just we have to recall again. But let me just start, just to correct. I think we have selected the large molecule programs have actually increased between 2017 and 2018 from 290 to 305, I think we have more programs, I think it’s not decreased, it’s increased. So we just…

James Quigley: That was the question.

So this year it’s increased to 305. Last year it was 290, the year before was 190. So we had 100 gain in 2018 and only 15 gain in 2019.

Richard Ridinger: What we have said, we are increasing – just we’re increasing in the clinical capacities because the demand goes up. We have announced that, I think, we are expanding.

We have in Hayward, California ramped up. We are investing in this. And that’s exactly because all these – all the demand is increasing on the Biologics. I think this is – there is no decrease. It’s an increase.

And also we have more commercial molecules. I think it’s in the Biologics all the numbers, I know – going up, and I see numbers are all going up. Maybe, hopefully, short downfall in market to catch the middle part, but let me – little bit to see how clearly as Rodolfo already said, 500 basis points was the drop between 2017 and 2018. And this is a little bit in the cyclical part. If you see 500 basis points at 17.9% and at the 500 basis points, you would be almost 23 points or so.

I think important is that even in this portfolio that we are deemphasizing the cyclical part. This is almost what we said, you remember, at the Capital Market Day. I think purposing on all the stuff. A lot of actions need to take this that was set. But the problem is a little bit at the businesses, of course, it’s a shortage in some of those volume products you can divest the Spring Bank.

And I think, but, of course, this is not what we want going forward. We want it more stable and more added value portfolio. And this is what needs to be done in this business. And this is what we said in the Capital Market Day. And that’s why if we had the same discussion exactly a year ago, let’s say, 23% margin, I think it’s a very little step.

But in fact, we have to make sure that we are looking deep into portfolio and see what can be done to make this a little bit more – less volatile.

Rodolfo Savitzky: James, could you repeat your second question? The one in the middle.

James Quigley: What needs to happen to get into the top of the revenue guidance with the high-single-digit?

Rodolfo Savitzky: From next year, you mean?

James Quigley: Yes, for 2019, yes.

Rodolfo Savitzky: Look I think as you know us now. The way we think about this case.

Let’s talk about the revenue guidance. Of course, we have a firm plan in place. In the case of Pharma, there’s a very high level of visibility. But is not given in the case of Pharma because we need to execute operationally. In the case of the consumer health and CRP, we have very strong plans in place.

Lots of learning from 2018. We feel confident about 2019. But of course, even in our plans, we have the base plan, and we have the – what we consider an upside plan. And typically, we need to see what is the momentum that happens in quarter one. And based on that, we can confirm whether we are at – I mean, what part of the range of the guidance we feel comfortable.

Richard Ridinger: But just let me comment, I think, guiding mid to high single-digit, I think is again, strong organic growth from my perspective. And this is I think definitely the goal of the company and this is you will see, when I’m not anymore in this discussion, but I know Marc. This is Marc’s strong message to the organization. This is a focus. And I think this is absolutely right.

This is that’s why I think it is remarkable one. Are there any further questions?

Operator: The next question from the phone comes from Daniel Jelovcan with Mirabaud. Please go ahead.

Daniel Jelovcan: Yes, hello. Can you elaborate a bit on the small molecules where your flat also, robust growth and according to my knowledge, this market is growing 5% to 7% kind of, where I guess with all the synergies with Capsugel, you were probably above that.

I know you don’t give specific indications about that. But is it a fair assumption that it was also maybe even close to 10%. That’s the first question. And the second question is, Rodolfo, when you talked about relating forward Q1 numbers for more visibility, can you maybe flag how was the exit quarter last year, so Q4. I know you don’t provide quarterly numbers, but when we looked at all the reports now in the world, it looked like November and especially December the world was collapsing.

And did you experience any significant slowdown in Q4? Although, compared to Q3, if you can give some qualitative elements on that? And the last question is, in the press release you mentioned that in Singapore, you have now installed the first 2,000 liters single use bags. Is that a trend which is now spreading all over the world or more specifically in Asia? And now it is – the most of the time it’s a decision by your client if you want to still reactor or the disposable reactor, does it also help you to reduce cost and improve margins with these kind of products? That are my three questions. Thanks.

Marc Funk: I’ll take the last question to start with, with respect to the site selection of Singapore to the disposable and the capacity to inflation. Utilization of disposable technology in Singapore was practical and pragmatic choice dictated by desires of the clients to manufacture at a certain pace.

And with the capability of our company to bring up to speed in this place a certain assets available to fulfill client needs. And to that extent, it is success.

Daniel Jelovcan: And mainly in Asia or in Europe or in announcement…

Marc Funk: That’s the second part of your question, which is this disposable technology now the standard of excellence? The answer is no. It is an alternative indispensable need to address the manufacturing of specific molecules that fit well into this kind of assets. But the stainless steel tanks are not correlated with the decline or a different route.

There is a need of stainless steel, addressing molecules, either to go into the medium to large-scale. And that trend and that need is not affected necessarily and this continue in the future to be of a need. This explained – explains to some extent also our decision last year to invest in midsized capacity in the United States, for example. In relation to your first question, what is the relevance in our portfolio of the small molecules? Historically, this is where the CDMO industry started in Lonza. And this over the last years particularly the last-month became very relevant.

And also thanks to portfolio, have you operational excellence, we managed to capitalize growth here that is for us interesting, exacerbated by the acquisition of Capsugel. But here what I can say is not to confirm nor infirm the percentage growth that you have mentioned, but what I can say is that Capsugel acquisition is something that we are very proud of. On the short term, to start with, but also in more medium term where our vision to come with an innovative offering where the service in the small molecule embedded with our know how of ingredients, API, formulations and the Capsugel is something that is the key road, a key path to sustain the future of this company.

Richard Ridinger: And maybe a comment to the last quarter. Of course, given the nature of part of our business in CDMO, of course, by definition if you have contract in place, this is a little bit different from so-called make to stop mechanisms.

I think as you have those in place. Because it’s not, I think, in the quarter, which is collapsing because of a demand fluctuations. Of course, in some areas of CRP, I think, of course, definitely you have differences in quarter-to-quarter. But we could not really see overall a collapse in the fourth quarter. And when I say the momentum of the business is intact, and that’s why you have seen the sales guidance, which was given.

Rodolfo Savitzky: Yes, from my side, just a short comment. Eco exactly what Richard said. And I have to say, we don’t disclose the data by quarter. We won’t start that. But definitely, the quarter result I would qualify it as positive and consistent with our projection for 2019.

I think it has to be clear that even though December 31 marks the end of the year and the start of another, we – it’s clear that the trends don’t recognize these artificial, let’s call it, timeline. But in our case, we saw a positive momentum in the non-CDMO part of the business and this is a good foundation for 2019.

Daniel Jelovcan: Okay. Thank you. And Richard all the best and you’re also player from my side as well.

Richard Ridinger: Thank you likewise.

Operator: The next question from the phone comes from the line of Patrick Rafaisz with UBS. Please go ahead, sir.

Patrick Rafaisz: Good afternoon and thanks for taking the time. Three more questions please.

The first is on Pharma & Biotech. You did talk about strong demand for commercial launch molecules. How should we think about potential mix impact in contract structures in 2019? Anything we need to take into account in our modeling here versus 2018? And the second question for Specialty Ingredients. For the cyclical bids, Richard you mentioned, 2017 was very strong year. How should we think then about the comparables in H1 for Specialty Ingredients, where EBITDA was already down quite a bit? Is that already a low base where you feel comfortable, you can build on, or is that still may be at risk if the environment doesn’t improve? And the last one on CapEx.

You already talked about 2019 extensively, and you’ve given us the CMD target of reversing back to 79% over-time. How linear should we assume that CapEx would come back after 2019 also with the China project now announced? This may be staying above 10% for longer, or should we assume below 10% already for 2019? Thanks.

Marc Funk: So for the first question about the large molecules Pharma & Biotech, is there any difference in the portfolio or anything to think about between 2018 and 2019. I would say, no. There is nothing material that needs to be perceived as different.

And there is – there are opportunities and the assets that we have in adequacy to the needs. On the CapEx 2019 and 2019, we have been clear at the Capital Market Day. At this stage, we do not foresee any changes into the guidance that we have given so far in the curve about the increase and the decline at a certain time to go back to more of a normality what can call normality, I don’t know, is something that is unchanged at this stage.

Richard Ridinger: Maybe you please comment on the Speciality Ingredients and the cyclical part. I think what has been already stated before.

I think this is a prudent approach in the beginning of the year. And actually the teams have worked in the last year and still in this first phase of the year on reestablishing some of the supply chains, which have caused some problems in the second half of 2018. And I think now it’s – I would not say that we can already say at this moment in time what’s – what is going to be for the first half. I think I need to ask you for a little bit of patience to see and quarter one is behind us, I think the management team will have a better picture how the reestablishment of the supply chains that has [indiscernible] to give you an update on that and we can do it right now.

Patrick Rafaisz: Okay.

That’s clear. Thank you very much.

Richard Ridinger: So ladies and gentlemen, now let me have some final, final words before closing. I think some of you have been in the call today, you have to competed me through all these years. So some of you will remember 2012, when I first arrived.

Lonza must be derailed by poor performance in their operational nightmare, but it had great potential. I think you will agree. Now we’re in 2019. I think Lonza is a totally different company. We have a clear strategy, great performance and good momentum.

But what remains from my perspective the same now as in 2012 is that we still have great potential. I want you to continue to support now my successor, Marc, as you have supported me. And I thank you very much for that. As I said a sincere thank you, again. And I hope we’ll meet again someday, and goodbye.