Report of the Supervisory Board
Dear Shareholders and
Business Partners,
Fiscal 2019 marked yet another a successful year for Sartorius, both financially and strategically. The company performed excellently in both divisions and across all geographies, and attained or exceeded its financial targets substantially raised at mid-year. To support organic expansion, additional production lines were put into operation at several sites, and IT infrastructure was extended. Beyond this, a smaller acquisition was successfully closed and a larger takeover was launched at the end of the year.
In 2019, 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. 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. Moreover, three extraordinary meetings took place in the context of the acquisitions mentioned above and the personnel decisions concerning the Executive Board.
At our meeting on February 14, 2019, we fully reviewed the annual and consolidated financial statements for fiscal 2018 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 endorsed the non-financial Group statement for the year under review. Beyond this, we conferred upon and approved the agenda, along with the proposed resolutions, for the 2019 Annual Shareholders' Meeting and the proposal for appropriation of the annual profit, as well as decided upon the remuneration of the Executive Board members for 2019. The Executive Board gave us an oral report on selected, relatively large customer projects and about various growth initiatives of both divisions in China and the USA.
At the Supervisory Board meeting on March 26, 2019, we dealt with various digitalization projects, among them the planned rollout of new software for customer relationship management. Furthermore, the Executive Board provided us with an overview of sales activities in Taiwan and the planned acquisition of our distribution partner there, which we approved. We moreover approved the extension of Rainer Lehmann’s appointment ahead of time as a member of the Executive Board and as Chief Financial Officer by five years until February 28, 2025.
The main topic of an extraordinary Supervisory Board meeting on July 11, 2019, was the planned acquisition of parts of the Israeli cell culture media specialist Biological Industries. In this context, the Executive Board also detailed its strategy for broadening the company’s cell culture media portfolio and building up the corresponding production capacities.
On the agenda of the Supervisory Board meeting on August 15, 2019, was the progress of the planned acquisition of Biological Industries. The Executive Board additionally described the changes in Sartorius’ competitive environment as well as the former’s intentions to participate in the bidding to acquire selected Danaher Life Science businesses. Furthermore, we dealt with appointing a successor for a position on the Supervisory Board that had become vacant after Supervisory Board member Dr. Guido Oelkers had informed us that he would be resigning from the board due to his high professional workload. The Supervisory Board agreed to the proposal submitted by the Nomination Committee to appoint Prof. David Raymond Ebsworth as Dr. Oelker’s successor. Beyond this, we were given an oral presentation on the progress of various digitalization projects.
At the focus of two extraordinary Supervisory Board meetings on September 23 and October 9 was the opportunity to acquire selected Danaher businesses. In September, the Executive Board informed us in detail about the acquisition status and the technologies offered for sale while October’s meeting focused on discussing the results of due diligence. Following indepth deliberations, the Supervisory Board approved the transaction that would be a good complementary fit with Sartorius’ strong position in the two fast-growing segments of bioanalytics and bioprocessing.
Topics on corporate governance and compliance were dealt with at the meeting on December 5, 2019. 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. The Supervisory Board Chairman also reported on various amendments to be expected in connection with the Act Implementing the Second Shareholders' Directive (ARUG II), as well as with the reform of 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 2020.
Another major focus of this meeting was on the reappointment of Executive Board Chairman and CEO Dr. Joachim Kreuzburg ahead of time up to November 10, 2025, as well as the terms of his Executive Board contract that had been prepared in the Executive Task Committee.
Activity Report of the Committees
Four committees support the work of the Supervisory Board. These prepare topics that are then dealt with by the full Supervisory Board and, in individual cases, take decisions instead 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 four times during the reporting year. Its discussions primarily focused on the company’s various strategic actions and on Executive Board and personnel matters, particularly the extensions of the appointments of the Executive Board Chairman and CEO and of the CFO. In addition, the committee obtained information on the progress of several Group projects and conferred on the pending changes to ARUG II and the GCGC to prepare for the discussions and the resolutions to be taken by the full Supervisory Board.
In the year under review, the Audit Committee held four meetings. The committee prepared for the full Supervisory Board's conference on endorsement and approval of the consolidated annual financial statements for fiscal 2018 and discussed the quarterly releases and first-half financial reports of 2019. 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 2019, 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 election proposals to be submitted to the Annual Shareholders' Meeting for shareholder representatives on the Supervisory Board met three times in the year under review. With respect to the resignation of Supervisory Board member Dr. Guido Oelkers at year-end 2019, the committee prepared a corresponding proposal for his replacement to be appointed by the court.
The Conciliation Committee pursuant to Section 27, Subsection 3, of the German Codetermination Law ("MitBestG") 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 2019 and the management report of Sartorius AG were reviewed by the independent auditing company KPMG AG 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 March 28, 2019. The independent auditors issued an unqualified audit certificate.
They attended the Audit Committee meeting on February 12, 2020, and the Supervisory Board Meeting on February 13, 2020, 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 13, 2020, 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 26, 2020, to pay dividends of €0.71 per preference share and €0.70 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 13, 2020, 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 2019, there were no personnel changes in the Supervisory Board or the Executive Board. The positions of Executive Board Chairman and CEO Dr. Joachim Kreuzburg and CFO Rainer Lehmann were each extended for a five-year period until November 10, 2025, and February 28, 2025, respectively.
On the part of the Supervisory Board, Dr. Guido Oelkers announced that he would resign from the Supervisory Board at the end of 2019, as already mentioned. We would like to thank Dr. Oelkers very much for his dedicated work on our board. The company’s local court of registration Amtsgericht Göttingen appointed Prof. David Raymond Ebsworth as a new Supervisory Board member until the election to be held by the Annual Shareholders’ Meeting.
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 especially intensive 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 2020
For the Supervisory Board
Dr. Lothar Kappich
Chairman