Report of the Executive Board

Dear Shareholders and Business Partners,

In 2018, Sartorius developed dynamically, with doubledigit growth rates in sales revenue and earnings. Group sales rose in constant currencies by 13.2% to approximately €1.6 billion; its underlying EBITDA margin rose by 0.8 percentage points to 25.9%. We therefore surpassed our original expectations and achieved our forecast that we had considerably raised at mid-year 2018. At the same time, we have defined the roadmap in important areas to consolidate and further expand our position as a leading international technology partner of biopharmaceutical research and the industry. In 2019, we are set to complete the major part of our multiyear investment program to expand production capacity and extend our Group headquarters. We are thus well prepared to optimally continue serving the growing needs of a strongly expanding market.

As in the previous years, we intend to have our shareholders participate adequately in the success of our company. Accordingly, the Supervisory Board and the Executive Board will submit a proposal to the Annual General Shareholders' Meeting on March 28, 2019, to raise dividends for the ninth time in succession to €0.62 per preference share and €0.61 per ordinary share.

Our Group's track record of growth is also reflected by the prices of Sartorius shares, which saw significant gains in a volatile and an overall challenging stock market environment: Preference shares rose sharply by 36.9%, and closed the 2018 stock market year at €108.9; ordinary shares closed at €96.0, up 27.3% from share prices at the end of 2017. Another positive sign is that besides being listed in the TecDAX, Sartorius preference shares have been additionally admitted to the MDAX as part of the new organization of the German stock indices in 2018. This is bound to further increase their attractiveness, especially for international investors.

Let us review the development of our divisions, which both contributed to the Group's positive performance.

The Bioprocess Solutions Division, which offers a product and service portfolio addressing all production steps in the biopharmaceutical industry, grew very dynamically in both sales revenue and underlying EBITDA following moderate prior-year performance. During the first half, it was already clear that we would exceed our original targets. Due to strong demand across all product categories and geographies, we therefore significantly raised our 2018 mid-year forecast. With division revenue up 14.8% in constant currencies and the underlying EBITDA margin up 0.6 percentage points to 28.6%, we reached the top end of this forecast.

Beyond increasing our key performance indicators, we also made considerable headway in operations. For example, the software of Umetrics, a data analytics company we acquired in March 2017, was successfully integrated into the Sartorius product array. Previously based on mutual exclusivity, the contract with the Lonza group in the area of cell culture media for commercial-scale manufacture was modified by mutual agreement. As a result, sales revenue for the division in 2019 will be slightly lower, yet by taking this step, Sartorius has gained the strategic leeway necessary to unlock further mid- to long-range opportunities in the segment of cell culture media.

The Lab Products & Services Division, which offers products and services primarily for laboratories performing research and quality control in the pharmaceutical and biopharmaceutical industries, as well as in further segments, showed solid development following exceptionally strong growth in 2017. We could not meet our original expectations due to a challenging market environment: Following satisfactory first-half performance, softer demand in Europe resulting from the slowing economy dampened the division's sales growth in the ensuing months. We achieved our second-half forecast that was revised downward, recording sales growth of 9.1% to €423.0 million and an increase in our underlying earnings margin by half a percentage point, to 18.5%.

Due to the acquisitions of the bioanalytics companies IntelliCyt and Essen BioScience in 2016 and 2017, we today have a highly attractive and innovative cell analytics portfolio. As a result, we have significantly strengthened the position of our Lab Products & Services Division among biopharma customers and research institutes in the life sciences segment: With the growing differentiation of the market for biologics, development of new active pharmaceutical ingredients is coming under increasing time and cost pressure. Efficiency will therefore be a key competitive advantage. Our innovative solutions support our customers in bringing new active compounds out on the market. We are convinced that the significance of bioanalytics will increase, and will continue to systematically promote market penetration of our technologies on the lab market.

Which targets have we set for the future?

Against the backdrop of global trends that we estimate will lead to a steadily increasing demand for biopharmaceuticals, all signs point to growth for Sartorius. In addition to our 2020 targets, which remain unchanged, we therefore set new, ambitious medium-term guidance for sales and profitability in February of the reporting year: We aim to double our sales revenue to €4 billion and increase our underlying EBITDA margin to about 28% in the period of 2020 to 2025. Two-thirds of this growth are projected to be achieved organically, and the remaining one-third is expected to be generated by acquisitions. This growth is likely to be accompanied by the creation of a considerable number of jobs; therefore, we assume that we will nearly double the number of our employees from currently around 8,000 to some 15,000.

For the fiscal year currently in progress, we expect further profitable growth. Consolidated sales revenue is projected to grow by about 7% to 11% in constant currencies, with our forecast already allowing for the change in the sales alliance with the Lonza group. Without this change, sales growth would probably be around 2 percentage points higher. Regarding our underlying EBITDA margin, we anticipate that it will increase by about one percentage point to slightly more than 27.0%, 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 required to be applied. Our ratio of capital expenditures to sales revenue is forecasted to be around 12%, down from the 2018 figure of roughly 15%.

At Sartorius, the team is what makes all the difference. The success of our company would be inconceivable without the expertise of our approximately 8,000 staff members worldwide, their 100% customer focus and, where necessary, their fighting spirit. On behalf of the entire Executive Board, I would like to cordially thank them for their willingness not to settle for the status quo and thus for their ceaseless efforts in contributing to the ongoing further development of our products and services as well as of our business processes.

My thanks also go out to you, our esteemed shareholders, customers and business partners. Over the past year again, you placed your trust in us and thus promoted the positive development of Sartorius in many different ways.


Yours sincerely,

Dr. Joachim Kreuzburg
CEO and Executive Board Chairman