Sartorius Releases Preliminary Figures for the First Half of 2009 and Rearranges Executive Board
The Biotechnology Division reports dynamic growth and significantly improved profitability
Sartorius published its preliminary results today for the first half of the current fiscal year. Business of both Group divisions showed highly divergent development as in the past two quarters, with the biotechnology Division reporting significant growth in sales revenue and profit and the Mechatronics Division posting substantial, cyclically-induced declines.
Business Development of the Divisions
Sartorius Stedim Biotech
After the Biotechnology Division had already started off 2009 with strong growth, this entity, which is officially named Sartorius Stedim Biotech (SSB) and is the larger of the two Group divisions, further accelerated its dynamic growth trend in the second quarter. Thus, its first-half order intake surged 8.8% (currency-adjusted: 5.8%) from 187.1 million euros in the year-earlier period to 203.5 million euros. Single-use products with their clearly double-digit growth rates contributed to fueling this increase in orders received. In particular, the division’s disposable bag business profited from the rising demand generated by the vaccine industry, from which Sartorius Stedim Biotech received several additional orders during the second quarter. As already reported for the last quarters, equipment business with large-scale bioreactor systems declined, by contrast, due to market conditions. The Biotechnology Division increased its sales revenue 7.4% (currency-adjusted: 4.3%) from 184.1 million euros a year ago to 197.8 million euros. Regional assessment revealed that Sartorius Stedim Biotech posted very sizeable gains again in North America.
The gratifying trend in order intake and sales revenue is also reflected by earnings development in the Biotechnology Division. Thus first-half earnings before interest, taxes and amortization adjusted for special items - underlying EBITA – were boosted from 20.4 million euros in the year-earlier period to 28.0 million euros. Accordingly, the corresponding EBITA margin significantly improved from 11.1% to 14.2%. Special items for the Biotechnology Division amounted to 1.6 million euros and predominantly resulted from non-operating write-downs.
“Looking at the more than 37% increase in our operating earnings level compared with the year-earlier period, we can be very satisfied with the development of Sartorius Stedim Biotech, and see that we are on the right track with our strategy and our product portfolio. This holds true even without the special, positive impact by the vaccine business, in which we are currently seeing added demand for our single-use products, such as sterilizing grade filters and single-use bags," said Sartorius CEO Dr. Joachim Kreuzburg. For the coming months as well, Sartorius expects demand for these products to continue to remain high. “We have already responded to accommodate this demand by operating additional shifts at some of our European plants,” continued Dr. Kreuzburg.
Sartorius Mechatronics
The Mechatronics Division, by contrast, continued to feel the impact of the global recession. Its order intake fell significantly and was affected especially by customers from the chemical industry, which drastically cut back on their orders during the past months. Compared with the first quarter of 2009, however, there are signs that the division's order situation is stabilizing. During the first half, the division received orders valued at 102.9 million euros. In comparison with the year-ago figure of 124.1 million euros, order intake thus fell 17.1% (currency-adjusted: –20.3%). This decline affected both the laboratory and industrial weighing equipment businesses while the service business showed stable development in the first half. Accordingly, sales revenue for the Mechatronics Division dropped in the first six months from 119.9 million euros a year earlier to 98.7 million euros and thus by 17.7% (currency-adjusted: –20.9%). The regional pattern shows that the division’s decline in revenue was less pronounced for Asia/Pacific than for Europe and North America. First-half underlying EBITA for the Mechatronics Division was -3.4 million euros (first half 2008: 6.6 million euros) as a result of the drop in sales. The division incurred one-time extraordinary expenses of 14.7 million euros, which are essentially related to the restructuring program currently being implemented.
“The present economic state has turned out to be very difficult for the Mechatronics Division and calls for wider-ranging restructuring moves of both a short-term and a long-term nature. In an initial step, our focus lies on making substantial and sustainable cost reductions. The package of measures we announced in April for cutting costs by more than 25 million euros is already in place. Moreover, we are also reviewing our strategic lineup in the Mechatronics Division and are working on tapping into additional business segments," commented Dr. Kreuzburg.
Business Development of the Sartorius Group
On the whole, the Group posted orders valued at 306.4 million euros in the period from January to June. Order intake thus dipped 1.6% (currency-adjusted: -4.6%) from 311.3 million euros a year earlier. First-half consolidated sales revenue was 296.5 million euros compared with 304.0 million euros a year ago, and therefore eased 2.5% (currency-adjusted: -5.6%). First-half consolidated underlying EBITA was 24.7 million, down from 27.0 million euros the year before. The corresponding EBITA margin was 8.3% (first half 2008: 8.9%).
In the second quarter, the Sartorius Group implemented a factoring program to further diversify its financing instruments. In an initial tranche of this 40 - 50 million euro program, trade receivables totaling around 28 million euros were sold. This factoring program along with our significantly positive operating cash flow enabled the Group to reduce net debt by more than 34 million euros in the second quarter, despite paying dividends totaling 8.5 million euros.
Rearrangement of the Executive Board
The Supervisory Board of the Sartorius AG decided unanimously in a meeting held on July 24th, 2009, to appoint Reinhard Vogt and Jörg Pfirrmann with immediate effect as new members of the Executive Board. At the same time the Supervisory Board and Dr. Günther Maaz agreed by mutual consent that Dr. Maaz, who will turn 60 in September 2009, will resign from his position on the Executive Board of the Sartorius AG.
Within the new constellation of the Executive Board, every Member of the Board has cross-divisional responsibilities. Reinhard Vogt (53) will be in charge of Marketing, Sales and Service, while Jörg Pfirrmann (36) will take over the responsibility for Finance, IT and General Administration. The CEO, Dr. Joachim Kreuzburg (44), will be in charge of Operations, Legal Affairs, Internal Auditing and Corporate Communications as well as Human Resources and therefore will also take over the function of the Executive for Labor Relations. At the same time he will keep his current positions as the Chairman of the Board of Directors and the CEO of the Sartorius Subgroup Sartorius Stedim Biotech.
Due to the new appointments, two experienced managers from inside the Group join the Executive Board:
Reinhard Vogt who has been with the Sartorius Group since 1983, has essentially shaped the strategic development of the Biotechnology Division and successfully achieved growth of sales revenues and profits. He will retain his present position as Executive Vice President for Marketing, Sales and Service of Sartorius Stedim Biotech.
Jörg Pfirrmann who has been working since 1999 for Sartorius, was previously globally responsible for Group Finance. In the last years he has played a major part in orchestrating the success of key restructuring processes and acquisition projects of the Sartorius Group.
“The Executive Board will now concentrate on the quick implementation of the already started cost-cutting and restructuring programs within the Mechatronics Division. Furthermore we intend to intensively develop technological and sales-related synergies between the two divisions as well as within Mechatronics to quickly build up additional business fields beyond the area of weighing technology. Even though the two divisions are currently in very different economic conditions, we see highly positive future potentials for both,” said Dr. Joachim Kreuzburg.
Outlook
In view of the positive development of first-half business in the Biotechnology Division, company management continues to project that for this division, sales revenue will grow and earnings will increase overproportionately in fiscal 2009. For the Mechatronics Division, the company still anticipates a double-digit decline in sales revenue and a negative earnings contribution due to the exceptionally tough market conditions. Given the continued high uncertainty regarding the global economy, however, Sartorius still considers it not possible to make a precise quantitative forecast of Group business development in 2009.
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