Sartorius continues to grow profitably in a challenging environment
The Lab Products & Services Division records significant double-digit growth due to organic growth and acquisitions
Sartorius recorded further growth in the first nine months of 2017 despite a partly challenging business environment.
"This year, different influences shaped the business development of our divisions," commented Group CEO Dr. Joachim Kreuzburg on the results. "While our Lab Products & Services Division has continued to grow highly dynamically through organic growth and the expansion of its portfolio in the area of bioanalytics, growth of the Bioprocess Solutions Division, compared to a very high previous-year base, was somewhat lower than expected due to a few concurrent, temporary effects. However, the basic growth drivers of the global biopharma market remain intact, so that we continue to see high growth potential for our bioprocess business and confirm our mid-term targets."
Business development of the Sartorius Group
In the first nine months of 2017, Sartorius increased its sales revenue by 8.6% in constant currencies (reported: 8.1%) to 1,043.6 million euros. The Asia|Pacific region recorded the highest gain, with sales up 24.7% to 256.5 million euros. In EMEA, Sartorius generated revenue of 451.0 million euros, 6.3% more than in the comparable year-earlier period. Especially in the Americas, transient manufacturing and supply bottlenecks in Bioprocess Solutions, as well as substantially softer customer demand for this Division after two very strong years, temporarily dampened growth dynamics. Accordingly, Group revenue in the region rose only moderately by 1.0% to 336.1 million euros. Order intake of the Sartorius Group rose at strong double-digit rates in both divisions in the third quarter and thus was up by 11.4% after nine months (all regional and order intake figures in constant currencies).
Despite unfavorable currency effects, underlying EBITDA increased by 7.3% compared with a strong prior-year base and reached 259.0 million euros. The Group's respective margin was 24.8% relative to 25.0% in the first nine months of the previous year; if exchange rates had remained constant, the prior-year figure would have been slightly exceeded. The relevant net profit for the Group grew by 6.9% from 98.9 million euros to 105.7 million euros. Earnings per ordinary share totaled 1.54 euros (9M 2016: 1.44 euros) and earnings per preference share 1.55 euros (9M 2016: 1.45 euros).
The Group's key financial indicators continued to remain at robust levels even after the most recent acquisitions of Essen BioScience in March 2017 and Umetrics in April 2017. At the end of the reporting period, the company's equity ratio was 33.6% and its ratio of net debt to underlying EBITDA stood at 2.7 (Dec. 31, 2016: 42.0% and 1.5, respectively). The capex ratio in the first nine months was 13.6%, as expected, due to the comprehensive expansion of the Group's worldwide infrastructure.
Business development of the divisions
The Bioprocess Solutions Division, which offers a wide array of innovative technologies for the manufacture of biopharmaceuticals, recorded nine-month sales growth of 4.1% in constant currencies to 752.9 million euros, relative to a very high prior-year revenue base. Development in the first nine months of 2017 was somewhat lower than expected due to some temporary effects. Demand, which was relatively soft in North America and parts of Europe after two very dynamic years in 2015 and 2016, was additionally affected in the third quarter in particular by inventory destocking by a few customers. Moreover, no deliveries were meanwhile possible from the company’s production facility in Puerto Rico due to Hurricane Maria, and ongoing bottlenecks in a partner's delivery capacity that lasted longer than expected impacted business performance in the area of cell culture media. Consolidation of the acquisitions of kSep and Umetrics contributed around one percentage point to sales growth in the first nine months of 2017. Order intake grew more strongly than sales in the reporting period, by 7.1% in constant currencies due to strong double-digit growth in the third quarter.
Underlying EBITDA of Bioprocess Solutions rose by 2.2% to 207.0 million euros; the respective margin reached 27.5% relative to 27.9% for the year-earlier period and would have reached the prior-year level if currency exchange rates would have remained constant.
The Lab Products & Services Division, which offers products and technologies for laboratories primarily in the pharma sector and in public research, recorded a significant gain in revenue, up 21.8% in constant currencies (reported: 22.0%) to 290.7 million euros. Driven by strong demand in all regions and all product areas, organic growth was at a good 7%. Expansion of the division's portfolio into bioanalytics as a result of the acquisition of Essen BioScience at the end of March 2017 contributed close to 15 percentage points to growth. Order intake in the first nine months of 2017 grew by 24.9% in constant currencies.
The division's underlying EBITDA rose sharply by 34.2% to 51.9 million euros; its respective earnings margin increased, despite unfavorable currency effects, from 16.2% to 17.9%. This was due to economies of scale related to strong organic growth and to profits contributed by acquisitions.
Full-year guidance adjusted and specified
Management assumes that the previously mentioned temporary effects will influence growth of the Bioprocess Solutions Division and, along with it, that of the Sartorius Group for the full year of 2017 as well. In view of these effects, the Sartorius Group now expects that sales revenue in constant currencies will increase by approx. 9% (previous guidance: approx. 12% to 16%). Due to adverse exchange rate effects, the underlying EBITDA margin is now projected to reach approx. the prior-year level of 25.0% (previous guidance in constant currencies: slightly more than 0.5 percentage points vs. 2016).
In view of the divisions, management now expects that sales growth for Bioprocess Solutions will reach approx. 4% (previous guidance: approx. 9% to 13%) and, the underlying EBITDA margin, including adverse exchange rate effects, will be approx. at the prior-year level of 28.0% (previous guidance in constant currencies: approx. 0.5 percentage points). For Lab Products & Services, management's projections remain basically unchanged, with sales expected to grow by about 22% (previous bandwidth 20% to 24%) and the division's underlying EBITDA margin forecasted to increase by nearly two percentage points relative to 16.0% a year ago, despite unfavorable currency effects.
The capex ratio for the current year is projected to be at the upper end of the bandwidth of around 12% to 15% of sales.
Sartorius confirms its mid-term targets.
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