Release Date: October 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sartorius Stedim Biotech SA (SDMHF, Financial) confirmed its guidance for the full year 2024, indicating confidence in meeting its financial targets.
- The company reported a significant increase in order intake, particularly driven by consumables, reflecting a positive trend in recurring business.
- Efficiency programs are positively impacting profitability, with expectations of further contributions in Q4.
- The EMEA region showed strong performance with approximately 5% growth, indicating regional strength.
- Cash flow significantly increased due to effective working capital and CapEx management, showcasing financial discipline.
Negative Points
- Sales revenue for the first 9 months of 2024 was slightly negative compared to the prior year, indicating challenges in achieving growth.
- The equipment business remains soft, with ongoing reluctance from customers to invest, particularly impacting the Bioprocess Solutions division.
- The Asia region, especially China, continues to underperform due to market corrections and local competition.
- Underlying EBITDA margin saw a slight decline due to mix effects and lower production volumes.
- The company faces challenges in the U.S. market due to overcapacity and destocking effects from the pandemic.
Q & A Highlights
Q: How did the mix in Bioprocess Solutions (BPS) orders develop in Q3 between consumables and equipment?
A: Joachim Kreuzburg, Sartorius AG and Sartorius Stedim Biotech SA - IR, explained that there was a healthy recovery in demand for consumables, reflecting progress in customer stock level reductions. However, there remains a reluctance among customers to invest in equipment, leading to a mix trend towards consumables in the order intake.
Q: Can you provide an update on market share trends, particularly regarding dual sourcing and competition in China?
A: Rene Faber, Head of Bioprocess Solutions Division, noted that while some market share gained during the pandemic is expected to revert, about one-third is likely to remain. Dual sourcing is being pursued by some customers but is not yet widespread. In China, local suppliers gained market share during the pandemic, but the situation has stabilized without further shifts.
Q: What is the outlook for equipment spending, and how is it affected by overcapacity and investment uncertainty?
A: Joachim Kreuzburg stated that a gradual recovery is expected, influenced by stimulus programs and interest rates. The post-COVID overcapacity is a factor, but encouraging discussions with customers globally suggest a positive outlook, though precise timing remains uncertain.
Q: How is the visibility of orders and customer behavior changing, and when might it return to pre-COVID levels?
A: Florian Funck, CFO, indicated that customers are aligning orders with current lead times, suggesting a shift to shorter-term visibility. This trend is expected to continue, becoming the new normal, though full pre-COVID visibility levels may not return immediately.
Q: How are higher mammalian yields impacting consumable growth, and what is the outlook for equipment sales into 2025?
A: Rene Faber explained that while higher yields allow more production with fewer resources, this trend is not new and is generally positive for Sartorius. The equipment market remains weak, and it's too early to predict 2025 outcomes, but stabilization is noted.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
