Based on the strong performance of the Bioprocess Solutions Division in the first half of 2020 as well as on high demand also expected to continue for the rest of the current fiscal year, Sartorius raised its full-year sales and earnings guidance for this division and thus for the entire Gr ... more
Sartorius looks optimistically to 2020
Sartorius confirmed its preliminary figures upon publication of its 2019 Annual Report. Group sales revenue rose in constant currencies by 14.8% (reported: +16.7%) to 1,827.0 million euros. Growth was almost entirely organic as the acquisition of the cell culture media specialist Biological Industries completed in December 2019 contributed only marginally to this increase. Order intake also rose by 14.8% in constant currencies (reported: +16.7%) to 1,939.5 million euros.
In line with its strong growth, Sartorius further increased its number of employees. At year-end 2019, the Group employed 9,016 staff members. This equates to an 11% increase or around 900 people more than a year ago. In particular, the company’s customer-facing units, research and development, and production reported staff gains.
“The once again very positive development of the Group shows that we have laid a strong foundation for sustained profitable growth by concentrating in both divisions on the dynamic biopharma sector,” commented CEO Dr. Joachim Kreuzburg on the past fiscal year. “We will extend our already good position by focusing on fields of the future, such as biosimilars as well as advanced therapies. From a technological standpoint as well, we have taken important steps to further increase the relevance of our product portfolio for customers. We aim to raise our revenue by 10% to 13% and further increase our profitability in 2020.”
In December 2019, Sartorius had acquired a majority stake in Biological Industries, an Israeli company specializing particularly in the development and manufacture of cell culture media for cell and gene therapies. As a result, the Group now owns production facilities for cell culture media. The planned acquisition of parts of Danaher’s life science portfolio announced in October 2019 covers, among others, the FortéBio business for label-free biomolecular characterization, as well as chromatography hardware and resins, with which Sartorius would extend its portfolio in the downstream area. The transaction is presently expected to close around the end of the first quarter of 2020.
Beyond operating business development and the integration of acquisitions, additional topics are on the 2020 agenda at Sartorius. “Over the past years, we have evolved from a product supplier for various sectors into an application-oriented solutions provider for life science research and the biopharmaceutical industry. We want to underscore this transformation and communicate it even more strongly than in the past with our new brand claim of ‘Simplifying Progress’ and our new brand look,” said Dr. Joachim Kreuzburg. In addition, Sartorius will be celebrating its 150-year company anniversary. “To mark this milestone event, we will be hosting an international Life Science Festival for the first time and look forward to discussing the latest trends and challenges in the life sciences and in the biopharmaceutical industry with leading experts in the sector.”
Overproportionate profit growth; increase in dividends planned
Underlying EBITDA rose overproportionately again relative to sales, as in the prior year, by 22.4% to 495.8 million euros in 2019; the respective margin was 27.1% (previous year: 25.9%) in line with our guidance. As expected, slightly less than one percentage point of this increase was attributable to the IFRS 162) Standard required to be applied for the first time in 2019. Relevant net profit rose by 19.2% from 175.6 million euros a year ago to 209.3 million euros, yielding earnings per ordinary share of 3.06 euros (2018: 2.56 euros) and earnings per preference share of 3.07 euros (2018: 2.57 euros).
Based on the company’s positive business performance, the Executive Board and the Supervisory Board will submit a proposal to the Annual General Shareholders’ Meeting on March 26, 2020, to pay dividends of 0.71 euros per preference share and 0.70 euros per ordinary share. Under this proposal, the total amount disbursed would increase by 14.6% to 48.2 million euros from 42.1 million euros a year earlier. The dividend payout ratio of 23.0% would be approximately at the level of the previous years (2018: 24.0%).
Solid key financial indicators
The Sartorius Group continued to make substantial investments in expanding its global capacity, even though, as expected, its CAPEX ratio decreased upon the completion of several large projects to 12.3% (2018: 15.2%). Due to strong net cash flow from operating activities and despite the intensive investment activity and successful acquisition, the company’s ratio of net debt to underlying EBITDA was 2.0 and thus below the prior-year figure of 2.4. Equity rose from 973.4 million euros to 1,081.2 million euros at year-end. In connection with IFRS 162), the equity ratio decreased slightly from 38.5% as of December 31, 2018, to 38.0%. Sartorius therefore continues to have a very sound balance sheet and financial base.
Growth in all regions
Sartorius dynamically increased its sales in all regions compared with the previous year. EMEA (Europe, Middle East and Africa) increased its revenue by 11.2% to 733.4 million euros, accounting for 40% of the Group’s consolidated sales. The Americas region achieved a 17.4% increase in sales to 629.9 million euros, contributing around 35% to Group revenue. In Asia | Pacific, Sartorius earned sales of 463.7 million euros (+17.4%), which equates to a share of around 25% of Group revenue.
(All growth rates for the regions are in constant currencies.)
Bioprocess Solutions strong; Lab Products & Services robust
The Bioprocess Solutions Division that offers a wide array of innovative technologies for the manufacture of biopharmaceuticals exceeded its already strong prior-year performance, increasing its sales revenue in constant currencies by 18.1% (reported: +20.0%) to 1,372.1 million euros. This gain was fueled by ongoing strong demand across all product categories, particularly in project business in Asia. The division’s order intake rose significantly as well by 18.0% (reported: +19.9%) to 1,479.3 million euros. Underlying EBITDA for Bioprocess Solutions increased overproportionately to sales by 24.5% to 406.8 million euros. The division’s respective margin rose due to economies of scale and as a consequence of the change in IFRS 162), from 28.6% to 29.6%.
The Lab Products & Services Division specializes in technologies and products for laboratories in the pharma sector and in life science research as well as in a few additional segments. It showed robust performance in a partly challenging economic environment, achieving sales growth of 5.9% (reported: +7.5%) to 454.9 million euros. The division’s order intake increased by 5.7% (reported: +7.3%) to 460.3 million euros. Underlying EBITDA for Lab Products & Services rose year over year by 14.0% to 89.0 million euros. The corresponding margin was positively affected by IFRS 162) and stood at 19.6%, up from the previous year’s level of 18.5%.
(All growth rates for sales revenue and order intake are given in constant currencies.)
Profitable growth projected for 2020
Sartorius projects that it will increase Group sales in fiscal 2020 by 10% to 13%, with the acquisition of Biological Industries, completed at the end of 2019, expected to contribute approx. 1.5 percentage points to this growth. Regarding profitability, Sartorius forecasts that its underlying EBITDA margin will increase year over year from 27.1% to about 27.5%. The ratio of capital expenditures (CAPEX) to sales revenue is expected to be around 10% (2018: 12.3%).
For the Bioprocess Solutions Division, the Executive Board projects sales growth of 11% to 14%, with consolidation of Biological Industries expected to contribute about one percentage point to this gain. With respect to the division’s underlying EBITDA margin1), management assumes that it will increase to around 30.0% (2018: 29.6%).
The Lab Products & Services Division should increase its sales revenue by 7% to 10%, with Biological Industries projected to contribute around 2.5 percentage points to growth. For this division, the underlying EBITDA margin is forecasted at around 20.0% (2018: 19.6%).
The above forecast does not consider the acquisition of parts of Danaher’s life science portfolio, which was announced on October 21, 2019, and is currently undergoing antitrust clearance. Following the closing of this transaction, presently expected around the end of the first quarter of 2020, management will update its full-year guidance accordingly.
All forecasts are based on constant currencies, as in the past years. In addition, we assume overall stable conditions regarding the global economy and supply chains.
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