Following extraordinary growth in 2020 and 2021, the life science group Sartorius again outperformed the market in fiscal 2022, achieving its targets for sales revenue and profitability. Both divisions contributed to this development and, according to preliminary figures, recorded double-digit percentage growth in sales revenue and earnings year-over-year. For fiscal 2023, the company projects further growth and continued high profitability.
“After two exceptionally dynamic years, we delivered another year of strong results. Despite the challenging operating environment, our growth was broad-based across the portfolio and the geographies, and we see us a good year ahead of our mid-term plan. While growth in the lab division was even slightly stronger than forecast, the bioprocess division was influenced by the expected normalization of demand, a process that is expected to continue for several quarters. For 2023, we therefore anticipate moderate sales revenue growth and a profit margin around the high prior-year level. As we look ahead, we see that the strong fundamental growth drivers in our markets remain unchanged. Demand for biopharmaceuticals is on the rise in all indication areas and regions, and at the same time the biotech industry is in an extraordinarily innovative phase. We are excellently positioned to support our customers in their endeavors and to seize the opportunities that arise from this. Substantial investments into capacities and acquisitions that expand our capabilities will therefore remain part of our growth strategy. While our basic assessment of mid-term market trends has not changed, we are raising our 2025 sales revenue forecast to around 5.5 billion euros to reflect changes in price levels caused by inflation. At the same time, we confirm our mid-term profitability target of an EBITDA margin of around 34 percent,” said CEO Joachim Kreuzburg.
Business development of the Group
Driven by significant organic growth in both divisions, sales revenue of the Sartorius Group rose by 15.0 percent in constant currencies (reported: +21.0 percent) year-over-year to 4,175 million euros in fiscal 2022. As expected, acquisitions contributed close to 2 percentage points to growth. All three business regions – EMEA, the Americas, and Asia | Pacific – expanded significantly, with the Americas region posting the strongest gain. The restrictions in China caused by the pandemic as well as the strong reduction of the business in Russia impacted growth to a relatively minor extent.
Following two exceptionally strong years due to the pandemic, order intake as expected recorded a year-over-year decline against the backdrop of demand normalization and a significantly lower Covid-19-related business, reaching 4,007 million euros (in constant currencies: -10.1 percent, reported: -6.1 percent). Excluding the Covid-19-related business, order intake would have grown slightly. In the Bioprocess Solutions division, in particular, the development of the previous two years had been positively influenced by high demand from coronavirus vaccine manufacturers and changed ordering patterns by some customers, who had placed orders larger in size and further in advance than usual.
Underlying EBITDA rose by 20.0 percent to 1,410 million euros in 2022. At 33.8 percent, the resulting margin was close to the high prior-year figure of 34.1 percent. The 2021 margin had been positively influenced by a partially delayed cost development, for example as a result of deferred new hires in relation to sales revenue growth because of the pandemic and low business travel activity. As planned, these cost positions normalized in 2022 and, in addition to a slight dilution caused by currency effects, had a dampening effect on profitability. Price effects on the procurement and customer sides largely offset each other.
Relevant net profit reached 655 million euros, representing an increase of 18.4 percent from the prior year. Underlying earnings were 9.57 euros (prior year: 8.08 euros) per ordinary share and 9.58 euros (prior year: 8.09 euros) per preferred share.
Key financial indicators
The Sartorius Group continues to have a very sound balance sheet and financial base. As of December 31, 2022, the equity ratio increased to 38.1 percent (December 31, 2021: 30.2 percent), and the ratio of net debt to underlying EBITDA was 1.7 (December 31, 2021: 1.5). Cash flow from investing activities stood at - 594 million euros, compared with -428 million euros in 2021. The ratio of capital expenditures (CAPEX) to sales revenue was 12.5 percent (prior year: 11.8 percent).
Increase in the number of employees
As of December 31, 2022, Sartorius had a total of 15,942 employees worldwide, 2,110 more than at the end of 2021. Following a significant increase in the first six months of 2022, the pace of new hires slowed down as the second half of the year began, as planned.
Business development of the Bioprocess Solutions division
The Bioprocess Solutions division, which offers a wide array of innovative technologies for the manufacture
of biopharmaceuticals and vaccines, achieved sales revenue of 3,326 million euros in 2022. This corresponds to a year-over-year increase of 15.9 percent in constant currencies (reported: +22.0 percent) and includes around 2 percentage points of non-organic growth from acquisitions. All product areas contributed to growth, while the Covid-19-related business declined significantly from the prior year.
As expected, order intake declined year-over-year against the backdrop of demand normalization and a significantly lower Covid-19-related business, reaching 3,123 million euros (in constant currencies: - 14.0 percent; reported: -10.4 percent). Excluding the Covid-19-related business, order intake would have grown slightly. In the two previous years, the division had recorded exceptionally high growth rates due to changed ordering patterns and strong demand from coronavirus vaccine manufacturers.
The Bioprocess Solutions division’s underlying EBITDA rose by 20.5 percent to 1,188 million euros. The resulting margin of 35.7 percent was close to the high prior-year level of 36.2 percent and was dampened by higher costs, as planned, for example due to the growth in the number of employees as well as other normalized cost positions.
Business development of the Lab Products & Services division
Sales revenue of the Lab Products & Services division, which specializes in life science research and pharmaceutical laboratories, recorded a very dynamic development, rising by 11.5 percent in constant currencies (reported: +17.4 percent) to 848 million euros. Around 1 percentage point came from non-organic growth. The bioanalytical instruments business showed a particularly strong expansion. Order intake increased by 7.4 percent in constant currencies (reported: +12.8 percent) to 885 million euros.
The division’s underlying EBITDA rose by 17.6 percent to 222 million euros, with the resulting margin widening slightly to 26.2 percent (prior year: 26.1 percent). A positive product mix and economies of scale compensated for negative currency effects and planned higher costs.
Outlook for fiscal 2023
Following the exceptionally strong previous years, Sartorius expects further growth in 2023 despite demand normalization and anticipated further declines in the Covid-19-related business. Consolidated sales revenue is expected to increase by an amount in the low single-digit percentage range. Excluding the Covid-19-related business, the increase would be in the high single-digit percentage range. Acquisitions are anticipated to contribute around 1 percentage point to growth. The Group’s underlying EBITDA margin should be around the level of the prior year (33.8 percent).
For the Bioprocess Solutions division, the company anticipates sales revenue growth in the low single-digit percentage range. Excluding the Covid-19-related business, the increase would be in the high single-digit percentage range. Acquisitions are expected to contribute around 1 percentage point to growth. The division’s underlying EBITDA margin is anticipated to be around the level reached in 2022 (35.7 percent).
Sales revenue growth in the Lab Products & Services division is expected to be in the mid single-digit percentage range. Excluding the Covid-19-related business, the increase would be in the high single-digit percentage range. This division’s underlying EBITDA margin is also expected to be around the level of the prior year (26.2 percent).
The company will continue its comprehensive capacity expansion program in 2023. The CAPEX ratio should be at roughly 12.5 percent and the ratio of net debt to underlying EBITDA at about 1.5. Possible acquisitions are not included in this projection.
Medium-term sales revenue target for fiscal 2025 updated
Based on the unchanged strong fundamental growth trends in its markets and the resulting positive prospects for the company, Sartorius confirms its fundamental growth projections. In light of increased inflation and associated price adjustments, the company therefore is making a mathematical adjustment to its medium-term sales revenue forecast and now expects sales revenue of around 5.5 billion euros in 2025 (previously around 5 billion euros). Sartorius plans to achieve this sales revenue increase primarily through organic growth and additionally by acquisitions. For the Bioprocess Solutions division, the company now projects sales revenue of around 4.2 billion euros in 2025 (previously around 3.8 billion euros) and for Lab Products & Services of around 1.3 billion euros (previously around 1.2 billion euros).
The forecast for the Group’s underlying EBITDA margin in 2025 remains unchanged at around 34 percent. For the Bioprocess Solutions division, the company continues to expect an underlying EBITDA margin of around 36 percent in 2025. The margin forecast for Lab Products & Services also remains unchanged at around 28 percent. The margin targets include expenses of around 1 percent of Group sales revenue for measures to reduce the company‘s CO2 emission intensity.