Morningstar

Sartorius AG Earnings: COVID-19 Demand Retreats Along With Profits

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Securities In This Article
Sartorius AG Vorz-Inhaber-Akt ohne Stimmrecht
(SRT3)

Wide-moat Sartorius AG SRT3 saw a tough start to 2023, as previous COVID-19 tailwinds turned into headwinds relative to the year-ago period, especially in its bioprocessing Sartorius Stedim arm. Management maintained its guidance for 2023. And while we have tinkered with our near-term assumptions, these minor changes did not materially affect our EUR 327 fair value estimate.

During the quarter, COVID-19-related sales largely disappeared, and the firm’s financial results suffered in comparison with the strong period last year that included substantial COVID-19-related sales. In the quarter, Sartorius AG sales declined 13% in constant currency, including Sartorius Stedim down 17%, on the near disappearance of COVID-19-related revenue and customer destocking, and the firm’s lab products and services division was down 2%. Adjusted EBITDA decreased by 22%, as margins contracted to 30% on negative operating leverage in its fixed cost base on the sales decline even as the firm was able to pass on most of the inflationary pressures in its costs to customers through price increases. Looking forward, order intake decreased 32% year over year, as customers appear likely to reduce inventories built through the pandemic period. Shares traded down 11% on the anticipation of continued weakness in the near term and uncertainty of whether management’s view of a second-half turnaround is realistic.

Management stuck to its full-year outlook, suggesting an uptick in demand after lapping COVID-19 headwinds and customer destocking activities that started in the second half of 2022. That 2023 outlook includes low-single-digit revenue growth, organically, and an adjusted EBITDA margin of 34% that is well above first-quarter levels on expected volume increases. In the long run, biopharmaceutical growth should boost demand for its tools, and we remain optimistic about the firm’s longer-term prospects, including its EUR 5.5 billion revenue goal for 2025, which includes tuck-ins acquisitions.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Julie Utterback, CFA

Senior Equity Analyst
More from Author

Julie Utterback, CFA, is a senior equity analyst, AM Healthcare, for Morningstar*. She focuses on medical technology and service companies. She covers managed care organizations including UnitedHealth, service providers like HCA, medical suppliers such as Baxter, and life sciences companies like Danaher. She is also the chairperson of the equity research team’s capital allocation methodology.

Before joining Morningstar in 2005, Utterback was an equity analyst at State Farm Insurance for several years. Utterback joined Morningstar in 2005 as an equity analyst in the healthcare industry, and initially she primarily covered medical technology companies, including orthopedic device, medical equipment, and cardiac device firms. In 2010, she joined Morningstar's credit research team, initiating coverage of the entire healthcare industry and generally helping the organization expand and maintain its credit coverage across many industries. She held that senior credit analyst role until April 2019, when she returned to the equity team to cover medical technology and service companies.

Utterback holds a bachelor's degree in finance from the University of Illinois Urbana-Champaign’s Gies College of Business. She also holds the Chartered Financial Analyst® designation.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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