Consolidated Financial Statements and Notes

Statement of Profit or Loss

2nd quarter1)
2017
€ in mn
2nd quarter1)
2016
€ in mn
6-month
2017
€ in mn
6-month
2016
€ in mn
Sales revenue 361.0 323.5 704.1 625.4
Cost of sales –184.8 -167.3 –357.0 –320.4
Gross profit on sales 176.2 156.2 347.1 305.1
Selling and distribution costs –76.0 –62.3 –146.0 –123.1
Research and development expenses –18.5 –15.2 –35.0 –29.6
General administrative expenses –19.8 –18.5 –41.3 –36.2
Other operating income and expenses2) –5.0 -0.3 –11.0 –6.3
Earnings before interest and taxes (EBIT) 56.8 60.0 113.9 109.9
Financial income 1.6 3.6 2.8 8.1
Financial expenses –6.9 –6.7 –11.7 –12.0
Financial result –5.3 -3.1 –9.0 –3.9
Profit before tax 51.5 56.9 104.9 106.0
Income taxes –14.9 –17.1 –30.4 –31.8
Net profit for the period 36.6 39.8 74.5 74.2
Attributable to:
Shareholders of Sartorius AG
25.2 29.1 51.8 53.4
Non-controlling interest
11.4 10.7 22.7 20.8
         
Earnings per ordinary share (€) (basic) 0.37 0.43 0.75 0.78
Earnings per preference share (€) (basic) 0.37 0.43 0.76 0.79
         
Earnings per ordinary share (€) (diluted) 0.37 0.43 0.75 0.78
Earnings per preference share (€) (diluted) 0.37 0.43 0.76 0.79

1) The 2nd quarter figures were not included in the auditors’ review.

2) The item "Other operating income and expenses" includes extraordinary expenses for Group projects and acquisition and integration costs of €12.7 million for the six-month period of 2017 (6-mo. 2016: €9.9 million).

 

 

Statement of Comprehensive Income

2nd quarter1)
2017
€ in mn
2nd quarter1)
2016
€ in mn
6-month
2017
€ in mn
6-month
2016
€ in mn
Net profit for the period 36.6 39.8 74.5 74.2
Cash flow hedges 19.1 –0.3 24.8 0.5
– of which effective portion of the change in fair value 18.3 –0.8 22.7 –1.4
– of which reclassified to profit or loss 0.8 0.5 2.1 1.9
Income tax on cash flow hedges –5.7 0.1 –7.4 –0.2
Net investment in a foreign operation –27.3 –2.1 –25.6 0.2
Income tax on net investment in a foreign operation 2.7 0.5 2.2 –0.2
Currency translation differences –19.5 3.1 –18.1 –13.7
Items that may be reclassified in the profit or loss statement,
net of tax
–30.7 1.4 –24.2 –13.2
Remeasurements of the net defined benefit liability 2.0 –7.4 2.0 –7.4
Income tax on items that will not be reclassified in the profit or loss
statement
–0.5 2.2 –0.5 2.2
Items that will not be reclassified in the profit or loss statement,
net of tax
1.5 –5.2 1.5 –5.2
Other comprehensive result after tax –29.2 –3.8 –22.7 –18.4
Total comprehensive income 7.3 36.0 51.8 55.8
Attributable to:
Shareholders of Sartorius AG
–1.9 25.2 29.9 38.8
Non-controlling interest
9.3 10.8 21.9 17.0

1) The 2nd quarter figures were not included in the auditors’ review.

 

 

Statement of Financial Position

Assets June 30, 2017
€ in mn
December 31, 2016
€ in mn
Non-current assets    
Goodwill 667.6 467.8
Other intangible assets 467.6 267.4
Property, plant and equipment 443.8 394.0
Financial assets 17.7 7.5
Other assets 0.8 0.9
Deferred tax assets 26.8 27.7
  1,624.4 1,165.4
Current assets    
Inventories 241.9 222.2
Trade receivables 271.6 241.2
Other financial assets 27.4 15.0
Current tax assets 16.4 21.6
Other assets 33.0 22.0
Cash and cash equivalents 72.4 62.0
Assets held for sale 4.6 3.6
  667.3 587.6
Total assets 2,291.7 1,753.0
Equity and liabilities June 30, 2017
€ in mn
December 31, 2016
€ in mn
Equity    
Equity attributable to Sartorius AG shareholders 578.8 579.7
Issued capital
68.4 68.4
Capital reserves
39.1 38.4
Other reserves and retained earnings
471.3 472.9
Non-controlling interest
168.4 157.1
  747.2 736.8
Non-current liabilities    
Pension provisions 62.4 64.1
Other provisions 7.8 7.8
Loans and borrowings 906.3 433.0
Finance lease liabilities 18.2 18.9
Other financial liabilities 67.9 73.7
Deferred tax liabilities 130.7 54.3
  1,193.4 651.8
Current liabilities    
Provisions 17.2 18.1
Trade payables 127.4 120.4
Loans and borrowings 64.9 93.0
Finance lease liabilities 2.8 3.0
Employee benefits 52.3 49.0
Other financial liabilities 22.9 32.3
Current tax liabilities 23.7 23.6
Other liabilities 39.9 25.0
  351.2 364.4
Total equity and liabilities 2,291.7 1,753.0

 

 

Statement of Cash Flows

6-month
2017
€ in mn
6-month
2016
€ in mn
Profit before tax 104.9 106.0
Financial result 9.0 3.9
Earnings before interest and taxes (EBIT) 113.9 109.9
Depreciation | amortization of intangible and tangible assets 48.0 33.6
Increase | decrease in provisions –0.9 1.1
Income taxes paid –28.7 –32.0
Other non-cash items 1.0 0.7
Gross cash flows from operating activities 133.2 113.3
Increase | decrease in receivables and other assets –35.6 –51.8
Increase | decrease in inventories –16.7 –29.8
Increase | decrease in liabilities (without loans and borrowings) –26.6 11.5
Net cash flow from operating activities 54.3 43.1
Capital expenditures –79.5 –69.4
Proceeds from the disposal of fixed assets 0.0 0.4
Net cash flow from investing activities –79.5 –69.0
Payments for acquisitions of consolidated subsidiaries and other business operations, net of cash
acquired
–362.6 –79.1
Net cash flow from investing activities, acquisitions and disposals –442.1 –148.1
Interest received 0.2 2.1
Interest paid and other financial charges –4.3 –3.6
Dividends paid to:
– Shareholders of Sartorius AG
–31.1 –25.8
– Non-controlling interest
–10.7 –8.7
Gross cash flows from financing activities –45.9 –36.0
Loans repaid –70.8 –2.3
Loans raised 515.0 164.5
Net cash flow from financing activities 398.3 126.3
Net increase | decrease in cash and cash equivalents 10.6 21.3
Cash and cash equivalents at the beginning of the period 62.0 52.8
Net effect of currency translation on cash and cash equivalents –0.2 2.0
Cash and cash equivalents at the end of the period 72.4 76.0

 

 

Statement of Changes in Equity

€ in millions Issued
capital
Capital
reserves
Hedging
reserves
Pension
reserves
Earnings
reserves
and
retained
profits
Difference
resulting
from
currency
translation
Equity attri-
butable to
Sartorius AG
shareholders
Non-
controlling
interest
Total
equity
Balance at January 1, 2016 17.1 88.4 –3.1 –15.1 406.5 24.0 517.7 127.0 644.8
Net profit for the period 0.0 0.0 0.0 0.0 53.4 0.0 53.4 20.8 74.2
Cash flow hedges 0.0 0.0 0.3 0.0 0.0 0.0 0.3 0.3 0.5
Actuarial gains | losses from
pension provisions
0.0 0.0 0.0 –6.4 0.0 0.0 –6.4 –1.0 –7.4
Currency translation differences 0.0 0.0 0.0 0.0 0.0 –10.2 –10.2 –3.5 –13.7
Net investment in a foreign
operation
0.0 0.0 0.0 0.0 –0.1 0.0 –0.1 0.3 0.2
Income tax on items that are
recognized in other
comprehensive income
0.0 0.0 –0.1 1.9 0.0 0.0 1.8 0.1 1.9
Other comprehensive result
after tax
0.0 0.0 0.2 –4.6 –0.1 –10.2 –14.6 –3.8 –18.4
Total comprehensive income 0.0 0.0 0.2 –4.6 53.3 –10.2 38.8 17.0 55.8
Share-based payment 0.0 0.7 0.0 0.0 0.0 0.0 0.7 0.0 0.7
Dividends 0.0 0.0 0.0 0.0 –25.8 0.0 –25.8 –8.7 –34.5
Capital increase1) 51.3 –51.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Purchase price liability Israel 0.0 0.0 0.0 0.0 –13.4 0.0 –13.4 –0.5 –13.4
Other changes in equity 0.0 0.0 0.0 0.5 0.4 0.0 1.0 –0.2 0.8
Balance at June 30, 2016 68.4 37.7 –2.9 –19.2 421.1 13.9 519.0 135.1 654.2
€ in millions Issued
capital
Capital
reserves
Hedging
reserves
Pension
reserves
Earnings
reserves
and
retained
profits
Difference
resulting
from
currency
translation
Equity attri-
butable to
Sartorius AG
shareholders
Non-
controlling
interest
Total
equity
Balance at January 1, 2017 68.4 38.4 –7.3 –17.7 473.6 24.3 579.7 157.1 736.8
Net profit for the period 0.0 0.0 0.0 0.0 51.8 0.0 51.8 22.7 74.5
Cash flow hedges 0.0 0.0 19.8 0.0 0.0 0.0 19.8 5.0 24.8
Actuarial gains | losses from
pension provisions
0.0 0.0 0.0 1.7 0.0 0.0 1.7 0.3 2.0
Currency translation differences 0.0 0.0 0.0 0.0 0.0 –13.6 –13.6 –4.4 –18.1
Net investment in a foreign
operation
0.0 0.0 0.0 0.0 –25.6 0.0 –25.6 0.0 –25.6
Income tax on items that are
recognized in other
comprehensive income
0.0 0.0 –5.9 –0.4 2.2 0.0 –4.2 –1.6 –5.7
Other comprehensive result
after tax
0.0 0.0 13.9 1.3 –23.4 –13.6 –21.9 –0.8 –22.7
Total comprehensive income 0.0 0.0 13.9 1.3 28.4 –13.6 29.9 21.9 51.8
Share-based payment 0.0 0.7 0.0 0.0 0.0 0.0 0.7 0.0 0.7
Dividends 0.0 0.0 0.0 0.0 –31.1 0.0 –31.1 –10.7 –41.8
Other changes in equity 0.0 0.0 0.0 0.0 –0.4 0.0 –0.4 0.1 –0.3
Balance at June 30, 2017 68.4 39.1 6.6 –16.4 470.4 10.7 578.8 168.4 747.2

1) In fiscal 2016, capital was increased by the use of retained earnings to perform a stock split.

 

 

Segment Reports

According to IFRS 8, Operating Segments, the identification of reportable operating segments is based on the "management approach"; i.e., the segments are defined analogously to the internal control and reporting structure of an entity. Accordingly, the divisions called Bioprocess Solutions and Lab Products & Services are to be considered operating segments.

“Underlying EBITDA" is the key performance indicator of the operating segments of the Sartorius Group. EBITDA corresponds to earnings before interest (financial result), taxes, depreciation and amortization. “Underlying EBITDA” means EBITDA adjusted for extraordinary items. In this connection, extraordinary items are expenses and income that are of an exceptional or a one-time nature and accordingly distort the sustainable profitability of a segment and, from the Group’s perspective, have a material impact on the net worth, financial position and earnings of the Group.

Apart from that, the recognition and measurement methods for the reportable segments conform to the general Group accounting principles.

Sales revenue Underlying EBITDA
€ in millions 6-mo. 2017 6-mo. 2016 6-mo. 2017 6-mo. 2016
Bioprocess Solutions 510.9 469.8 140.8 128.1
Lab Products & Services 193.2 155.7 33.7 25.3
Total continuing operations 704.1 625.4 174.5 153.4
Reconciliation to the profit before tax        
Depreciation and amortization     –48.0 –33.6
Extraordinary items     –12.7 –9.9
Earnings before interest and taxes (EBIT)     113.9 109.9
Financial result     –9.0 –3.9
Profit before tax from continuing operations     104.9 106.0

Geographical Information

Sales revenue
€ in millions 6-mo. 2017 6-mo. 2016
EMEA 302.9 288.1
Americas 229.0 212.3
Asia | Pacific 172.2 125.1
Group 704.1 625.4

Notes to the Condensed Interim Financial Statements

1.  General Information

Sartorius AG is a listed joint stock corporation established according to German law and is the highestlevel parent company of the Sartorius Group. The corporation is recorded in the German Commercial Register of the District Court of Goettingen (HRB 1970) and is headquartered at Weender Landstrasse 94–108 in Goettingen, Federal Republic of Germany.

The Sartorius Group organizes its business in two divisions: Bioprocess Solutions and Lab Products & Services. With its Bioprocess Solutions Division, Sartorius is a leading international supplier of products and technologies for the manufacture of medications and vaccines on a biological basis, so-called biopharmaceuticals. As part of its total solutions provider strategy, the Bioprocess Solutions Division offers the biopharmaceutical industry a product portfolio that covers nearly all process steps of the industry's manufacture. These products encompass cell culture media for the cultivation of cells, bioreactors of various sizes for cell propagation and different technologies, such as filters and bags for cell harvesting, purification and concentration, all the way to filling.

The Lab Products & Services Division focuses on laboratories in the research and quality assurance sectors of pharmaceutical and biopharmaceutical companies and on academic research institutes. It serves further customers in the chemical and food industries. The division's portfolio covers instruments and consumables that laboratories use, for example, in sample preparation or in other standard applications.

2. Significant Accounting Policies

The consolidated annual financial statements of Sartorius AG for the period ended December 31, 2016, were prepared in accordance with the accounting standards of the International Accounting Standards Board (IASB) – the International Financial Reporting Standards (IFRS) – as they are to be applied in the EU. In the present interim financial statements that were prepared in conformance with the requirements of IAS 34 “Interim financial reporting,” basically the same accounting and measurement principles were applied on which the past consolidated financial statements of fiscal 2016 were based.

Furthermore, all interpretations of the International Financial Reporting Standards Interpretations Committee (IFRS IC) to be applied effective June 30, 2017, were observed. An explanation of the individual accounting and measurement principles applied is given in the Notes to the Financial Statements of the Group for the year ended December 31, 2016.

A list of the companies included in the scope of consolidation for the Group financial statements is provided in our 2016 Annual Report. In the current fiscal year, the following companies were consolidated for the first time in the reporting period:

  • Essen Holdings Inc., USA
  • Essen Intermediate Holdings Inc., USA
  • Essen Instruments Inc., USA
  • Essen BioScience Ltd., UK
  • Essen BioScience K.K., Japan
  • Sartorius Stedim Data Analytics, Sweden

These are additions from acquisitions; see Section 5 for details.

For calculation of income tax expenses, the provisions of IAS 34.30c) were adopted; i.e., the best estimate of the weighted average annual income tax rate expected for the full financial year, 29%, was applied.

3. Use of Judgments and Estimates

In preparing these interim financial statements, management has made judgments, estimates and assumptions, based on their best knowledge of the current and future situation, that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates, however.

The significant judgments and estimates made by management in applying the Group's accounting policies and the key sources of estimation uncertainty have remained the same as those that were applied to the consolidated financial statements for the year ended December 31, 2016.

4. Accounting Rules Applied for the First Time in the Current Fiscal Year

TThe Group did not yet apply the following new accounting rules as their application was not yet mandatory for the reporting period:

  • Annual Improvements to IRFSs – Cycle 2014-2016 (issued in Dec. 2016), Amendments to IFRS 12
  • Amendments to IAS 12, Recognition of Deferred Tax Assets for Unrealised Losses
  • Amendments to IAS 7, Disclosure Initiative

First-time application of these standards is not expected to have an impact on the presentation of the Group's financial statements. The following amendments are to be applied as of 2018 (IFRS 15, IFRS 9) and 2019 (IFRS 16):

IFRS 15, Revenue from Contracts with Customers, defines a comprehensive framework for determining whether, in which amount and at which point in time revenue is to be recognized. This standard replaces the existing guidance for revenue recognition, including IAS 18, Revenue; IAS 11, Construction contracts; and IFRIC 13, Customer Loyalty Programmes.

The Group is currently conducting a project to analyze the effects of the application of the new standards in the future. At this time, the Group does not expect any material changes regarding the amount and timing of revenue for the major part of the Group's business. However, especially in the case of construction contracts that are currently accounted for under IAS 11, the timing of revenue recognition may change as a result of the new criteria of IFRS 15 for revenue recognition over time.

At the current state of analysis, the Group does not expect full retrospective application of this new standard. Instead, the Group plans to recognize the cumulative effect of applying IFRS 15 at the date of initial application as an adjustment to the opening balance of equity. Furthermore, at initial application, the Group expects to apply IFRS 15 only to contracts that are not considered completed contracts at the date of initial application.

IFRS 9, Financial Instruments, replaces the existing guidelines in IAS 39, Financial instruments: recognition and measurement. IFRS 9 includes revised guidelines for classification and measurement of financial instruments, including a new model of expected credit losses for the calcuation of impairments of financial assets, as well as the new general guidelines for hedge accounting. This standard also adopts the guidance of IAS 39 for recognition and derecognition of financial instruments. The Group is currently conducting a project to analyze the effects of the application of this new standard in the future. At the current state of analysis, there is no information contrary to the disclosures in the Group's consolidated financial statements. Please refer to the disclosures made in Group financial statements for the full year of 2016.

The application of IFRS 16, Leases, is mandatory for periods from 2019 onwards. IFRS 16 introduces a standardized accounting model according to which leases are generally to be recognized on the lessee's balance sheet. A lessee recognizes a right-of-use asset representing its right to use a lease asset, as well as a liability resulting from the lease, which represents its obligation to make lease payments. There are exemptions for short-term leases and leases of low-value assets. Accounting for the lessor is comparable to that of the current standard; i.e., lessors continue to classify leases as financial or operating leases.

The Group has started to analyze the effects of this new standard and does not plan to apply the standard earlier than 2019. At the current stage of analysis, the Group plans to use the exemptions for short-term leases and leases of low-value assets and to recognize the corresponding lease payments as an expense generally on a straigt-line basis over the particular lease term.

Application of IFRS 16 will likely lead to an increase in fixed assets and financial liabilities. Based on its present level of knowledge, the Group does not expect any significant impact overall on its key performance indicators, such as equity ratio or underlying EBITDA, however. For example, on the basis of the Group's future financial obligations in relation to operating leases as reported on December 31, 2016, the equity ratio would be reduced by about 1%.

With regard to all new changes described above, analysis of their impact has not yet been completed. The information provided above can be regarded as an update of the information provided in the last annual consolidated financial statements for the year ended December 31, 2016. Therefore, the information provided should be read in conjunction with the information disclosed in the Notes to those annual consolidated financial statements.

5. Business Acquisitions and Divestitures

Acquisition of Essen BioScience

On March 24, 2017, the Group acquired the U.S. company Essen BioScience Inc. headquartered in Ann Arbor, Michigan, purchasing 100% of the voting rights in this company. The acquisition has been expanding the bioanalytics portfolio of the Lab Products & Services Division.

Essen BioScience develops and markets novel cell imaging and analysis systems for medical drug research, which are increasingly becoming standard equipment in pharmaceutical laboratories. These systems represent a platform of instrumentation, software and reagents for real-time live-cell imaging and fully automated data analysis. The information delivered by these systems provides new insight and understanding into the mechanisms of healthy and diseased cells, which helps significantly accelerate often timeconsuming discovery and development of new drugs.

Founded in 1996, the company currently employs approximately 150 people and is expected to generate sales revenue of around U.S. $60 million. Besides its headquarters in the USA, Essen BioScience has sales companies in the U.K. and in Japan.

Determination of the acquisition-date fair values of the assets acquired and liabilities assumed has not yet been completed. Therefore, the purchase price allocation is preliminary based on the current knowledge of management:

Preliminary
purchase price
allocation
€ in mn
Other intangible assets 229.3
Property, plant and equipment 1.3
Inventories 9.1
Trade receivables 9.9
Other assets 0.7
Cash and cash equivalents 14.9
Deferred taxes – net –73.3
Other liabilities –22.1
Net assets acquired 169.8
 
Purchase price 309.4
Goodwill 139.6

The converted purchase price of €309.4 million was paid in cash. The expenses of €0.3 million directly attributable to the acquisition were recognized as other operating expenses. Goodwill is not expected to be tax-deductible. According to its present level of knowledge, the Group expects that the intangible assets to be recognized will be primarily technologybased, customer-related and brand-based.

Besides being attributable to the synergies that are to be realized by the acquiree's use of the Group's sales and distribution network, the resulting goodwill of the Umetrics acquisition is attributed to extension of the product portfolio of the Lab Products & Services Division and expansion of this division's position with respect to biopharmaceutical customers.

Acquisition of Umetrics

On April 3, 2017, the Group acquired 100% of the voting rights in the Swedish company MKS Instruments AB (Umetrics) based in Umeå, Sweden. In the meantime, the company has been renamed "Sartorius Stedim Data Analytics AB." In addition to these shares, the Group acquired further related intangible assets through asset deals as part of the business combination. The acquisition adds complementary products to the portfolio of the Bioprocess Solutions Division.

Umetrics is a globally leading provider of data analytics software for modeling and optimizing biopharmaceutical development and manufacturing processes. The company currently employs approximately 50 people and is expected to generate sales revenue of about $15 million in 2017.

The determination of the acquisition-date fair values of the assets acquired and liabilities assumed has not yet been completed. Therefore, the purchase price allocation is preliminary based on the current knowledge of management:

Preliminary
purchase price
allocation
€ in mn
Other intangible assets 30.3
Property, plant and equipment 0.1
Inventories 0.0
Trade receivables 1.2
Other assets 0.3
Cash and cash equivalents 6.9
Deferred taxes – net –6.3
Other liabilities –4.6
Net assets acquired 28.0
 
Purchase price 75.0
Goodwill 47.0

 

The purchase price of approximately €75.0 million was paid in cash. The expenses €0.2 million directly attributable to the acquisition were recognized as other expenses in profit or loss. It is expected that the goodwill of this company will not be deductible for tax purposes. According to its present level of knowledge, the Group expects that the intangible assets recognized are primarily technology-based and customer-related intangible assets.

Since their initial consolidation, the entities acquired in the first half of 2017 have contributed sales revenue of around €16 million (Essen BioSicence) and €2 million (Umetrics) to consolidated earnings. On the whole, these figures did not have a material impact on Group earnings.

If the acquisitions had taken place as of January 1, 2017, sales revenue for the Group in the first half of 2017 would have been approximately €713.5 million. Without the impacts on the purchase price allocation, the effects on net profit would be immaterial.

6. Financial Instruments

Carrying Amounts and Fair Values

€ in millions Categories June 30, 2017
Carrying
amount
June 30, 2017
Fair value
Dec. 31, 2016
Carrying
amount
Dec. 31, 2016
Fair value
Financial assets Available for sale 5.7 5.7 3.8 3.8
Financial assets Loans and
receivables
3.3 3.3 3.2 3.2
Derivative financial instruments Held for trading 0.0 0.0 0.3 0.3
Derivative financial instruments designated as
hedging instruments
n/a 8.7 8.7 0.2 0.2
Financial assets (non-current) 17.7 17.7 7.5 7.5
Trade receivables Loans and
receivables
271.6 271.6 241.2 241.2
Receivables and other assets Loans and
receivables
23.5 23.5 14.7 14.7
Derivative financial instruments Held for trading 0.1 0.1 0.0 0.0
Derivative financial instruments designated as
hedging instruments
n/a 3.9 3.9 0.3 0.3
Other financial assets (current) 27.4 27.4 15.0 15.0
Cash and cash equivalents Loans and
receivables
72.4 72.4 62.0 62.0
           
Loans and borrowings Financial
liabilities at cost
971.2 977.4 526.0 536.2
Finance lease liabilities IAS 17 21.1 32.2 21.9 33.5
Trade payables Financial
liabilities at cost
86.9 86.9 76.4 76.4
Trade payables | payments received for orders n/a 40.6 40.6 44.0 44.0
Trade payables   127.4 127.4 120.4 120.4
Derivative financial instruments Held for trading 6.2 6.2 5.6 5.6
Derivative financial instruments designated as
hedging instruments
n/a 1.1 1.1 13.8 13.8
Other financial liabilities Financial
liabilities at cost
63.8 69.2 66.9 73.7
Other financial liabilities Fair value through
OCI
14.2 14.2 13.8 14.7
Other financial liabilities Fair value through
profit or loss
5.5 5.5 5.8 5.8
Other financial liabilities   90.8 96.1 105.9 113.6


For the equity investments measured at acquisition cost (financial assets), it is not possible to determine fair values reliably due to the absence of active markets. This applies mainly to shares in non-consolidated subsidiaries. These are essentially sales companies of the Group; the calculation of fair values for their activities would therefore not be relevant for the economic decisions of the users. There is currently no intention to sell the assets of Sartorius Group affiliates.

The fair values of the financial instruments were determined on the basis of the market information available on the reporting date and are to be allocated to one of the three levels of the fair value hierarchy in accordance with IFRS 13.

Level 1 financial instruments are calculated on the basis of prices quoted on active markets for identical assets and liabilities. In Level 2, financial instruments are calculated on the basis of input factors, which are derivable from observable market data or on the basis of market prices for similar instruments. Level 3 financial instruments are calculated on the basis of input factors that cannot be derived from observable market data.

The financial instruments to be recognized at fair value on the reporting date are exclusively derivatives in the form of forward contracts, interest rate swaps and structured forward contracts. They were measured on the basis of their quoted exchange rates and market yield curves (Level 2).

The fair values to be disclosed for financial liabilities recognized at amortized cost, especially liabilities to banks and those related to note loans ("Schuldscheindarlehen"), as well as finance lease liabilities, were measured on the basis of the market interest rate curve, taking the current indicative credit spreads into account (Level 2).

The purchase price liability for the non-controlling interest in Sartorius Israel Ltd. and for the liability resulting from the AllPure phantom stock units are required to be disclosed in the amount of the present value of the expected purchase price payments. Their present value is to be derived in both cases from the expected revenues as of the exercise date and from the risk-adjusted discount rate (Level 3).

The fair values of the remaining financial assets and liabilities to be disclosed approximate the carrying amounts on account of their predominantly shortterm maturity.

The maximum credit loss risk is reflected by the carrying amounts of the financial assets recognized in the Statement of Profit or Loss.

Measurement of Fair Value

The Group recognizes transfers between the levels of the fair value hierarchies at the end of the reporting period during which the change has occurred. In the current reporting period, there were no transfers between the levels.

The valuation of the level 3 liability is based on a discounted cash flow technique in which the expected future payments that are discounted using a riskadjusted discount rate are taken into account. The expected payments are determined by considering possible developments of future revenue and the amounts to be paid under each scenario. The significant unobservable input in this calculation is the future sales revenue which was considered at a compound annual growth rate of 15-20% for the AllPure liability.

The carrying amount of this liability developed as follows:

2017 €
in mn
2016 €
in mn
Balance at January 1 5.8 5.4
Financial expenses 0.1 0.0
Translation effects –0.4 –0.1
Balance at June 30 5.5 5.4

An increase (a decrease) of the sales revenue by 10% in each of the following years would lead to an increase (a decrease) of the liability by €0.5 million (€0.5 million).

Concerning the liability for the purchase of the noncontrolling interest in Sartorius Israel Ltd., the input factor that cannot be derived from observable market data is also sales growth for which a compound annual growth rate of approx. 15% was assumed.

The carrying amount of this liability developed as follows:

2017
€ in mn
2016
€ in mn
Balance at January 1 13.80.0
Initial measurement 0.013.4
Financial expenses 0.20.2
Translation effects 0.2–0.1
Balance at June 30 14.213.5

An increase (a decrease) in expected sales revenue by 10% in each of the following years would lead to an increase (a decrease) of the liability by €1.4 million (€1.4 million).

7. Related Companies and Persons

The Group companies included in the consolidated financial statements carry out business activities and transactions in related party relationships as defined by IAS 24. In particular, this concerns transactions with non-consolidated subsidiaries and are generally concluded according to the customary market terms.

In the reporting period, sales revenue of €4.6 million (H1 2016: €4.2 million) was generated by these companies; there were liabilities from loans and borrowings as well as trade payables, both totaling €11.9 million (H1 2016: €10.8 million). A long-term service contract exists with an affiliate for which expenses of €3.5 million (H1 2016: €3.1 million) were incurred in the reporting period.

For further details, also on related companies and persons, see page 159 in our 2016 Annual Report.

8. Other Disclosures

In the interim reporting period, no asset impairments were identified. Generally, asset impairment tests need to be performed for goodwill and other assets with indefinite useful lives.

Regarding its acquisition activities, Sartorius placed a €350 million note loan in the first half of 2017 to further strengthen its financing structure.

The note loan consists of three tranches with maturity terms of 5, 7 and 10 years. These tranches completely bear fixed interest rates. In total, note loan tranches of €595 million are therefore outstanding as of June 30.

Exchange differences arising from net investments in foreign operations are recognized in other comprehensive income. In connection with the acquisitions in 2016 and 2017, these net investments increased significantly, which led to a respective impact on the Group's other comprehensive income.

In the reporting period, Sartorius AG paid dividends totaling €31.1 million, of which €15.4 million were for ordinary shares and €15.7 million for preference shares.

Independent, certified auditors performed an audit review of this consolidated six-month report. The figures of the individual second quarter in the statement of profit or loss, as well as the statement of comprehensive income, were not part of this review.

9. Material Events After the Reporting Date

No material events occurred up to completion of the preparation of these interim financial statements.

Independent Auditors’ Review Report

To Sartorius Aktiengesellschaft, Goettingen

We have reviewed the condensed interim consolidated financial statements of the Sartorius Aktiengesellschaft, Goettingen – comprising the condensed statement of profit or loss, statement of comprehensive income, statement of financial position, statement of cash flows, statement of the changes in equity and selected explanatory notes – together with the interim Group management report of the Sartorius Aktiengesellschaft, Goettingen, Germany, for the period from January 1 to June 30, 2017 that are part of the semiannual financial report according to § 37 w WpHG ("Wertpapierhandelsgesetz": German Securities Trading Act). The preparation of the condensed interim consolidated financial statements in accordance with those IFRSs applicable to interim financial reporting as adopted by the EU, and of the interim Group management report in accordance with the requirements of WpHG applicable to interim Group management reports, is the responsibility of the company’s management. Our responsibility is to issue a report on the condensed interim consolidated financial statements and on the interim Group management report based on our review.

We performed our review of the condensed interim consolidated financial statements and the interim Group management report in accordance with the German generally accepted standards for the review of financial statements established by the German Institute of Independent Auditors, "Institut der Wirtschaftsprüfer" (IDW). These standards require that we plan and perform the review to obtain reasonable assurance that the condensed interim consolidated financial statements have been prepared, in all material respects, in accordance with the IFRSs applicable to interim financial reporting, as adopted by the EU, and that the interim Group management report has been prepared, in all material respects, in accordance with WpHG requirements applicable to interim Group management reports. A review is limited primarily to company employees' responses to our inquiries and to analytical assessments and, therefore, does not provide the assurance attainable in a financial statement audit. Since, in accordance with our audit review assignment, we have not performed a full audit of the financial statements, we cannot issue an audit report.

Based on our review, no matters have come to our attention that cause us to presume that the condensed interim consolidated financial statements have not been prepared, in material respects, in accordance with the IFRSs applicable to interim financial reporting as adopted by the EU or that the interim Group management report has not been prepared, in material respects, in accordance with the requirements of WpHG applicable to interim Group management reports.

Hanover, Germany, July 20, 2017

KPMG AG
Wirtschaftsprüfungsgesellschaft

 

Sven-Olaf Leitz
Auditor
(German Public Auditor)


Frank Thiele
Auditor
(German Public Auditor)

Responsibility Statement of the Legal Representatives

Declaration of the Executive Board

We declare to the best of our knowledge that the condensed interim consolidated financial statements for the first half ended June 30, 2017, present a true and fair view of the actual net worth, financial situation and profitability of the Group in accordance with the accounting standards to be applied in preparing these statements. We also certify that the progress of the Group’s business, including its business performance and its situation, are represented accurately in the Group interim report in all material respects and describe the most important opportunities and risks of the Group’s projected development for the remaining six months of the financial year.

Goettingen, July 20, 2017

Sartorius AG
The Executive Board