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Report of the Executive Board

Dear Shareholders and
Business Partners,

This promises to be a special year for Sartorius because our company will turn 150 in 2020. To mark this anniversary, we will be holding a series of events with scientists, customers and employees as an opportunity above all to venture a look ahead: In which direction is our industry moving? Which challenges will we need to master in the future? Where will the next breakthroughs and opportunities unfold? After all, we are in an extraordinarily dynamic phase of development in the life sciences that offer exciting future prospects.

But first, let us review the past year: Sartorius continued its highly dynamic development in 2019 and closed the year with double-digit growth rates in sales revenue and earnings. With sales revenue surging 14.8% to just over €1.8 billion and the EBITDA margin up 1.2 percentage points at 27.1%, we surpassed our business performance targets anticipated at the beginning of the year considerably, even edging above our significantly raised forecast issued at mid-year. Another encouraging development is that our employee headcount increased significantly once again – by around 11% or some 900 people, taking the total to just over 9,000.

At the same time, we have consolidated and enhanced our position as a leading international technology partner for biopharmaceutical research and the industry. The expansion of our production capacities means we are well prepared to optimally meet the growing demands of a rapidly expanding market, both today and tomorrow. With our innovative tools and technologies, we help ensure that new scientific findings can be applied more quickly to improve patient care and that more people have access to better medicine.

By acquiring a majority stake in Biological Industries, an Israeli company that develops and manufactures cell culture media, Sartorius now has its own cell culture media production facility for the first time, thus significantly expanding its range of bioprocessing media. To date, Biological Industries has concentrated primarily on the future-oriented field of cell and gene therapies, an area that has seen some major breakthroughs in the recent past. With this majority takeover, we are thus simultaneously expanding our product portfolio for customers in the dynamically growing market for advanced therapies.

In October 2019, we also signed an agreement to acquire parts of the Danaher life science portfolio for approximately U.S. $750 million in cash. The portfolio up for acquisition is an excellent strategic fit for both Sartorius divisions. At our Lab Products & Services Division, it strengthens the strategically important area of bioanalytics through a widely accepted and differentiating technology for use in biopharmaceutical drug research. And at the Bioprocess Solutions Division, it helps us expand our existing portfolio, especially in downstream processing. The planned transaction is currently undergoing antitrust clearance in connection with Danaher’s intended takeover of GE’s biopharma business, and we expect our acquisition to be completed around the end of the first quarter of 2020.

The extremely positive performance of our Group’s business also led to a further rise in the price of Sartorius shares. In a stock market environment that was generally upbeat despite the weaker global economy and conflicts over economic policy, we were able to record above-average gains: Our preference shares closed the 2019 trading year at a price of €190.80, up 75.2%, while the ordinary share price rose by 82.3%, closing at €175.00.

Once again, we plan to enable our shareholders to participate appropriately in the company’s success. The Supervisory Board and the Executive Board will submit a proposal to the Annual Shareholders' Meeting on March 26, 2020, to raise dividends for the tenth time in succession, with a payout ratio of €0.71 per preference share and €0.70 per ordinary share.

Let us now take a closer look at our divisions, which both contributed to the positive development of the Group.

The Bioprocess Solutions Division, which offers products and services for all phases in the production of biopharmaceuticals, showed very dynamic growth in sales and earnings, as in the previous year. Due to strong demand across all product categories and geographies in the first half, we raised our full-year forecast for 2019 substantially at mid-year. With an increase in division sales of 18.1% in constant currencies and an EBITDA margin of 29.6%, up one percentage point, we even slightly exceeded this new forecast.

Operationally, we have set the course for further positive development: Our considerably extended production lines for single-use bags and filters that went into operation in the past summer at our site in Yauco, Puerto Rico, give Sartorius the scope to supply customers in the Americas with an even broader product range directly from the region. Our facility in Aubagne, France, started up operations at its new cleanroom for single-use bag manufacture, and new production capacities were also built up at the German facilities in Göttingen and Ulm.

The Lab Products & Services Division, which offers products and services for research and quality assurance laboratories, primarily for the pharmaceutical and biopharmaceutical industries besides other segments, developed robustly in a partly challenging economic environment. With a 5.9% increase in sales revenue, we reached the lower end of our forecast, as expected, while the division's EBITDA margin rose by more than one percentage point to 19.6%.

We are convinced that powerful bioanalytical tools are gaining importance in our industry and are therefore continuing to drive the expansion of this business area systematically. Following the acquisitions of Intellicyt and Essen Bioscience in 2016 and 2017, Sartorius already has a superbly positioned, innovative cell analysis segment in place. The planned acquisition of parts of Danaher’s life science portfolio, which also includes the FortéBio business for label-free analysis of biomolecules, would make our range of bioanalytics solutions even more relevant and attractive for our customers.

All signs point toward continued growth for Sartorius. We anticipate that demand for biopharmaceuticals will continue to rise steadily and, along with it, the need for high-performance technologies and solutions for their development and production. Our goal is to maintain our steady growth and achieve sales of around €4 billion by 2025, with an EBITDA margin of about 28%. We also expect to employ around 15,000 people.

We are confident that our anniversary year will bring further profitable growth. In 2020, sales revenue is estimated to grow by around 10% to 13% in constant currencies. This means we are set to achieve the medium-term forecast we made in 2012 for the year 2020, with consolidated sales of around €2 billion. Regarding our EBITDA margin, we expect an increase to 27.5%. Our CAPEX ratio will probably be around 10%, below the prior-year level of 12.3%. These figures do not consider the acquisition of parts of the Danaher life science portfolio so we will adjust our forecast once the transaction is completed.

The most important building block for the past and future success of Sartorius is our team. More than 9,000 staff members worldwide are dedicating their expertise and efforts to drive the progress of Sartorius. On behalf of the entire Executive Board, I would like to express my sincere thanks for their willingness to always go the extra mile.

I would also like to thank our valued customers, business partners, and shareholders. Based on the trust you have placed in us throughout the year, you have contributed importantly to the positive development of Sartorius. We would be pleased if you would continue to accompany us on the road to success during our anniversary year and beyond.


Sincerely yours,

Dr. Joachim Kreuzburg
CEO and Executive Board Chairman