Strong profitable growth at Sartorius Stedim Biotech

Sartorius Stedim Biotech, a leading partner of the biopharma industry, closed the first nine months of 2020 with significant double-digit growth rates in sales revenue and earnings. “In the third quarter, we saw high demand for our entire product range,” said Joachim Kreuzburg, Chairman of the Board of Directors and CEO. “On top of overall strong organic growth, additional momentum was generated by the positive development of our recent acquisitions, as well as by preparations of biopharmaceutical customers to build up production capacities for coronavirus vaccines and Covid‑19 therapeutics. We aim to close the full year at the upper end of, or even slightly above, our guidance raised at the end of the first half. Yet further development of the currently worsening pandemic situation may considerably affect these results.”

Sartorius Stedim Biotech continued its dynamic growth of the first half on into the third quarter. Nine‑month sales revenue increased by 29.2 percent (reported: 28.1 percent) to 1,379.4 million euros. In addition to strong organic growth across all product segments and geographies, consolidation of the most recent acquisitions of Danaher life science businesses and of Biological Industries contributed around 4 percentage points to sales growth. Pandemic-driven effects presumably added around 9 percentage points to growth, with around half of these related to the ramp-up of production capacities for coronavirus vaccines and Covid-19 therapeutics and the other half to inventory buildup by customers. Order intake¹ surged in the first nine months of 2020 by 43.9 percent (reported: +42.8 percent) to 1,637.9 million euros and was positively impacted by around 14 percentage points by the pandemic effects.

Earnings of the Sartorius Stedim Biotech Group rose at a significantly overproportionate rate with respect to sales. Underlying EBITDA¹ was up by 39.2 percent to 434.7 million euros; the respective margin increased year over year from 29.0 percent to 31.5 percent. Significant economies of scale played the strongest role for this substantial increase in profitability with an additional effect from lower costs in some areas due to the pandemic situation. The most recent acquisitions had only a minor effect on the company’s earnings margin, while currency headwinds had a slightly dilutive impact. Relevant net profit¹ for the Group increased in relation to sales, by 40.4 percent to 278.1 million euros. Consolidated earnings per share were 3.02 euros (previous year: 2.15 euros).

Business development of the regions

Sartorius Stedim Biotech grew by double digits in all geographies: Reporting a sales gain of 32.3 percent to 344.7 million euros, the Asia | Pacific region that accounts for 25 percent of total Group sales showed the highest dynamics. Sales revenue in the Americas, which contributes around 35 percent to Group sales, also rose significantly by 29.9 percent to 484.3 million euros. Generating around 40 percent of Group sales, the EMEA² region recorded a sales increase of 26.6 percent to 550.5 million euros. (All figures on sales revenue and order intake in constant currencies)

Key financial indicators

The equity ratio of the Group continued to remain at a very solid level of 58.3 percent even after the closing of the recent acquisitions and the increased balance sheet total due to a significantly expanded cash position (December 31, 2019: 64.4 percent). Net debt to underlying EBITDA¹ for the past twelve months remained at 0.3 as expected for the period ended September 30, 2020, compared with year-end 2019. The ratio of capital expenditures (CAPEX) to sales revenue was 5.6 percent (prior-year period: 9.1 percent).

Number of employees further increased

As of the reporting period ended September 30, 2020, Sartorius Stedim Biotech employed 6,979 people worldwide. Compared to headcount as of December 31, 2019, this number rose by 756. The increase has resulted, in particular, from acquisitions and from hiring additional production staff due to the rising capacity utilization at most manufacturing sites. At the end of the reporting period, around 4,850 people were employed in the EMEA² region, approximately 1,100 in the Americas and more than 1,000 in the Asia | Pacific region. (Prior-year base slightly adjusted due to the change in the scope of consolidation)

Outlook for 2020 specified

Based on its strong nine-month performance, Sartorius Stedim Biotech now expects consolidated sales revenue to increase at the upper end of, or slightly above, the range of 26 percent to 30 percent forecasted to date. As projected so far, the non-organic contribution to this growth by Biological Industries and the portfolio acquired from Danaher should amount to a good 3 percentage points and around 2 percentage points respectively. Driven by dynamic sales growth and somewhat lower costs, the Group’s underlying EBITDA margin¹ is now forecasted to be around 32 percent (previously around 31 percent). The planned acquisition of purification specialist BIA Separations, which was announced in early October and is expected to close by late 2020, is not expected to have any material impact on Sartorius Stedim Biotech’s sales revenue or underlying EBITDA¹ for the full year of 2020.

The ratio of capital expenditures (CAPEX) to sales revenue remains unchanged at around 8 percent (previous year: 9.4 percent). Due to strong cash flow, net debt to underlying EBITDA¹ is likely to be slightly below 0.5 by year-end 2020, as projected so far, even after the acquisition of BIA Separations is completed in the fourth quarter (previous year: 0.3).

Due to the ongoing pandemic, this guidance continues to be subject to greater uncertainty than usual. In particular, these projections are based on the assumptions that logistics chains will continue to be stable and the relevant production lines will remain continuously in operation. All forecasts are based on constant currencies, as in the past years.

Mid-range forecasts are also subject to particularly high uncertainty at present. For the time being, Sartorius Stedim Biotech therefore has not changed its defined targets for 2025 of achieving sales revenue of around 2.8 billion euros and an underlying EBITDA¹ margin of about 30 percent³. With publication of the preliminary full-year 2020 figures, management will provide a forecast for the next financial year and explain its 2025 targets in detail.

_{1 Sartorius Stedim Biotech publishes alternative performance measures that are not defined by international accounting standards. These are determined with the aim of improving the comparability of business performance over time and within the industry.}

_{- Underlying EBITDA: earnings before interest, taxes, depreciation and amortization and adjusted for extraordinary items; derivation shown on page 4.
- Order intake: all customer orders contractually concluded during the respective reporting period
- Underlying net profit: profit for the period after non-controlling interest; adjusted for extraordinary items and non-cash amortization, as well as based on a normalized financial result and tax rate; derivation shown on page 4.
- Underlying earnings per share: relevant net profit for the period divided by the number of shares outstanding (92,180,190)
- Ratio of net debt to underlying EBITDA (9M 2020): 164.6 million euros | 434.7 million euros = 0.3
- CAPEX ratio (9M 2020): investment payments in relation to sales revenue for the same period; 77.2 million euros / 1,379.4 million euros = 5.6 percent}

_{2 EMEA = Europe, Middle East, Africa}

_{3 Further information is provided on page 22 of the Sartorius Stedim Biotech 2019 Annual Report}

_{This press release contains forward-looking statements about the future development of the Sartorius Stedim Biotech Group. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such statements. Sartorius Stedim Biotech assumes no liability for updating such statements in light of new information or future events.}

_{This is a translation of the original French-language press release. Sartorius Stedim Biotech shall not assume any liability for the correctness of this translation. The original French press release is the legally binding version.}

Follow Sartorius Stedim Biotech on Twitter @Sartorius_Group and on LinkedIn.