Lonza : Full-Year Alternative Performance Measures Report

Enabling a Healthier World

Alternative

Performance

Measures

Full-Year 2021

Alternative Performance Measures - Full-Year 2021

Introduction

This Finance Report and other communications with investors and analysts includes Alternative Performance Measures (APMs) that are not defined by IFRS (non-GAAP-

measures) but are used by the management­to assess the financial and operational performance at a divisional and group level. These supplementary financial measures should not be viewed in isolation or as alternatives to Lonza's consolidated financial position and financial results, which are reported in accordance with IFRS. Instead,

our APMs are intended to provide a complementary perspective on Lonza's performance by isolating distorting effects like exchange rate fluctuations or one-time items. They are also intended to provide additional key performance indicators to complement the performance dash- board. The APMs in use may not correspond to performance measures with similar names in other companies. Every APM shown in the financial report relates to the performance of the current or the previous reporting year.

The APMs are structured in operational Performance Measures as well as Liquidity and Capital Measures. The operational Performance Measures consist of the definition of the CORE concept, the derivation of EBITDA (CORE and non-CORE) and the disclosure of profitability

measures at constant exchange rates. The Liquidity and Capital Measures consist of Net Debt and ratios based on Net Debt and Return on Invested Capital, as well as Operational Free Cash Flow.

The following table outlines which APMs are applied on divisional level and respectively on group level:

Performance Measures	Division	Group

Sales and sales growth at constant exchange rate

CORE EBITDA / CORE EBITDA margin

EBITDA

CORE EPS

CAPEX

Liquidity and Capital Measures	Division	Group

Net Debt

Net Debt / CORE EBITDA ratio

Debt / Equity ratio

Return On Invested Capital (ROIC)

Operational Free Cash Flow (before and after acquisition)

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Alternative Performance Measures - Full-Year 2021

Performance Measures

CORE Results

As exceptional items can differ significantly from year to year, Lonza excludes these exceptional effects from the reported IFRS results to determine the CORE results. We believe that disclosing CORE results of the Group's performance enhances the financial markets' understanding because the CORE results enable better year-on-year comparisons. Furthermore, the Group uses CORE results in addition to IFRS as important factors when internally assessing the Group's performance.

The following exceptional items are considered as CORE adjustments that exceeds the threshold of CHF 20 million per event1:

• Restructuring income and expenses,
• Environmental-relatedincome and expenses (related to historical environmental issues only),
• Acquisition and divestiture related income and expenses,
• Impairments and reversals of related impairments,
• Litigations,
• One-timeeffects arising from changes to pension plans - curtailments and settlements.

In accordance with the CORE results, APMs such as CORE Earnings per share (CORE EPS) and CORE EBITDA are directly affected by the exclusion of the adjustments listed above.

The reconciliation of the IFRS result to the CORE result for the Full-year 2021 and 2020 is as follows:

	Million CHF	2021	2020	2
			restated
	Profit from continuing operations	677	732
	Environmental remediation expenses3	300	8
	(Income) / expense resulting from acquisitions and divestitures4	0	(7)
	Tax effect5	(33)	0
	CORE Profit from continuing operations	944	733
	CORE Profit from continuing operations attributable	941	731
	to equity holders of the parent
	CORE Earnings per share attributable to equity holders	12.67	9.82
	of the parent

1. In the context on the CORE definition, an "event" represents an individual business case that might involve income/expenses across several fiscal years
2. CORE results for the Full-year 2020 were restated to reflect the changes from the revised Alternative Performance Measures policy that was introduced on 1 January 2021
3. Environmental remediation expenses in 2021 predominantly relate to Gamsenried (CH). Refer to note 6 disclosed in the Selected Explanatory Notes of the Full-Year Report 2021
4. Positive impacts related to the acquisition of Capsugel in 2017
5. Group tax rate on continuing operations of 10.9% for 2021 and 8.8% for 2020

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Alternative Performance Measures - Full-Year 2021

Earnings before interest, tax, depreciation and amortization (EBITDA) from Continuing Operations

In line with the CORE adjustments, Lonza assesses operational performance based on CORE EBITDA, which can be reconciled in two steps:

	Million CHF	2021	2020
	Result from operating activities (EBIT)	851	901
	Depreciation of property, plant and equipment	347	284
	Amortization of intangible assets	175	169
	Impairment and reversal of impairment on property, plant,	(8)	24
	equipment and intangibles
	Earnings before interest, taxes and depreciation (EBITDA)	1'365	1'378
	Million CHF	2021	2020	1
			restated
	Earnings before interest, taxes and depreciation (EBITDA)	1'365	1'378
	Environmental remediation expenses2	300	8
	(Income) / expense resulting from acquisition and divestitures3	0	(7)
	CORE EBITDA	1'665	1'379

1. CORE results for the Full-year 2020 were restated to reflect the changes from the revised Alternative Performance Measures policy that was introduced on 1 January 2021
2. Environmental remediation expenses in 2021 predominantly relate to Gamsenried (CH). Refer to note 6 disclosed in the Selected Explanatory Notes of the Full-Year Report 2021
3. Positive impacts related to the acquisition of Capsugel in 2017

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Alternative Performance Measures - Full-Year 2021

Growth at constant exchange rates

Financial results in constant currencies are adjusted to eliminate the impact of changes in exchange rates between the reported and reference period - typically the prior year. This adjustment allows management to focus on operational results, without any distorting effect from changes in foreign currency exchange rates from one period to another.

Constant currency is calculated by converting sales and CORE EBITDA of the current year at the exchange rate of the prior year. The resulting margins can therefore be compared with the reported profit margins of the prior year to understand fundamental business trends.

Lonza Group (Continuing Operations)

Million CHF20212020 Change in %

Sales	5'409	4'508	20.0
Retranslation at prior year rates	(1)
Sales in constant currency	5'408		20.0
CORE EBITDA	1'665	1'3791	20.7
Retranslation at prior year rates	(7)
CORE EBITDA in constant currency	1'658		20.2
Margin in %	30.7

Biologics

Million CHF20212020 Change in %

Sales	2'699	2'146	25.8
Retranslation at prior year rates	(24)
Sales in constant currency	2'675		24.7
CORE EBITDA	979	831	17.8
Retranslation at prior year rates	(6)
CORE EBITDA in constant currency	973		17.1
Margin in %	36.4

Small Molecules

Million CHF20212020 Change in %

Sales	767	692	10.8
Retranslation at prior year rates	5
Sales in constant currency	772		11.6
CORE EBITDA	215	192	12.0
Retranslation at prior year rates	9
CORE EBITDA in constant currency	224		16.7
Margin in %	29.0

1 CORE results for the Full-year 2020 were restated to reflect the changes from the revised Alternative Performance Measures policy that was introduced on 1 January 2021

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