Sartorius continued on the growth track in 2018 in both divisions and across all geographies, and thus achieved its forecast raised considerably at mid-year. According to preliminary figures, Group sales revenue rose in constant currencies by 13.2% to 1,566.0 million euros (reported: 11.5%). The non-organic share of the increase in consolidated sales was around one percentage point. Order intake rose in constant currencies by 12.5% to 1,662.5 million euros.
“Sartorius demonstrated its operational strength again in 2018 by its dynamic development. We achieved our ambitious revenue and earnings targets that we had raised as of the first half last year and further extended our strong international market position,” said Dr. Joachim Kreuzburg, CEO and Executive Board Chairman of Sartorius AG. “We are very optimistic about 2019, despite weaker economic indicators and a few macroeconomic risks, and plan to continue on our profitable growth track.”
The Group’s underlying earnings before interest, taxes, depreciation and amortization (underlying EBITDA) increased overproportionately by 14.7% to 405.0 million euros. Its corresponding margin rose by 0.8 percentage points to 25.9%. Relevant net profit for the Group surged 21.9% from 144.0 million euros a year earlier to 175.6 million euros. This yielded earnings per ordinary share of 2.56 euros (2017: 2.10 euros) and earnings per preference share of 2.57 euros (2017: 2.11 euros).
Regionally, the Americas showed the highest dynamics following moderate development in the previous year. Here, Sartorius increased its sales revenue by 16.6% to 520.1 million euros. The Asia | Pacific region achieved a gain of 15.5% to 388.2 million euros compared against a very strong previous year. In the EMEA region (Europe | Middle East | Africa), sales revenue was up 9.4%, to 657.7 million euros. (All regional figures in constant currencies.)
Key financial indicators
The Sartorius Group continues to have a very sound financial base. Its equity ratio at year-end was 38.5%, above the previous year’s level of 35.1%, and its ratio of net debt to underlying EBITDA edged down slightly from 2.5 in 2017 to 2.4 despite its extensive investment program. Capital expenditures rose by 13.6% from the already high prior-year figure to 237.8 million euros. Investing activities focused on the expansion of production capacity levels at the company’s site in Yauco, Puerto Rico, and on the extension of Group headquarters as well as manufacturing capacity in Göttingen, Germany. The ratio of capital expenditures to sales revenue was 15.2% relative to 14.9% in the previous year.
Growth of the Group is also reflected by the increase yet again in the number of employees. For the year ended December 31, 2018, a total of 8,125 people were employed at Sartorius worldwide, representing a year-over-year gain of 600 new employees or 8.3%.
Business development of the divisions
The Bioprocess Solutions Division, which offers a wide array of innovative technologies for the manufacture of biopharmaceuticals, grew very dynamically and even better than expected at the beginning of the year. It increased its sales revenue in constant currencies by 14.8% to 1,143.1 million euros (reported: 13.1%). The division’s highly competitive product portfolio and rising demand across all product categories fueled growth, which was mainly organic, while acquisitions contributed about half a percentage point of non-organic growth. Order intake in constant currencies was up 14.9% from the year-earlier figure. The division’s underlying EBITDA rose slightly overproportionately by 15.7% to 326.9 million euros. Its underlying EBITDA margin increased accordingly by 0.6 percentage points to 28.6% due to economies of scale.
The Lab Products & Services Division, which offers laboratory instruments and technologies for R&D and quality assurance primarily in the life science sector, developed robustly following a very strong year earlier. Despite softer demand in Europe since the second half of 2018, the division increased its sales revenue by 9.1% (reported: 7.3%) to 423.0 million euros. Essen Bioscience acquired in March 2017 contributed some 2.5 percentage points of non-organic growth. In constant currencies, order intake for the division was up 6.3% from 2017. The division’s underlying EBITDA climbed 10.4% to 78.1 million euros; its earnings margin was
positively influenced by economics of scale and product mix effects, and stood at 18.5%, half a percentage point above the prior-year figure.
Further profitable growth expected for 2019
Sartorius expects to grow profitably in 2019 as well. Consolidated sales revenue is thus projected to grow by about 7% to 11%. This forecast considers the changes to the sales alliance with the Lonza group in the area of cell culture media. Without these changes, sales growth would probably be some 2 percentage points higher. Regarding profitability, management forecasts that the company's EBITDA margin will increase to slightly more than 27.0% over the prior-year figure of 25.9%, with the operating gain projected to be about half a percentage point and the remaining increase expected to result from a change in the accounting rules. The ratio of capital expenditures to sales revenue is forecasted to be around 12%, down from the 2018 figure of 15.2%.
For the Bioprocess Solutions Division, management expects dynamic growth to continue. It anticipates that sales will increase by about 8% to 12% over the previous year’s high revenue base (without considering the modification of our partnership with Lonza, between approx. 11% and 15%). Management forecasts that the company's underlying EBITDA margin will increase to slightly more than 29.5% relative to the prior-year figure of 28.6%. The operating gain is expected to account for around half a percentage point.
The Lab Products & Services Division is partly dependent on the development of economic cycles. A number of indicators now signal that economic development is slowing in important economic regions. Against this backdrop, management forecasts that the division’s sales revenue will increase by about 5% to 9% and the underlying EBITDA margin to slightly more than 20.0% (previous year: 18.5%), with the operating gain accounting for about half a percentage point.
All forecasts are based on constant currencies, as in the past years. A no-deal exit of the U.K. from the E.U. might impact our supply chains in both divisions to a certain degree in spite of the measures already taken to counteract this development. A reliable prognosis concerning possible effects cannot be made at the current time.