Sartorius (FWB:SRT), a leading international laboratory and process equipment provider, increased its operating profit in 2009 despite the difficult macroeconomic climate and achieved operating earnings of 60.9 million euros, up from 56.8 million euros a year earlier. “As a result, we are among the companies that were able to close the 2009 year of crisis with a positive development of operating earnings,” commented CEO Dr. Joachim Kreuzburg on the company’s full-year results at the annual press conference in Goettingen, Germany.
“In addition to our strong focus on our operating results, strategic acquisitions will again be an issue as of 2010, but we are in no hurry in this regard.”
Both divisions of the Group contributed very differently to consolidated earnings. The Biotechnology Division, which predominantly manufactures consumables for the biopharmaceutical industry and contributes approximately two thirds to consolidated sales, reported dynamic growth and attained a new level in operating profit. By contrast, the Mechatronics Division, which manufactures primarily weighing and control equipment, i.e., capital goods and is thus much more dependent on economic cycles, saw its development of business and earnings severely impacted by the global downturn. Nevertheless, this division achieved a turnaround as a result of extensive restructuring measures during the course of the year and closed 2009 with positive operating earnings.
For 2010, Dr. Kreuzburg expects growth in sales revenue and profit for both divisions. “I assume that the Biotechnology Division can maintain its strong growth. Production technology in our key customer segment, the biopharmaceutical industry, is undergoing rapid change. Pharmaceutical manufacturers are increasingly switching from stationarily installed stainless steel equipment to flexibly deployable single-use products made of plastic. This is exactly the direction in which we have been strategically heading and propelling developments in the Biotechnology Division right from a very early stage. Meanwhile, we offer the widest and best integrated portfolio in the industry for the manufacture of pharmaceuticals using single-use systems. We will be launching highly attractive new products in this market segment in 2010 as well."
Referring to the Mechatronics Division, Dr. Kreuzburg mentioned the considerable unknowns still surrounding the current business cycle, but for the division expects the economy to recover slightly. “On the cost side, we are in a substantially improved position thanks to our extensive restructuring program. Moreover, in 2009 we initiated a strategic realignment of the Mechatronics Division. Building on our strong market position in weighing equipment, we will transform our company from being a technology specialist into an applications expert. Through strategic alliances and our own developments, we will be adding new technologies to our array of products, technologies that help our customers enhance their production processes in terms of cost, quality, safety and reliability. In the process, we are focusing even more strongly on the food and the pharmaceutical industries, both of which are sectors with excellent mid- and long-term growth prospects."
In view of strong consolidated cash flow and highly robust key balance sheet ratios and financials, Dr. Kreuzburg sees the Sartorius Group in a capable position to take further growth steps. “In addition to our strong focus on our operating results, strategic acquisitions will again be an issue as of 2010, but we are in no hurry in this regard.”
Essential Figures on the Business Development of the Divisions and of the Group
Sartorius Stedim Biotech
The Biotechnology Division, which operates under the name of Sartorius Stedim Biotech (SSB), looks back upon a successful fiscal 2009 and increased its sales revenue 9.4% from 366.0 million euros to 400.4 million euros (currency-adjusted: 8.3%). Order intake also considerably jumped 11.5% from 367.1 million euros to 409.2 million euros (currency-adjusted: 10.3%). Again, double-digit growth rates generated by the company’s business with single-use products for the biopharmaceutical industry substantially fueled this growth. In addition, SSB benefited in the reporting year from the high demand driven by vaccine manufacturers who required considerable quantities of single-use bags and filters used in the production of the vaccine against the H1N1 virus. This effect contributed around two percentage points to growth. As expected, business with large-scale bioreactor systems slightly declined, by contrast, but saw positive momentum as of the second half of the year.
Regarding regional distribution of sales revenue, all business regions with their significantly positive growth rates contributed to the successful development of sales. North America achieved the highest growth, where sales were up 18.1% (currency-adjusted: 11.6%), followed by Asia|Pacific, with sales up 7.8% (currency-adjusted: 4.7%), and Europe, up 5.1% (currency-adjusted: 6.5%).
This strong sales development is also reflected by the Biotechnology Division’s earnings. Its earnings before interest, taxes and amortization, which were adjusted for special items (underlying EBITA or operating earnings), grew overproportionately by 51.5% to 60.2 million euros from 39.7 euros a year earlier. The corresponding EBITA margin rose from 10.9% to 15.0% and thus marks a new level. Besides the uplift in sales volume, the division’s enhanced product mix and stringent cost management were decisive for this boost in profitability.
Sartorius Mechatronics
Amid a climate of pronounced reluctance to invest shared by nearly all customer sectors, the Mechatronics Division reported a steep decline in demand for its products in the reporting year. This impacted its business with industrial weighing and control equipment slightly more than its business with laboratory instruments. By contrast, service business proved to be robust. Compared with a year ago, the division’s sales revenue dropped 17.9% from 245.6 million euros to 201.7 million euros (currency-adjusted: -19.3%). At 205.9 million euros, order intake was also down 15.2% from 242.7 million euros a year earlier (currency-adjusted: -16.6%). Following an especially steep plunge in first-half demand, business indicated initial signs of recovery at year-end.
The regional pattern shows that the division’s decline in revenue was somewhat less pronounced in Asia|Pacific at a minus of 8.2% (currency-adjusted: -12.7%) than in the regions of North America (-14.4%; currency-adjusted: -19.1%) and Europe (-22.4%; currency-adjusted -21.7%).
Despite the drop in sales, the Mechatronics Division posted slightly positive operating earnings of 0.7 million euros, up from 17.1 million euros a year ago. This increase was due to an extensive restructuring program, which was implemented in the reporting year to adapt the division’s structures to the changed market conditions and which reduced its annual cost base by a good 30 million euros. The division’s underlying EBITA margin was 0.4% compared with 7.0% for the year-earlier period.
Business Development of the Sartorius Group
At Group level, the excellent development of the Biotechnology Division's business compensated for the recession-induced losses in the Mechatronics Division for the most part. Consolidated sales revenue in 2009 was 602.1 million euros compared with 611.6 million euros a year ago, and therefore eased only slightly by 1.6% (currency-adjusted: -2.7%) relative to the previous reporting period. At 615.1 million euros, order intake was slightly above the year-earlier figure of 609.8 million euros (0.9%; currency-adjusted: -0.4%).
On account of the Biotechnology Division’s significant rise in profitability, consolidated operating earnings rose 7.2% from 56.8 million euros to 60.9 million euros. The corresponding earnings margin climbed from 9.3% to 10.1%. Extraordinary expenses, which are predominantly comprised of provisions for the restructuring program in the Mechatronics Division, totaled 30.0 million euros. Unadjusted consolidated EBITA was 30.9 million euros (previous year: 56.8 million euros).
The Group’s relevant net profit – underlying consolidated net profit after minority interest without the two non-cash items of amortization and interest for share price warrants – was also slightly up from 18.2 million euros a year ago, at 20.8 million euros; this equates to earnings per share of 1.22 euros, up from 1.07 euros in the previous year. In particular, due to the significant restructuring charges in the Mechatronics Division, the unadjusted consolidated net profit after minority interest amounts to -7.3 million euros (12.4 million euros).
Key Balance Sheet Ratios and Financials at an Improved, Solid Level
A particular focus of the reporting year was on strengthening cash flow. Because of strong operating profit, stringent management of working capital and the factoring program implemented in middle of the reporting year, operating cash flow surged from 53.0 million euros to 143.4 million euros. Accordingly, the key balance sheet ratios and financials were at an overall improved, solid level: the equity ratio was 38.9% (Dec. 31, 2008: 38.5%) and the ratio of net debt to EBITDA was 2.6 (previous year: 2.7).
Research and Development Adapted to Accommodate Market Conditions
In fiscal 2009, Sartorius spent 40.2 million euros on research and development, down from 43.9 million euros a year ago; at 6.7%, its ratio of R&D costs to sales revenue eased slightly from a year earlier. While R&D costs in the Biotechnology Division remained at a constantly high level, R&D spending in the Mechatronics Division was adapted to accommodate the changed market conditions. As in the Biotechnology Division, Sartorius plans to extend its product portfolio in the Mechatronics Division through targeted alliances with external partners from science and industry.
Workforce Reduced by Restructuring in the Mechatronics Division
As of December 31, 2009, the Sartorius Group employed 4,323 people, 337 persons, or -7.2%, fewer than in the previous year. This decrease essentially resulted from the adjustment of personnel capacity in the Mechatronics Division in line with its lower business volume. Together with employee representatives, the company agreed on socially responsible arrangements as far as possible in making the unavoidable cuts in staff costs. The number of employees in the Mechatronics Division dropped from 2,298 to 1,942. In contrast, the Biotechnology Division slightly increased its number of staff 0.8% from 2,362 to 2,381 by the end of 2009.
Dividends Proposed at the Year-Earlier Level
The Supervisory Board and the Executive Board of Sartorius AG will submit a proposal to the Annual General Shareholders’ Meeting on April 21, 2010, to pay the dividends in the same amounts as in the previous year: 0.42 euro per preference share and 0.40 euro per ordinary share. As a result, the total profit distributed would be 7.0 million euros as in 2008. This dividend proposal mirrors the operating profitability of the past fiscal year and the positive future prospects of the company.
Positive Outlook for Both Group Divisions
For the Biotechnology Division, management expects currency-adjusted sales growth in the upper single-digit range for 2010. This increase is forecasted to comprise strong gains for single-use products and moderate gains for its equipment business. As in 2010 extra business with the vaccine industry is not anticipated and equipment business is likely to contribute a relatively high percentage to sales growth, the division’s operating EBITA margin is expected to rise rather slightly.
For the Mechatronics Division, which is more strongly dependent upon business cycles, management assumes that despite the persistent uncertainty about economic development, there will be a slight upturn. Against this backdrop, currency-adjusted sales growth is expected in the lower single-digit percentage range. Given the division’s significantly reduced cost base as a result of extensive restructuring measures, its operating EBITA margin should attain around 5%.
For the entire Group, management accordingly expects sales growth in constant currencies to be slightly above 5% and its operating EBITA margin to continue to improve by one to two percentage points. Furthermore, management anticipates a significantly positive operating cash flow.
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Dr. Joachim Kreuzburg, CEO and Executive Board Chairman of Sartorius:
https://www.sartorius.com/en
Sartorius Stedim Biotech delivers innovative systems and solutions for the manufacture of biopharmaceutical medications:
https://www.sartorius.com/en
Sartorius Mechatronics produces weighing and control equipment for laboratory and industrial applications in the food and pharmaceutical industries:
https://www.sartorius.com/en
Upcoming Financial Dates:
April 21, 2010 Annual General Shareholders’ Meeting in Goettingen, Germany
April 2010 Publication of first-quarter figures (Jan. – March 2010)
Sartorius raises 2020 sales and earnings forecast based on dynamic performance in the first half