Sartorius closes 2010 with strong gains in sales revenue and earnings
Considerable growth and further gains in earnings expected for 2011
Group CEO Dr. Joachim Kreuzburg, satisfied with the company’s results, said: “Considering all key financials, 2010 was a very successful year for Sartorius. The Biotechnology Division showed excellent development in Asia and North America and is operating at a strong level of profitability. Our Mechatronics Division grew more dynamically on a broad basis than expected and has returned to robust profitability that can be further increased. Looking ahead to 2011, we are confident. We got off to a good start in the current year and are expecting to achieve further profitable growth in both divisions.”
Business Development of the Sartorius Group
According to preliminary figures, Sartorius generated consolidated sales revenue of 659.3 million in fiscal 2010. This equates to an increase of 9.5% (constant currencies: 6.4%). The gain in order intake was even stronger: It jumped 10.7% to 681.1 million euros (constant currencies: 7.5%). Both Group divisions and all regions contributed to this dynamic business development.
Regionally, Sartorius grew the strongest in Asia/Pacific. Here, sales revenue surged 17.6% in constant currencies; order intake soared 26.6%. These figures reaffirm the company's strategy of actively participating in growth regions such as China and India early on. In North America as well, Sartorius posted significant gains: Sales rose at a double-digit rate of 11.0% in constant currencies; order intake, at 4.5%. Because of an extraordinary effect on business in the year before, sales revenue in Europe edged up only by 0.3% in constant currencies; order intake in this region grew 4.9%.
Strong development of sales revenue was accompanied by overproportionate gains in earnings and in operating EBITA margin. Sartorius uses earnings before interest, taxes and amortization (EBITA) as the key profitability measure. To enable a more meaningful comparison with the year-earlier figures, the company reports earnings adjusted for extraordinary items (= operating EBITA or operating earnings) in addition to EBITA.
In the reporting period, the Group’s operating earnings surged 40.4% to 85.5 million euros from 60.9 million euros a year ago. The respective margin climbed by nearly three percentage points from 10.1% to 13.0% and thus reached a new high. Both Group divisions contributed to this strong development of earnings. The Biotechnology Division further increased its already high profitability. The Mechatronics Division achieved substantial improvements following a weak 2009 due to the global economic crisis. Favorable exchange rates had a positive impact of half of a percentage point on the margin.
Extraordinary items stood at -6.3 million euros compared with the previous year’s figure of -30.0 million euros, which were predominantly expenses incurred for restructuring. Including these extraordinary items, consolidated EBITA increased more than 2.5 times from 30.9 million euros to 79.2 million euros.
The Group’s relevant net profit rose 87.7% from 20.8 million euros a year ago to 39.0 million euros. The corresponding earnings per share are 2.29 euros, well up from 1.22 euros a year ago. The unadjusted consolidated net profit after minority interest totals 31.0 million euros. In the previous year, it was negative, at -7.3 million euros, on account of the considerable expenses incurred for restructuring the Mechatronics Division.
Despite the share buyback program for its biotechnology subgroup, Sartorius was able to pare back its net debt, based on its strong operating cash flow in the reporting year, by 27.8 million euros, or a good 12%, from 224.7 million euros to 196.9 million euros. The key debt service coverage ratio, the ratio of net debt to operating EBITDA, significantly improved and was at 1.8 at year-end compared with 2.6 as of December 31, 2009.
Business Development of the Divisions
Sartorius Stedim Biotech
The Biotechnology Division, which operates under the name of Sartorius Stedim Biotech (SSB), increased its sales revenue in the reporting period by 8.0% from 400.4 million euros to 432.6 million euros (constant currencies: 5.1%). Order intake also considerably jumped 8.1% from 409.2 million euros to 442.3 million euros (constant currencies: 5.0%). Again, the company’s business with single-use products for the biopharmaceutical industry substantially fueled this growth. Business with bioreactors and other biotechnological production systems also added positive momentum. Relatively large orders for these products were received from the Asian region, where local biopharmaceutical companies in particular have been investing in the installation of new systems.
A regional comparison shows that primarily in Asia|Pacific, business expanded very dynamically, with order intake up 51.7% and sales revenue up 25.4%. In North America as well, sales grew strongly by 12.1% and order intake rose 3.8%. In Europe, by contrast, business was flat (order intake: +0.2%; sales revenue: -3.3% / all regional figures given in constant currencies). This development was not only the result of sluggish demand. It was also significantly due to a base effect: The comparative year-earlier figures were higher than average as a result of extraordinary business generated with producers of the H1N1 vaccine.
Overall positive development of sales revenue is reflected by the division’s earnings. The division succeeded in further increasing its already high profitability. Its operating earnings improved overproportionately by 16.6% from 60.2 million euros to 70.2 million euros. The respective margin rose from 15.0% to 16.2%.
While the global economy recovered, business for the Mechatronics Division expanded dynamically in all segments and regions. The division increased its sales revenue in 2010 by 12.4% from 201.7 million euros to 226.7 million euros (constant currencies: 8.9%). The gain in order intake was even stronger. It jumped 16.0% to 238.8 million euros (constant currencies: 12.4%). Both of the division's businesses with laboratory instruments and industrial weighing and control equipment, respectively, contributed to this encouraging development. Service business, which was hardly impacted by the economic crisis in 2009, also grew.
Regarding regional development, the Mechatronics Division reported high growth rates in all of its business regions. In Europe, order intake climbed 14.8% and sales revenue rose 7.9%. In North America, order intake increased 6.6% and sales were up 7.5. In Asia/Pacific, the division’s order intake grew 9.8% and its revenue rose 9.6% (all regional figures given in constant currencies).
After the year of crisis in 2009, the Mechatronics Division substantially improved its earnings in the reporting year and returned to robust profitability. In addition to the significant rise in volume, efficiency gains made during restructuring in 2009 also contributed to this strong rebound in profitability. The division’s operating earnings soared, reaching 15.3 million euros compared with 0.7 million euros the year before. Accordingly, the division’s operating EBITA margin improved from 0.4% a year ago to 6.8%.
Outlook for 2011
Positive business development is anticipated to continue in the current year as well. For 2011, Sartorius expects sales to grow between 6% and 8% in constant currencies for both divisions and thus for the entire Group. Along with growth in sales, profitability is projected to further increase. Without any currency effects considered, the operating EBITA margin at Group level is forecasted to increase to around 14%. The Biotechnology Division is expected to contribute an operating margin of approximately 17% and the Mechatronics Division a margin of around 8% to this result. Furthermore, management anticipates a significantly positive operating cash flow.
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