The pharmaceutical and laboratory supplier is expecting a drop in sales for the first time in a long time.
(Photo: Sartorius)
Frankfurt With a slump of more than 15 percent at times, the shares of the pharmaceutical and laboratory equipment supplier reacted to the company’s forecast cut from the weekend on Monday. The price fell to 302 euros at the top and thus the lowest value for almost three years. The extent of the profit warning surprised even analysts from various banks. According to Morgan Stanley, for example, the new outlook is below the market’s most pessimistic expectations.
The reason for the sales and profit warning: Customers in the pharmaceutical industry are continuing to reduce the inventories built up during the corona pandemic and are holding back on orders. According to the analysts at UBS, the management of Sartorius was overly optimistic when it stuck to its annual targets after an already weak first quarter.
In the wake of Sartorius, the shares of Darmstadt-based Merck KGaA also lost more than five percent. Like Sartorius, Merck also produces products in its Life Science division that are required in laboratories and for the manufacture of pharmaceuticals.
The Dax group Sartorius lowered its forecast for the current fiscal year late on Friday evening: Instead of a slight increase in sales, the company now expects a decline in the range of 10 to 15 percent, the profit margin (Ebitda) should only reach around 30 percent, instead of how the previous year’s level of almost 34 percent.
A drop in sales and higher costs had already caused the operating result (Ebitda) to fall by 22.1 percent to 272 million euros in the first quarter. At the telephone conference on the results of the first quarter at the end of April, analysts repeatedly asked critical questions about how Sartorius justified its forecast. At that time, CEO Joachim Kreuzburg was still confident that business would pick up in the second half of the year.
This optimism now seems to have evaporated. For the second half of the year, the company is now correcting its own expectations downwards. The analysts at Berenberg had already agreed that Sartorius would concede its annual targets. However, the extent of the forecast reduction came as a surprise.
Difficult environment, uncertain forecasts
The analysts are positive that Sartorius is sticking to its medium-term goals, although it is now becoming more difficult to achieve them: According to this, sales should increase from the last 4.2 billion euros to around 5.5 billion by 2025. The margin should be 34 percent before interest, taxes, depreciation and amortization (Ebitda).
Sartorius emphasized in a press release that the fundamentally positive development in the markets for life sciences and biopharmaceuticals is currently being overshadowed by the exceptionally weak demand situation after the pandemic. However, the company also pointed out that volatility in the industry has increased significantly in recent years. The changed geopolitical situation is causing additional uncertainty. This makes it difficult to forecast business figures, it said.
In recent years, Sartorius has benefited from high demand for products used in the manufacture of corona vaccines and drugs, and at times achieved growth rates of more than 30 percent. These corona effects had already subsided in the past year.
For the current year, the company had expected a further normalization in Covid-19 sales. But even without taking the corona business into account, according to the current forecast, sales at Sartorius would have fallen by a mid to high single-digit percentage.
More: Sartorius Lowers Forecasts – Second Half of the Year Doesn’t Get Any Better