Sartorius AG Investor Relations

We focus in both divisions on the attractive biopharmaceutical market characterized by long‑term and stable growth trends.

Key Growth Drivers

• Growing world population
• Increasing incomes and better access to healthcare services in emerging economies
• Aging population and rise in age-related diseases in industrialized countries

Medical progress is also fueling growth, resulting in the ongoing development and approval of new biopharmaceuticals and in the improvement or expansion of indications for already existing active pharmaceutical ingredients. Therefore, a growing number of biotech medications are being approved for treatment of rare diseases considered incurable until now, and innovative cell and gene therapies are projected to further drive growth in the biopharma sector.

Sartorius has leading market positions in core technologies and is continuously expanding its portfolio by new, complementary technologies that help our biopharma customers develop and manufacture medications faster and more easily. Our strength in selecting suitable partners or acquisition candidates is based upon our in-depth understanding of applications. We are thoroughly familiar with our customers’ requirements and their entire value-added chains, and particularly understand the interactivity of the systems they use. Our innovation strategy is based on three pillars:

• Integration of innovations through acquisitions
• Alliances with partners
• Own product development

Due to exceptionally strong organic growth, Sartorius invested considerably in building up production capacities in the reporting year. Capital expenditures totaled approximately €523 million in 2022 and were used to expand sites in Germany, France, Puerto Rico, the USA, South Korea, and China, among other countries.

North America and Asia are the key focal areas of the regional growth strategy. The USA is the world's largest market for bioprocess equipment and laboratory products. Yet because it is home to the main competitors for both company divisions, Sartorius formerly had lower market share in this region than in Europe and Asia. By systematically strengthening its sales and service capacities, Sartorius has gained market share in the USA in recent years.

In Asia, one focus is on expanding production capacity in China, particularly for the Chinese market, which offers significant growth potential due to rising private and government health care spending and the rapid establishment of regional biopharmaceutical plants. In South Korea, which offers excellent growth prospects with its dynamically expanding biopharma market, Sartorius started initial work to build a new production facility at the beginning of 2023.

Recurring business with sterile single-use products accounts for over seventy percent of the Group´s sales revenue. These offer customers cost advantages, flexibility, and less resource usage, and thus a better ecological footprint compared with conventional processes employing reusable stainless-steel components.

The high share of recurring revenues is also bolstered by the strict regulatory requirements on the part of the customers. Because health authorities validate production processes as an integral part of an application for approval of a new medical drug, the components initially validated can be replaced only at considerable expense once they have been approved.

Beyond this, the company’s broad and stable customer base that is primarily addressed directly through a specialized sales force also contributes to this favorable risk profile.

The bioprocess technology market is characterized by relatively high entry barriers arising in part from the biopharmaceutical industry’s strong degree of regulation and its technological complexity.

Acquisitions that are complementary to or extend the company’s strengths appropriately have been and will remain part of the portfolio strategy for both divisions. Due to high innovation dynamics, the company considers further additions to be possible on an ongoing basis across the entire breadth of the product portfolio.

Acquisition Criteria

• Complementarity of technologies to our existing portfolio
• Strong market positioning, for example, through innovative products with unique selling propositions
• Integration capability
• Appropriate valuation
• Growth and profitability profile

For many years, we have firmly embedded sustainability at many levels in our business. To us, it means operating responsibly and nurturing long term relationships – with respect to customers, employees, investors, business partners and society as a whole.

Based on the slight recovery in demand since the end of the third quarter of 2023 and the market outlook forecast by industry observers, Sartorius expects to grow profitably in 2024 and beyond. Due to inventory optimization measures at customers that have not yet been fully completed, the company projects business momentum to increase gradually in the course of the year, resulting in a rather moderate first half of 2024. In addition, business performance could also be affected by increasing geopolitical tensions and economic slowdowns in some regions.

Against this backdrop of still somewhat unstable market trends and therefore limited visibility, management forecasts an increase in Group sales revenue in the mid to high single-digit percentage range, with a non-organic contribution accounting for around 1.5 percentage points. In terms of profitability, management anticipates the underlying EBITDA margin to rise to slightly more than 30 percent, compared with the prior-year figure of 28.3 percent. At around 13 percent, the ratio of capital expenditures to sales revenue is expected to be below the 2023 figure of 16.5 percent. Excluding possible acquisitions, the ratio of net debt to underlying EBITDA is projected to be at slightly above 3.

For the Bioprocess Solutions division, management expects a gradual continuation of the demand recovery and an increase in sales revenue in the mid to high single-digit percentage range, including a contribution of acquired businesses of around 2 percentage points. The underlying EBITDA margin is projected to be over 31 percent, compared with the prior-year figure of 29.2 percent. The above-average profitability of the Polyplus business will have a slightly positive effect on the margin development.

Business in the Lab Products & Services division depends to an extent on economic conditions and a series of indicators currently pointing to a subdued development in key economic regions. Against this backdrop and despite the observed recovery trends, management predicts a subdued sales revenue increase in the low single-digit percentage range and an underlying EBITDA margin at around the previous year’s level of 25.1 percent.

All forecasts are based on constant currencies, as in the past years. Management points out that the industry has become increasingly dynamic and volatile in recent years. In addition, uncertainties due to the shifting geopolitical situation, such as various countries’ nascent decoupling tendencies, are playing an increasing role. This results in increased uncertainty when forecasting business figures.

Sartorius intends to continue its profitable growth path in the long term and expects to grow faster than the market. According to the new medium-term targets, the Group plans to achieve average annual growth in the lower double-digit percentage range over the five-year period to 2028 of which acquisitions are anticipated to contribute around a fifth. The underlying EBITDA margin is also expected to increase and reach around 34 percent in 2028. The margin targets include expenses of around 1 percent of Group sales revenue for measures to reduce the company’s CO2 emission intensity.

In terms of its two segments, Sartorius expects the Bioprocess Solutions division to grow on average in the low to mid-teens percentage range per year between now and 2028 with an underlying profit margin of around 36 percent. The Lab Products & Services division is projected to expand at an average annual rate by a mid to high single-digit percentage with a margin of 28 percent in 2028.

“Our goals remain ambitious because we have put ourselves in a very competitive position and are addressing a market with unchanged strong and sustainable, fundamental growth drivers,” said Kreuzburg. “The rapidly growing new modalities, such as cell and gene therapies, which can often be used to treat previously untreatable diseases, are playing an increasingly important role. In this context, the need for innovation is more pressing than ever, as are our customers’ efforts to make their processes faster, more efficient and more resource effective. With our broad and differentiated product portfolio, we are in an excellent position to support our customers in this.”

“In addition to our financial growth targets, we are continuing to pursue an ambitious sustainability agenda: Between now and 2030, we intend to cut our CO2 emissions intensity by an average of around 10 percent per year, to reduce all avoidable direct as well as indirect emissions from purchased energy to zero, and to use 100 percent renewable electricity. By 2045 we aim to achieve net zero emissions. Moreover, we are working on several initiatives to use materials efficiently and promote circular material cycles,” continued Kreuzburg.

All forecasts are based on constant currencies, as in the past years. Management points out that the industry has become increasingly dynamic and volatile in recent years. In addition, uncertainties due to the shifting geopolitical situation, such as various countries’ nascent decoupling tendencies, are playing an increasing role. This results in increased uncertainty when forecasting business figures.

Sartorius is a globally operating company with subsidiaries in more than 30 countries. The holding company Sartorius AG is the parent company of the Sartorius Group. The corporation is headquartered in Göttingen, Germany, and listed on the German Stock Exchange with preference and ordinary shares.

Sartorius manages its bioprocess business as a legally independent subgroup whose parent corporation is Sartorius Stedim Biotech S.A., which is listed on Euronext Paris. As of February 09, 2024, Sartorius AG held around 71.5% of the shares of Sartorius Stedim Biotech S.A. The Group’s lab business is legally combined in a further subgroup whose parent company is Sartorius Lab Holding GmbH, in which Sartorius AG holds a 100% stake.