Sartorius Reviews Fiscal 2014 Results

04-Mar-2015 - Germany

Sartorius closed fiscal 2014 with significant gains in sales revenue and earnings. At the annual press conference in Goettingen, Germany, CEO Dr. Joachim Kreuzburg stated that the Group had even slightly exceeded its financial targets and reached important milestones: "Our largest division, Bioprocess Solutions, again proved to be the key growth driver for our company’s sales and earnings. Not only did Sartorius achieve significant organic growth, but also its most recent acquisitions have shown excellent performance. The results for Lab Products & Services were still impacted by portfolio cleaning, as expected, but this will no longer have an effect in the current fiscal year. As planned, we completed the sales transaction of our smallest Group division, Industrial Technologies. Now we can fully concentrate on the further development of our two core activities."

For the current fiscal year as well, Sartorius expects significant growth and a further increase in profitability. As part of a multi-year program, the Group plans to continue investing in its international production capacities and in expanding its headquarters in Goettingen, Germany.

Double-digit Gains in Order Intake and Sales Revenue

Business development at Sartorius in 2014 was again dynamic, with order intake and sales revenue growing at double-digit rates. Total Group order intake rose 13.4% to 929.2 million euros in constant currencies. Sales revenue also grew significantly by 12.6%, attaining 891.2 million euros after 791.6 million euros in the reporting period a year ago.

In view of the divisions, Bioprocess Solutions showed outstanding performance yet again. This division, which focuses on single-use products for the manufacture of biopharmaceuticals, reported considerable gains across all product segments. In addition to excellent organic growth, the two acquisitions of TAP Biosystems and cell culture media business provided further impulses for expansion. Both acquisitions developed under the Sartorius umbrella more strongly than expected. Order intake climbed 18.3% to 652.7 million euros in constant currencies. Consolidated sales revenue surged 18.5%, attaining 615.6 million euros.

For the Lab Products & Services Division, which supplies premium laboratory instruments and lab consumables, order intake rose 3.2% to 276.5 million euros in constant currencies. Its sales revenue was up 1.4% to 275.5 million euros. As expected, the phase-out of a few nonstrategic product lines from its portfolio thus continued to have a noticeable impact of around two percentage points on the division's sales revenue, while this effect was only minor on the development of its order intake.

Dynamic growth of the Sartorius Group was driven by all regions. Business in North America increased at the highest rate, with sales revenue up 32.0% in constant currencies. Here, the newly acquired operations had an especially positive effect. Sales increased 10.9% in Asia and 6.6% in Europe. While North America and Europe benefited from the recent acquisitions, the latter played only a subordinate role for Asia.

Profitability Further on the Rise

The Sartorius Group increased its underlying EBITDA by 15.1% to 186.8 million euros. Its corresponding margin was 21.0% relative to 20.5% a year ago. Earnings contributed by the Bioprocess Solutions Division climbed to 145.6 million euros; its respective margin rose from 23.0% in the year-earlier period to 23.7% as of the reporting date. The Lab Products & Services Division reported an underlying EBITDA of 41.2 million euros after 43.4 million euros in the prior year. This equates to a margin of 15.0% (FY 2013: 15.9%).

Relevant net profit for the Group was 73.7 million euros, up 13.8% year over year. Its respective earnings per ordinary share amount to 4.31 euros, up from 3.79 euros in 2013, and per preference share, 4.33 euros, up from 3.81 euros in the previous year.

Strong Net Worth and Financial Position

Net operating cash flow rose year on year from 103.3 million euros to 129.7 million euros. The ratio of net debt1 to underlying EBITDA decreased from 2.0 a year earlier to 1.7. In the reporting year, the equity ratio increased from 38.1% to 39.1%.

Sartorius consolidated its financing within the Group in December 2014 by taking out a syndicated loan of 400 million euros with a maturity term of five years. This new loan agreement replaces two syndicated credit lines ahead of schedule.

Research and Development Expenditures Increased

In fiscal 2014, Sartorius invested 50.4 million euros in research and development, 5.7% more than in the previous year. Its ratio of R&D costs to sales revenue was 5.7% relative to 6.0% a year ago.

Overproportionate Investments

As planned, Sartorius invested further in its projects: The most important ones were the expansion of production capacities, primarily the extension of filter manufacture in Goettingen, Germany; consolidation and expansion of Group headquarters on the Sartorius Campus; and the rollout of a new ERP system. Investments climbed from 60.6 million euros to 80.9 million euros. The company's capex ratio was 9.1%.

Number of Employees Rose

At the end of 2014, the Sartorius Group employed 5,611 people, 453 persons or 8.8% more than in the previous year. Of this figure, some 200 people from recent acquisitions joined the workforce.

Dividends Set to Rise Further

At the Annual Shareholders' Meeting on April 9, 2015, the Supervisory Board and the Executive Board will submit a proposal to increase dividends for fiscal 2014 year over year from 1.02 euros per preference share to 1.08 euros and from 1.00 euro per ordinary share to 1.06 euros. If approved, the total amount disbursed under this proposal would thus rise from17.2 million euros to 18.2 million euros.

Positive Outlook for Fiscal 2015

Sartorius forecasts significant, profitable growth for the current year as well. Therefore, the company expects sales to grow approximately 4% to 7% in constant currencies. Its underlying EBITDA margin is projected to further increase to about 21.5%. Sartorius plans to maintain its investments at approximately the prior-year level of around 10% of sales.

In view of the two divisions, management anticipates that sales for Bioprocess Solutions will grow 5% to 8%, and its underlying EBITDA margin will rise to approximately 24.5%.

For the Lab Products &Services Division, Sartorius expects that sales will expand by 2% to 5%. The lab division's underlying EBITDA margin is projected to rise to around 15.5%. Compared with guidance for the bioprocess division, the forecast for the lab division is more uncertain as the laboratory marketdepends more strongly on economic cyclesthan the bioprocess business.

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