Report of the Supervisory Board
Dear Shareholders and Business Partners,
We look back yet again upon a successful fiscal year of very high growth for Sartorius. The company performed excellently in both divisions and across all geographies, and fully attained its financial targets raised at mid-year. To support our strong organic expansion, we invested considerably in additional production capacity and the extension of our IT infrastructure at several sites.
In fiscal 2018, the Supervisory Board intensively dealt with the situation and prospects of the company. We advised the Executive Board concerning corporate management and performed the tasks assigned by German corporate law and the company’s Articles of Association. The Executive Board kept us informed by providing regular, prompt and comprehensive reports, both written and verbal, about all relevant corporate planning and strategic development issues, the progress of business in the divisions, the situation of the Group, including its risk situation, risk management and internal control systems, as well as about compliance. All of the company's significant transactions were discussed in depth by the respective committees responsible, as well as by the full Supervisory Board, on the basis of the reports provided by the Executive Board. Following thorough review of the Executive Board's reports and proposed resolutions, we voted on these to the extent that our vote was required.
Cooperation between the Supervisory Board and the Executive Board was always characterized by openness, constructive dialogue and trust.
Focus of the Supervisory Board’s Conferences
In the reporting year, the Supervisory Board convened at four ordinary meetings, which the Executive Board also attended, provided these conferences did not concern the latter board's matters. We regularly conferred on the development of sales revenue, earnings and employment for the Group; the financial situation of the company and of its affiliates; and on strategic projects.
At our meeting on February 20, 2018, we fully reviewed the annual and consolidated financial statements for fiscal 2017 and endorsed them based on the reports given by the Audit Committee and the independent auditors who were present during this item of the agenda. Following the report given by the independent auditors and a discussion, we moreover endorsed our non-financial Group statement. Beyond this, we conferred upon and approved the agenda, along with the proposed resolutions, for the 2018 Annual Shareholders' Meeting and the proposal for appropriation of the annual profit. Furthermore, we decided upon the remuneration of the Executive Board members for 2018. The Executive Board additionally gave us an oral report on the progress of implementing the various digitalization initiatives. Further topics on the agenda involved announcement of the newly defined midterm targets for up to 2025, as well as the planned further development of the internal Group organization.
In the meeting on April 5, 2018, we dealt thoroughly with various strategic projects. The Executive Board also provided an overview on IT and data security in the company and reported on the progress of various investment activities.
At the Supervisory Board meeting on August 30, 2018, topics involving innovation management were on the agenda. The Executive Board described a number of current projects and initiatives designed to connect Sartorius to an even greater degree with the community driving innovations outside the company. Beyond this, the Executive Board reported on several alternatives to further develop business with cell culture media.
Topics on corporate governance and compliance were dealt with at the meeting on December 6, 2018. After our consultations, we decided upon the wording of the Declaration of Compliance in accordance with the German Corporate Governance Code (GCGC), with this Declaration confirming that Sartorius complies in full with the recommendations of the current Code. In addition, the Supervisory Board Chairman reported on the suggestions presented for consultation by the government commission for reforming GCGC. The Supervisory Board also examined the results of the efficiency review of its work and approved the budget submitted by the Executive Board for 2019.
A further focus of the conference was on the appointment of two new members to the Executive Board, as well as on the wording of the particular terms and conditions of the Executive Board contracts, which had been prepared in the Executive Task Committee. Discussions included the results of the comparison of Executive Board remuneration, which the Supervisory Board had assigned to an independent compensation consultant in the reporting year.
Activity Report of the Committees
Four committees support the work of the Supervisory Board. They prepare topics that are then dealt with by the full Supervisory Board and, in individual cases, take decisions in lieu of the full board, as far as permitted. The committee chairpersons reported regularly to the Supervisory Board on the details of their committee work.
The Executive Task Committee met at an above-average rate, nine times, during the reporting year. Besides conferring on various strategic measures of the company, the committee above all reviewed Executive Board and personnel matters. In particular, it intensively discussed and prepared for appointments to the new Executive Board positions as well as decisions on their remuneration. In addition, the Executive Task Committee received information on the progress of various Group projects and considered the succession planning for top managers, as well as amendments to the Corporate Governance Code, to prepare resolution proposals to be approved by the full Supervisory Board.
In the year under review, the Audit Committee held five meetings. The committee prepared for the full Supervisory Board's conference on endorsement and approval of the consolidated annual financial statements for fiscal 2017 and discussed the quarterly and first-half financial reports of 2018. Additional focal points were monitoring the effectiveness of the Group-wide risk management and internal control system by the Internal Auditing Department as well as measures for further improvement of compliance. The committee also conferred on the subjects of Group financing.
Beyond these items, the committee reviewed the Internal Auditing Department report, which did not indicate any material discrepancies in business transactions, and also considered the department's plans for the upcoming months. With respect to the audit of the annual financial statements for fiscal 2018, the committee confirmed the independence of the auditors, and deliberated in detail on selecting auditors to recommend at the Annual Shareholder’s Meeting for appointment and commissioning to perform an audit review, as well as on defining and monitoring the audit procedure and the focal points of the audit.
The Nomination Committee that draws up proposals to be submitted to the Annual Shareholders' Meeting for electing shareholder representatives to the Supervisory Board did not meet in the year under review. The Conciliation Committee pursuant to Section 27, Subsection 3, of the German Codetermination Law ("MitBestG“) likewise did not have to be convened.
Audit of the Annual and Consolidated Financial Statements; Review of the Non-Financial Group Statement
The annual and consolidated financial statements prepared by the Executive Board for fiscal 2018 and the management report of Sartorius AG were reviewed by the independent auditing company KPMG Wirtschaftsprüfungsgesellschaft based in Hanover, Germany. This company had been commissioned by the Audit Committee of the Supervisory Board pursuant to the resolution passed at the Annual Shareholders’ Meeting on April 5, 2018. The independent auditors issued an unqualified audit certificate.
They attended the Audit Committee meeting on February 13, 2019, and the Supervisory Board Meeting on February 14, 2019, and reported on the essential results of their audits.
Sufficient time was allotted for discussion of all issues with the auditors. Written information and audit reports had been sent to all Supervisory Board members on time and were discussed in detail during the meetings mentioned. On the basis of its own examination of the annual Sartorius AG and consolidated financial statements, the Sartorius AG management report and the Group management report, the Supervisory Board concurred with the results of the audit conducted by KPMG and, at the meeting on February 14, 2019, endorsed the financial statements of Sartorius AG and the Group on recommendation by the Audit Committee. The annual financial statements were thus approved. The Supervisory Board and the Executive Board will submit a proposal at the Annual Shareholders’ Meeting on March 28, 2019, to pay dividends of €0.62 per preference share and €0.61 per ordinary share to shareholders from the retained profit.
Furthermore, the Executive Board submitted a Non-Financial Group Statement based on the German Law to Strengthen Companies’ Non-Financial Reporting to implement the EU CSR Directive. The content of this statement was submitted to a voluntary review by KPMG AG Wirtschaftsprüfungsgesellschaft based on a limited assurance engagement. On the basis of this review, KPMG issued an unqualified opinion. The auditing company attended the Supervisory Board meeting on February 14, 2019, and reported on the results of its audit review. Following intensive discussions and examination, the Non-Financial Group Statement was also endorsed by the Supervisory Board members.
Composition of the Supervisory Board and the Executive Board
In fiscal 2018, there were no personnel changes in the Supervisory Board or the Executive Board. Effective January 1, 2019, Dr. René Fáber, Head of the Bioprocess Solutions Division, and Gerry Mackay, Head of the Lab Products & Services Division, were appointed new members of the Executive Board. Executive Board member Reinhard Vogt stepped down from his position on the Executive Board as of December 31, 2018, by mutual and amicable agreement on the best of terms. The Supervisory Board thanks him for his exceptionally successful service that he dedicated to the benefit of the company for more than 35 years in various functions, the most recent of which as a member of the Executive Board since 2009.
Moreover, the Supervisory Board would like to thank the Executive Board and all employees across the globe for their great commitment and successful hard work throughout the fiscal year ended. In addition, the Supervisory Board expresses its appreciation to its shareholders for the confidence they have shown yet again in the company.
Hamburg, February 2019
For the Supervisory Board
Dr. Lothar Kappich