Sartorius AG

Ladies and gentlemen, welcome to the Sartorius and Sartorius Dedim Biotech conference call on the 9-month 2024 results. I am Sergin, the chorus call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Dr. Joachim Kreutzburg. Please go ahead, sir.

Thank you very much. Welcome, everyone. Good day. And pleasure to walk you through our results for the first nine months of 2024. As always, we will do this together. That means it's myself and Florian Funk, CFO of the Sartorius Group, as well as René Faber, CEO of Sartorius Data and Biotech. And we will start with the results of Sartorius AG or the Sartorius Group. And then thereafter, we will walk you through the additional information on Sartorius Data and Biotech. So let me start with highlighting the key results of the first nine months of 2024. And I think the two main results points here are that the results are in line with our expectations, and secondly, that we confirm our guidance of full year 2024. The sales revenue for nine months are close to prior year level as expected, and we at the same time see a significant increase of our order intake. Clearly, the recurring business shows a positive trend, and this is very much in line with the continued depletion of stock levels by our customers. This, of course, particularly is impacting the bioprocess solutions division, where the nine-month revenues are very close to prior year level, and the positive trend in consumables is offsetting the continued soft equipment business. For the LPS division, where The instruments business and therefore the investment part of the business, so to say, is stronger. We still see a certain decline of our revenues, which is reflecting the reluctance of many customers globally to make investments and to decide upon investments. And that is particularly the case for China still. I think one can say that our profitability on a group level is on a very robust level. This is also very much positively influenced by the effects from our efficiency program, where we are still expecting increasing contribution during Q4. We also are reporting a significantly increase of our cash flow, which is reflecting both a reduction of our working capital as well as our capex management. And then once again, the guidance for 2024, we confirm in all metrics. Before I hand over to Florian, I would like to once again show a chart that we have used for a couple of quarters now, which is showing the very significant volatility over the last couple of years. and where we also see that the normalization hasn't been a, yeah, like ideally V-shape kind of normalization, but after the very sharp increase of order intake and the decoupling of order intake from sales revenue, we saw a more volatile development of the order intake and therefore also more a couple of Ws, if you wish, in regards to this normalization. But nevertheless, when you take a look on this chart, I think one can say that we see a gradually normalizing set of numbers here as well. So this is the bigger picture, and now we will focus on the most recent results. Florian.

Yeah, thank you, Jochen. And welcome, everybody, and also good afternoon from my side. Let's have a look at our financial key figures. Overall, our performance in Q3 was what I would call solid and in line with our expectation. Sales for the nine months are still slightly negative versus prior year with minus 2.8% reported, respectively 2.0% FX adjusted. But we are looking quite confidently into the rest of the year. And confidence is fueled by looking at the activity level that we see with our customers, which is driven, as also Joachim stated, by mainly our consumables and recurring business, also as expected. Recurring sales are constantly improving over the course of the year, and maybe to remind you, we started from a negative high single-digit decline in Q1, now to a positive high single-digit growth in Q3, with a nine-month performance being um positively low single digit over the course of the first three quarters and this is as we always said any performance in 24 will be driven by the recurring business by the consumables business q3 numbers are fully in line with our expectations and what we communicated also during our H1 call. Just as a recap, we told you in the H1 call that Q3 will show the lowest sales in absolute terms of all quarters in 24, and that the sales performance versus prior year will be close to the H1 performance. So H1 was minus 2.2% in constant currencies, and now Q3 was minus 1.7% in constant currencies, so very much in line with that. And regarding the underlying EBTA margin, nine-month figures show a solid 27.7%. We communicated in the H1 call that mainly because of our internal inventory reduction program and the seasonally low sales volume in Q3, margin will be lowest in Q3. Our underlying EBTA margin in Q3 standalone was 27.1%. which indeed was lower than the H1 margin of 28.1, but it was already above the prior year Q3 margin of 26.7%, which shows that positive effects from our efficiency program are kicking in, and despite the negative effects from inventory reduction. With the efficiency program, we are targeting more than 100 million euro in 2024 and are well underway. And this program will have its biggest impact in Q4-24. To give you a little bit more feeling for the sequence of the numbers, we will see roughly 60% of the impact of the program in H2. And of that H2 impact, 60% once again then in Q4. Order intake was up in the nine months by 6.6% in constant currencies to 2.326 billion euro. And in order intake, we also saw a good performance in consumables and a rather soft order intake on equipment. And well, as a consequence, on the back of the lower EBDA in million euro and the higher interest expenses after the PolyPlus acquisition, underlying net profits and EPS are below prior year. Coming then to the regional performance. In both divisions, we see EMEA being the strongest performing region with an overall growth of approximately 5 percent. EPS being a little bit higher than this 5 percent, LPS is slightly up against prior year. With regards to Asia, the lower performance is very much due to the China effect, where markets, as you know, have heavily corrected in H123, and since several quarters seems to have found the bottom. Excluding China, the Asia sales performance would have been positive in mid-single digits, roundabout. To remind you, China currently accounts for approximately 8% of the group sales, 6% BPS, and 13% LPS. Looking at the Americas, the performance has to be seen in connection with the fact that during the pandemic, the U.S. business overproportionately benefited from our ability to deliver at these times and had, therefore, the biggest exposure to stocking at our customers. and in turn also now has the biggest exposure to destocking effects. Reni will comment a little bit later on BPS, but let me start with some broader comments. Order intake in BPS is up approximately 8% to 1.836 billion in constant currency. Please note that the recurring order intake is over all three-quarters and 24 up double digits. Overall, sales growth was flattish at minus 0.8% and constant currencies to 1.962 billion euro, while PolyPlus acquisition is contributing approximately 2.5% to this number. The current sales are up after nine months by low single digit, with improving performance over the quarters from quite negative territory to a high positive single digit growth in Q3. Underlying EBITDA and corresponding margin is slightly down, but margin was 28.9% still on a very robust level. A slight margin decline is driven by mixed effects, but especially the lower production volumes alongside with our internal inventory reduction program are due to that. We are working against these effects with the already mentioned efficiency program, which will also, of course, in DPS show the strongest contribution in Q4. Please also note that on the back of this efficiency program, Q3 in BPS is the first quarter where the underlying EBITDA in terms of margin and million euro is above the prior year number. So if you look at margin, for example, it is in Q3 28.4% versus 27.4% in the prior year. And also Q4, you'll see margin above prior year. Then coming to LPS. where the market environment stays challenging, having to digest the much weaker China market and seeing across the board customer reluctance to invest in instruments. In this environment, I think we can be very satisfied with an auto intake that came in slightly above prior year in constant currencies. Saves are down by 6.5 percent in constant currencies in nine months against quite high comps, especially from China at the beginning of the year. Especially equipment business with bioanalytic instruments is still weak. The broader lab essential business is currently doing better. And as you know, lab essential business is coming with lower margins than the BioA instruments, so there's a negative mixed effect. Also, the overall volume effect versus prior year and the output reduction were weighing on the LPS margin. As you can see here, underlying EBTA is down to 118.5 with a margin of 23.2. If we go to the next slide, as usual, we have added one page in the deck with some additional financial data that some of you use for your modeling and deeper understanding. Let me do some short comments. Extraordinaries are slightly below prior year, mainly because in 24 we had less M&As. integration costs. The main buckets in the Extraordinaries in 23 and 24 are restructuring costs and here predominantly severance costs to be recorded in 24. This number also contains to some extent corporate projects like our currently running S4 HANA transition project. The financial result in prior year was heavily influenced by a positive non-cash or not valuation effect adjusted For these non-cash one-offs, the financial result is down only due to the increase in average net debt versus prior year. Cash flow, and Joachim mentioned that, is showing the results of our working capital and capex management and is up from 91 million in prior year to this year, 280 million. And also Q3 has been a strong free cash flow contributor with around 180 million in that quarter. Looking at CapEx, the prior year number in investment is, of course, impacted by the Pulley Plus acquisition. Adjusted for that, the nine-month CapEx in million euro is well below the nine-month figure for the prior year. CapEx as a percentage of sales is down to 12.9% after three quarters, and this is already quite close to our full year 24 financial guidance of around 12%. This brings me to the next chart and some balance sheet-related figures. Non-current assets are slightly up to $7.825 billion, mainly because of our CapEx program and the included growth project adding to the property plant and equipment position. Equity ratio stands at healthy 38.6%. where the increase is driven, of course, by the capital increase that we did in Q1 24. And capital increase is also the reason for the reduced net debt of 3.946 billion. And this quarter is the first quarter in this year where this number is below 4 billion. This brings me to net debt to EBTA ratio, which stands at 4.4 times after nine months. And as you know, we are working on further reducing these numbers to around four times. And I see us well underway here. And with that, I would like to conclude for that moment and hand over back to Joachim.