Sartorius AG

Thank you very much. Good day everybody and welcome to the conference call on our preliminary results for 2018 for both the Sartorius Group, as well as for Sartorius Stedim Biotech.

As always, I would like to kick-off our call here with talking about the highlights for the year 2018, and then I will turn the call over to Rainer, our CFO who will walk you through the figures in more detail. And then I will talk about the outlook at the end of the presentation about the group and then also will explain the results for SSB to you.

So, let’s have a brief look on the highlights for fiscal 2018. We have been able to achieve double digit growth rates for sales, as well as order intake and also earnings, particularly the Bioprocess Solutions division was contributing through very dynamic profitable growth, ahead of the initial expectations at the beginning of the year 2018 and also order intake was quite strong.

The electronics and services division had to operate in a more challenging environment, particularly from the second half of last year onwards. In light of these circumstances, I think the development can be called robust one, and for 2019 we see a couple of macro-economic challenges ahead, but nevertheless have a quite optimistic outlook for the year that we have entered four weeks ago.

And with that, I would now like to turn over to Rainer.

Yes. Thank you, Joachim.

Also, welcome and good afternoon from my side. Let’s start with some key figures.

We finished the year with sales revenues amounting to 1.56 billion, which is an increase in constant currencies of 13.2%. So, really another strong performance for the overall Sartorius Group.

Roughly 1 percentage point of that growth is attributed to non-organic sales. The order intake, we could increase by 12.5% in constant currencies to 1.66 billion, which is nice because we could really see that we kept the spread of roughly 100 million between revenue and order intake.

The strong sales performance related to an EBITDA of 405 million, which is an increase of 14.7%, and translates to a margin of 25.9%, that is really an increase of 0.8 percentage points. I have to say that, really, the foreign exchange did not play any major role in 2018 for those results.

Underlying earnings per share for the ordinary shares are €2.56 and for the preferred ones one €0.01 more, €2.57. So, if you look how is the regional development on the next slide, we’re really happy with our strong performance in the Americas.

One of the strongest gains with 16.6%, we could achieve revenues of 520 million and really had a nice momentum versus we have to be on though moderate comps in 2017. Remember that in 2017 we had some temporary effects in that region.

In EMEA, we posted revenues of 657.7 million. It’s an increase of 9.4% in constant currencies, really driven by a very robust performance on the Bioprocess Solutions side.

There we could achieve double-digit growth, but that was diluted a little bit by really softer LPS growth, which was below our expectations. I will comment on that later when we go a little bit more in detail to the divisional results.

In Asia Pacific, both divisions again posted very solid growth rates, double-digit, in lab, as well as in Bioprocess, and that we have to say against fairly high comps compared to the previous year. In the regional distribution we have actually a slight shift in favor of the Americas compared to 2017.

There we have a revenue share now of 33%; EMEA, a 42% still remains of course our strongest region; and Asia Pacific same sales ratio of 25% as in the previous year. If you go on the next slide, we see a bit more details about the Bioprocess Solutions Division.

Order intake, as well as sales revenue both – all regions contributed double digit, order intake increased by 14.9% in constant currencies to 1.23 billion, which is really driven by equipment, but also strongly by our single-use product portfolio. The Umetrics acquisition contributed 0.5 percentage point to the sales growth.

Revenues rose to [1.14 billion], it’s an increase of 14.8% in constant currencies and it’s right really in-line with our guidance, which we really quantified a little bit more on Q3 that we would hit the upper range between 12% and 15%. So, we're very happy with that performance.

Underlying EBITDA, we could increase our margin from by 28% to 28.6% to 300 – roughly 327 million, which is an increase of 15.7%. Also, here, foreign exchange played a very minor effect, roughly 0.1 percentage point.

The [life] profitability is clearly attributed to economies of scale, which we continue to see throughout the year and expect also to see it going forward, but Joachim will explain at the end. If you move to the LPS division on our next slide, we see here a solid performance.

Although we have to say it is below our expectations. As you remember in Q3, we changed our guidance from 12% to 15% to 8% to 10%, so we’re able to hit right in the middle, sales revenue increased in constant currencies by 9.1% to 423 million, really attributed to the weakening, to the weaker, I have to say economy in Europe.

And let’s not forget, we had fairly tough comps in 2017. Order intake increased to 428.8 million, [while 6.3%] in constant currencies.

Overall, solid performance. Just as a note, the Essen Bioscience acquisition contributed as planned 2.5 percentage points to the revenue growth.

Also, in the LPS side, we could increase our EBITDA margin from 18% to 18.5%. As we expected it and revised our guidance on Q3.

So, EBITDA is at 78.1 million, an increase of 10.4%. Mainly, the increase is also attributed here to the economies of scale and also favorable product mix.

To go into the next slide, we’re going to see some additional key performance indicators based on the strong operational performance on the underlying EBITDA and 405 million. It’s an increase of 14.7%.

We clearly see here quite a big deviation on the extraordinary items, let me explain that that it really includes a positive effect, resulting from the consolation of the liability in connection with the modified agreement in the sales culture media business related with our partner Lonza. This amounted approximately to 30 million.

Financial and result, you see a slight increase here. This is really, mainly driven by the hedge accounting, we had some negative foreign exchange effect in this position, otherwise from an interest point of view it is really on previous year level.

Underlying profit rose by almost 22% to 175.6 million, and the net profit by 23.2% to 141 million, so very strong earnings. The net operating cash flow increased by 18.4% to 244 million, which we're very happy with.

And investing cash flow was 242 million, which obviously translated and we expected it also on the guidance that our investment ratio would hop around 15%. We basically achieved at the end of the year at 15.2% of revenue.

On the next slide, we see our key financial indicators. Equity ratio again increased as we expected, 38.5%; and our dynamic indebtedness ratio went slightly below previous year, also expected to 2.4 and net debt is roughly 960 million.

And with that, I’ll pass on to word to Joachim again.

Thank you, Rainer. On the next and last chart on the Sartorius Group, I would like to present the outlook for 2019 to you.

The format is I think very familiar to you. On the left side, you see the key performance figures for the year 2018 and on the right side then in the orange box the set of figures for 2019.

I would like to start from the bottom with the Lab Products & Service Business. Here we expect top line growth in constant currencies between 5% and 9%.

Of course this division is to some extent dependent on the overall economic development, and clearly as we have touched upon before, we do see a weakening economy, particularly in Europe, but not only, I think all of us and all of you are aware of the signals that one can hear and read regarding the Chinese economy, but also maybe the U.S. one we will see within the next couple of weeks how the guidance is for that economy will look like.

So, that’s clearly something that will play a role here to some extent and that is why we expect 5% to 9%, which should translate into a performance head of the markets probably, but yet may be a little bit below the longer year average that we would normally expect, but definitely of course a little bit difficult to factor that in precisely at the beginning of the year also taking into account such aspects as a potential hard Brexit that is very difficult to quantify, both in regards to the extent of a potential impact, as well as the timing effect that this might have. So, but that is how we see that.

So, we've factored this economic environment in as far as possible, but of course there are always some risks remaining. For the EBITDA margin, for Lab Products & Services we expect an increase up to slightly above 20.0%.

What is very important here is to know and you see this in the second bullet point below the table that this has two elements; one, is an operational increase that we would expect to come in at around 0.5 percentage point; and, then an effect which comes from the first time mandatory application of the International Accounting Standard IFRS 16 on leases, which basically leads to a reclassification or different classification going forward of payments on leases as depreciation, partially at least in a short format, and therefore we expect the EBITDA margin as stated here at slightly about 20%. For Bioprocess Solutions, we expect a top line growth of between 8% to 12%.

Here, we have factored in a dilution of around 3 percentage points presumably following the modification of the agreement with Lonza regarding Cell Culture Media. We have communicated this one two months ago roughly, and explained that we are expecting around €40 million of a reduction of our business in the Cell Culture Media Domain because this might be executed directly through Lonza going forward, and therefore this then would mean that we have this dilution effect of roughly 3 percentage points.

Margin wise, as you can read here, we expect an EBITDA margin of slightly about 29.5% [indiscernible] the operational increase should be 0.5 percentage point, and the remainder coming from IFRS 16 as mentioned before. For the group that sums up then to a top line growth expectation of 7% to 11% in constant currencies and to an underlying EBITDA margin of slightly above 27.0%.

And here the effect from the modification of the agreement with Lonza plays a role of around 2 percentage points of topline growth dilution. The CapEx ratio as we always talked about in numerous conversations throughout the last 2, 3 years we expect to go down again now.

We expect this figure to be around 12 percentage points. 12% for the year 2019, after a good 15% in 2018.

By far, the majority of the massive expansion of our facility in Puerto Rico has been finalized, but of course some remaining work still has to be performed here. The same is for the significant expansion and consolidation of our site here in Germany, and then there are of course some other expansion as you can imagine when you're growing around the 10% mark.

Having said that, I would like to move forward by briefly walk you through the figures for Sartorius Stedim Biotech, of course most comment pretty much those that you have heard from Rainer before regarding the Bioprocess division, so therefore just briefly we have seen a very dynamic profitable growth for Sartorius Stedim Biotech of course in light of a more moderate, particularly sales revenue performance last year, order intake wasn't that bad. So therefore, that we have achieved 14.2% for order intake is, I would say a remarkable increase, but also 13.7% for sales revenue is absolutely in-line with our significantly upgraded guidance for SSB.

And the absolute figures I think are important to note that around €95 million of higher order intake that we have achieved in comparison to the sales revenue level. All proportional increase of the EBITDA margin – of the EBITDA figure and therefore an expansion of our margin up to 28.2%, very significant increase of our earnings per share by 21.5% to €2.38, and then as I said before, the comments regarding economies of scale, etcetera, I think we have talked about before.

From a regional perspective, also here I think most has been said, particular a strong performance in the Americas, against a bit more moderate comps, but nevertheless clear outperformance of the market because the moderate comps where due also for our competition that has faced basically the same conditions last year. So, I think we continue to outperform here and gain market share in that region as we are exquisitely are shooting for, but also the performance in the more mature market of Europe have been very solid, as well as the growth in Asia Pacific against more challenging costs.

The cash flow figures look, I would say, very healthy. We have been able to convert our very positive trend and development regarding the EBITDA into a significant increase of our net operating cash flow.

The comment regarding the extraordinaries, I think have been made [indiscernible]. CapEx ratio has seen a peak as we expect in 2018 at 14.5% approximately, a bit above the year 2017 because of the very significant investments if we had to recall, which is part of the SSB operation.

The financial position for SSB remains extraordinarily strong with an equity ratio of now at 66.5%, and net debt to underlying EBITDA of still around [0.4] even though we are executing this very ambitious CapEx program. Finally, the outlook for 2019, and again of course I think the comment has been made basically.

We are expecting to achieve 7% to 11% topline growth for SSB, which includes a dilution by 3 percentage points following the modification of the agreement with Lonza. We expect to increase our underlying EBITDA margin in-line with what we have shown before for BPS by slightly more than 1 percentage point, and the CapEx ratio we expect to also be below the figure for 2018, and for SSB we expect that to come in at around 11%.

And once again let me say that the increase of the underlying EBITDA margin should include or should consist of 0.5 percentage point of operational increase and the remainder following IFRS 16’s first-time application. Thank you very much for your attention so far, and now we would like to open Q&A.

Good afternoon. [indiscernible] from UBS.

I have two questions please. The 2.4 debt-to-EBITDA ratio implies cash outflow of around 50 million.

So, you have given us your Q4 CapEx number. If we assume debt to be repaid or rate, this would imply a weak Q4 in terms of net cash flow from operating activities, can you comment on that?

And then second, your BPS guidance of 8% to 12%, which is already impacted by the Lonza agreement suggest acceleration over 2018, where is that acceleration coming from and any inorganic addition? Thank you.

Yes. Thank you very much for these questions.

So, for the cash flow and in Q4 that’s quite right. That’s untypical, given the fact that we had a very strong Q4, and therefore a certain tendency to higher accounts receivables also.

So, typically there is a kind of whatever timing effect of delivering goods and then the reception of the payments. Absolutely nothing extraordinary behind that just normal course of business and timing.

And regarding the guidance for 2019, I would say what we’re basically saying with 8% to 12% after a dilution of this 3 percentage points, and given the fact that what we have achieved in 22,018 was more or less completely organic and organic growth. What we are saying is, that we expect pretty much a continuation of the organic growth trend from 2018 into 2019.

We see that well backed by the development of our orders as we have highlighted as well, so there is no – therefore no change of any particular trend in. Maybe if I may add one word on timing here, but that is already one level more into the details.

When we compared the quarters in 2018, we would say that Q1 was a little bit, let’s say strong in comparison to quite strong, and even stronger [indiscernible] maybe that’s the right wording. So, maybe this growth rate could be coming in even a little bit at the upper end or even higher for Q1, let’s see.

It is a bit early to see that, but that could be the case, and little bit lower than logically for the other quarters, but again that is nothing that I would recommend pretty much into. That is simply a little bit again the normal slight fluctuations, but again, the basis of our expectation or more or less the result from our in-depth planning is basically that we expect the continuation of the organic growth trend.

Thank you.

My first question would be a follow-up on BPS, could you elaborate a bit on the process of how you compile your guidance for this segment? So, how much visibility do you actually have on consumables orders for the year when you provided guidance?

And could you give us any indication or do you get any indication from the magnitude of orders or equipment orders you get from your clients at the beginning of the year? So, basically just simply want to check how robust your guidance assumptions are, because it sounds a bit that you got some kind of exceptional maybe exceptional and strong Q1 order book, and just wanted to know what you see for the rest of the year.

And my second question is, generally a follow-up on your macro view. You mentioned that hard Brexit could have some adverse impact on your guidance.

So, is it fair to say that your current outlook for 2019 is based on the assumption that the macroeconomic environment will not further deteriorate from here, and hence will remain stable? And then my last question is on the cell media business.

Will you retrieve from that business now or what is your approach to win back market share here? Thank you.

Yes. Thank you very much.

So, first on the visibility, of course the visibility for the first quarter is quite high given the order book and simply the nature of our business. Of course, it’s difficult to precisely predict the growth rate at this point in time, but of course given the nature of the business and the order book that is the visibility there is quite high.

And then quite frankly, we often like to say that it’s easier to predict our growth rate over a three-year spend – over three quarters because of the visibility or let’s say even the commitment of customers at the beginning of the year and regarding the orders that they might place in September or October or so is limited. So therefore, there is always a kind of uncertainty of course in the nature of this business and I guess of a new business.

So, I would say, we do have a very high visibility and robustness because of the fact that we do have a very significant portion of 75% approximate of single-use products and therefore repetitive business, but even as these accounts were like 90% of what we can expect, of course there is still the uncertainty regarding the remaining 10% and when precisely they will come in and then of course leads to also a certain bandwidth within our guidance and sometimes as we have seen in the last couple of years that we sometimes had to adjust our guidance by some percentage point in the further course of the year. So, I think we would never try to give the impression if that was kind of perfect visibility at the beginning of the year, but we try to factor in as many information available as possible from all over direct interactions with customers globally be it key accounts, be it smaller customers on all levels.

So, we really have a very sound budgeting process here that is the basis for our forecasting, but of course there is always a certain uncertainty included, partially also because our customers have to live with a certain uncertainty. They also don't know precisely if and if yes, when, they might get the approval for a new drug for instance and that can have an impact of let’s say 1 percentage point of growth.

It’s not a question of life or death for our business, absolutely not, but of course it has an impact on growth and when exactly it happens. So that’s basically on that.

On the macro environment, Brexit – so, we do not expect the Brexit to – and the potential hard Brexit to change our business that we operate ourselves in the UK or that we have with UK customers fundamentally. However, it clearly might have an impact on supply chain.

So, one way or the other. And we have prepared ourselves for that.

As I think most companies do by building up certain safety stock levels, but I think we all know that this is a situation that is pretty much potentially at least new for everybody and that there are potentially not sufficient resources and defined processes available to operate in a maybe abruptly fundamentally changed environment. So, that is an uncertainty.

I think it’s only fair and reasonable to address that, but it’s clearly there are limits to predicting that and factoring that into our guidance, and therefore I think it’s largely right how you have like summarized it that what can be seen today and what is reflected in also those outlooks on GDP growth et cetera that are publicly available for all the different regions of the world. We have tried to factor into our guidance.

If things develop differently from that then of course this might have an impact on our business development. On the sale culture media, the modification of the agreement with Lonza are basically means that both companies Lonza and Sartorius Stedim Biotech now have both operationally and strategically all freedom to operate.

Because basically we have removed the accessibility, the mutual accessibility, the bidirectional accessibility so to say are from our agreement. And we clearly believe that after having shown that we are absolutely able to grow such business and to triple it within like three years, and seeing the synergies that we can create for customers and the attractivity that we have for that we could create in front of customers by having that in our portfolio is something that we want to continue.

And therefore, we are working on potential ways to build up in more or less fully owned sales culture media business within our portfolio, but of course, here it is much more important as with any other business developments that we are undertaking that the quality and the sustainability is the first factor that we want to maintain, and then have an eye on then speed. We still have access to sales culture media from Lonza.

So, we are able to serve our customers. There is no rush that we are in here, but I could definitely imagine that in the longer run or in the mid-term however we would like to call that now, we will build up one way or the other in on sales culture media business.

Very helpful. Thank you so much.

Hi. Good morning and congratulations on the year-end.

Thank you.

The question I have is regarding Essen instruments, the growth contribution there was what, 250 basis points to the year and what’s the outlook in your view to Essen does it – is it reducing the level of volatility you’re expecting in the instrumentation side of the business, could you give us some update and color and your view on what Essen does and is Essen taking some share?

Yes. Definitely.

So, our bioanalytics business or cell analytics business of which Essen is the larger part and the other businesses or the other part is the IntelliCyt business has led I think to a certain shift of our overall growth rate. In the LPS division, as well as regarding our profitability and that we have seen already in 2017, 2017 to some extent and also in 2018.

We do believe that the fact that we are able to grow that business significantly means that the adoption of this technology by our customers is progressing well. So, in that sense one could also say Essen and IntelliCyt are taking share.

Even though there is a – that each may be the additional comment that basically both technologies don’t have any direct competition because there are of course many other cell analytical technologies available, but no automated systems that are directly comparable and competing with the two we are talking about here. So, definitely it has changed the strategic positioning, as well as some key operational performance factors of our lab division.

Going forward, we believe that the entire segment of life science research as we have talked about extensively in the course of these acquisitions, but also for example 11 months ago during our capital markets state is the key strategic direction of this division. We believe that this is an area, which provides very significant growth potential, also because the company is being active here and also the academic sector being active here is a very relevant one with a lot of growth potential on the one hand and also with strong need for more powerful tools to perform the other demanding experiments and partial also process development undertakings.

So, and that is why and this segment of cell analytics or the broadest base of bioanalytics is really a core activity that you could say that basically is taking place in all life science research lab be it of academic nature or industrial nature. So, that is how we see this segment.

Of course, let me add that we are talking about systems here that are by and large close to around $100,000. So, I would not exclude this business from the business that is to some extent depending on let’s say the ability of customers to make larger investments and therefore to some extend also dependent on the macroeconomic environment there.

So, if we would see a very significant cut back in the U.S. in regards to the R&D spending, the public spending is there, then that would have a certain impact here.

But as we are not talking about the mature technology, but one that really making inroads, I'm not talking about that we would see a decline than in this business, but may be a certain impact on the growth rate. But again, happy to have that in our portfolio.

Has changed the performance and the strategic positioning of the division.

Thank you very much.

Oliver Reinberg from Kepler Cheuvreux. Three questions, if I may.

Starting with the outlook for LPS, the outlook actually looks quite strong considering what we have seen in the outside world. Can you just help us to understand, if you strip out the growth of bioanalytics what is the underlying growth rate that you applied for the rest of the activities at LPS, and to see, I think orders in Q4 were actually flat or minus 1% is that not any kind of a concern for you?

Secondly, I want to follow-up on cash conversion, I think in Q4, the operating cash flow was actually flat year-on-year despite the fact that the EBITDA was up 50 million. Is it truly explained by the receivables or do you have any kind of incremental comment on that?

And also, in terms of cash conversion, I think for the group you were at 60%, I think SSD at 66%, which probably would suggest that the LPS is relatively weak, can you comment around that and also if you have any kind of cash conversion targets for the future years? And last question, can you just share with us what was the absolute number of capitalized R&D cost in the full-year?

Thank you.

Thank you very much. So, on LPS, the growth of the non-bioanalytics business would be around the – like the lower end of the bandwidth that we are giving.

So, that would be, I think how one could capture that one, whereas the growth for the bioanalytics business would be clearly in the double-digit range, but of course that business is the smaller part of it. So, therefore, that’s the composition there.

On the cash flow that you were asking for, you can basically say, I think besides the effect that I was talking about for some of the receivables, I would say the other effect is that we have seen a little bit of higher CapEx towards the end of the year. And so, I think that you could see that the CapEx ratio was I think if I remember correctly, just around this 10% or slightly about 10% at the beginning of the year was higher during the last quarter and then of course had also some impact on the cash outflow, but again, there is no what we talk about cash conversion then for me that always has the notion of fundamental features of a business, and both the fact of the accounts receivables and inventories towards the end of the year, as well as the effect from the timing from certain CapEx is nothing that I would consider to be fundamental.

And LPS as you rightly point out, has been a bit higher impacted by that to a higher extent because if you deduct SSB from the group then you not only have LPS, but also those kind of group overhead or support functions of global infrastructure kind of items that are carried by, so to say, by the headquarters and not by SSB and therefore look like as if they were a part from LPS from a cash flow point of view. And then finally, the R&D CapEx figure is a good 30 million for the year 2018.

Okay. Thanks for that.

If I may just follow-up, on cash conversion do you have any kind of targets on mind or is the focus for the next two years still on growth and less on cash conversion?

We have, quite frankly, we do not want now to add any KPI, let’s say through the backdoor now to the [indiscernible] here. We might add that at some point in time we – I think we talked that before we said, that we wouldn't do.

So, particularly in the course of our very significant CapEx program at the moment, but we might do that going forward. The only figure so far and that I can also share here with you, we are still operating on average and on average means over the year and at the different reporting date, but also at the end of the year at a little bit higher net working capital figures then we are shooting for mid-term.

To give you a feeling for that, we are talking about let’s say approx. 100 days by end of 2018 and we believe a more realistic figure going forward is around 90 days.

We benchmark us internally in our regular reporting and we're not doing bad at all in comparison to our competition, as far as the figures are available, but nevertheless we believe that this figure can be a little bit lower when some of the process improvements that we are working on have been introduced fully, particularly the inventory level is a little bit higher that doesn't result in extraordinary write-off here that’s not our problem, but clearly we have a little bit high inventory levels than we believe that we may be should have in the long run and the reason for that is mainly that we want to make sure at the moment to keep our delivery times short enough to satisfy our customers, which and is some product segments has been a challenge because in some product segments we were growing 25% or even stronger and here clearly we then have decided for a more risk-averse approach to our networking capital. So – but that you know, that’s nothing that explains Q4.

For Q4, I gave huge explanation, but in general there is something that we would say. And if we add some more cash flow related KPIs to the set of things going forward that’s well possible, but as I said that we might do after the completion of our CapEx program.

That’s helpful indeed. If I may sneak in a last question, on the IFRS change, I think you have like 60 basis points, 70 basis points of margin support, what is the offsetting nature of that, so what [indiscernible] should we expect and anything that we should consider below EBITDA?

Basically, what happens is that, let’s say costs that have been part of the P&L before, now split into depreciation and to some extent interest. After before the capitalization of the utilization rights of such leasing objects, so the balance sheet gets a little bit longer and therefore there’s slight dilution of the equity ratio.

So, and then of course you have the depreciation on these utilization rates on the leasing objects and again largely becoming depreciation to some extent becoming interest. So, the majority is always on par with let’s say the accounting work before on the EBIT level.

And it’s fully on par with the work before on the net result level.

Perfect. Thanks very much.

Welcome.

Thanks for taking my questions. Two, if I may.

The first one is on the BPS division. When you think of your single-use component sales, can you potentially quantify on the performance of how many compounds does this sales line depend?

A ballpark number her would certainly help, in my view? The second question is on the LPS division.

Is it potentially possible to split out the percentage of revenues from the LPS division really depending on the big economy i.e. the percentage of sales going into the chemical industry, the percentage of revenues potentially going just to academic research, which to my understanding is not necessarily depending on European economy in the first place, and how much of the LPS revenues really go into bioanalytics products that would also be very helpful?

Thank you very much.

Yes, thank you. So, actually to report on the number of compounds or if I understand that correctly, a pharmaceutical product that our products are used for is a figure that we don’t report.

It would be a very, very high number, and clearly also a number that is basically getting bigger and bigger because there are much more additional products being produced at this point in time than there maybe products where the manufacturing or the production is discontinued by customers, but again, we would not disclose that figure partially to be honest also because we would not have a very precise grip on it anyways because the level of insight that we get by our customers is different, but we also believe that we would not like to share too much information here with the public world, which not only nice investors and analysts belong, but also competition. So, therefore bear with us that we would not share that figure.

And on LPS, we would say that the bioanalytics business roughly accounts for something around the 20% mark of our business. The life science research segment as a customer segment or application kind of area roughly for 50% that includes both bio pharma, as well as life science academics customers and the remaining 50% are basically other areas from chemical industry through environmental lapse diagnostic lapse, partially food and beverage and so and so.

And even quality assurance in pharma so to say is not bellowing to life science research. So, that’s roughly how you would say that.

And if you carve out academia overall, which is not entirely, but predominantly life science research academia then we would say academia is around 20%.

Okay, thank you very much.

Different dimensions now, that I showed you, but that is roughly the set of figures.

That is already very helpful. And maybe I can sneak in a follow-up question as well on the visibility then for your single use revenue stream in BPS?

What percentage of your revenues is roughly visible beyond 3 months? Can you quantify this or you want to share it?

I tried to explain that before, but maybe I think in doing that in a good way – the way how we look on it is basically that in a little bit simplified way now, you could say that – if I simplify extremely, I would say all of the existing single use business is recurring. So, if we make 100 in a given time – in a given quarter, we will also make 100 in the next quarter.

The only question is, how much more will we make? Simplified model now.

Okay? And then you understand why I say, well, for us it is we don't have typically the question of will we grow the business as you know.

The question is, rather will you grow 5%, 10%, 15%, and that is to some extent depending on timing. And even if we are quite sure that we will do another x million with customer ABC, whatever, we not always know precisely when we will get the business because in quite some cases the customer does not know exactly when he would be able to expand his manufacturing or even start his manufacturing because he is dependent from, for instance new approvals or whatsoever.

So, that’s – of course it’s a simplification I leave out no, any whatever potential impact on fluctuating stock levels at customers and what have you, but it’s not that far from reality.

Very good. Thank you very much.

That was helpful.

Good afternoon, everyone. Gunnar Romer, Deutsche Bank.

Just a bigger picture question on your sales composition in BPS, just curious if you can comment on the split between originator and biosimilar customers. In the current sales, but also probably more importantly and when it comes to the acquisition of new businesses, I would assume that share goes up, so the biosimilar shares goes up, but it would be great if you could add some color around that.

And then with regard to your BPS outlook, can you comment on the expectations by region in 2019? Is this in-line with the trends you are seeing also longer term, is there anything we need to take into account specifically for 2019.

So, any color on that would be very helpful? Thanks.

Yes. So, on the biosimilar business, I think your remark from a qualitative standpoint is absolutely correct.

The business is becoming more relevant for us. To date it accounts for, up a single digit figures of our sales revenues in BPS.

It’s a bit to a high extent affected by equipment sales or [indiscernible] recently because quite a large portion is the investment by customers into building up capacities and then naturally you have a higher level of equipment being part of such orders. And also, I think this is as you all know it’s an early stage of the biosimilar business.

The first wave for approval is I think we have seen or seeing daily, maybe already seeing now the beginning of the second wave, let’s see, but still it’s not on such a little bit more flattened, I mean quite increasing, but not so strongly fluctuating part than the originators business. So, having said all that, we believe it clearly will play a double-digit role going forward, but that will take maybe a couple of more years until this will account 15% or maybe then in the long run, also more than that percentage, which is quite normal given the fact that yes we are in an industry where things are not changing from one day to the other, approval would take some time.

We also see different speeds of approving biosimilars in different countries just as we have seen it with the generics business couple of decades back. That also didn’t happen all at the same time in all countries.

So, again between 5% and 10% to date getting into the double-digit region within the next few years and yes, that’s I think what we can see so far. On your second point, we do not give a detailed quantitative guidance for the regions, but what we see is that we should expect higher growth rates from Asia and the Americas in comparison to Europe.

That is the typical pattern in normal years and in that regard, we would expect a normal year 2019. In the Americas, this is driven by a healthy underlying market growth plus us going – continuing to gain market share and in Asia we expect a quite [indiscernible] proportionate growth of those growth markets.

Of course, quite to some extent fueled by China, but also other markets are going growing quite nicely India, Korea, Singapore, also to some extent with all – to some extent little bit different drivers. So, that is how we would expect 2019 to look like.

That’s helpful. Thank you and just last question.

Can you talk about your exposure if at all currently to gene and biotherapy?

Yes. So, the exposure that we have here is in the lower-to-mid single-digit percentage rate in comparison to our turnover.

It’s relatively small, I guess it is of course a very interesting business. It’s also a growing business, but as you all know it’s basically one exception depending on how you look on it.

It’s a business that is largely taking place in R&D labs, may be partially in process development labs and somewhere in between. So, therefore, nothing large-scale if that is the right way to look on it anyways.

So, a business that we are focusing on in a certain way by making sure that we understand the special needs of these customers where we’re also looking into what that potentially means for our product portfolio going forward. So, so far, we don't have any products that I just like tailor made for such customers and for such applications.

So, all of our sales today are sales of existing products into that applications. But again, going forward, we could imagine very well that that plays a bigger role.

That's helpful. Thank you.

Yes. Thanks for taking my follow-up.

It’s on the EPS adjustment. So, the difference between the IFS number, the adjusted number is quite high and I wanted to ask whether you can provide some color on the nature of these adjustments, and whether the difference will come down anytime soon?

Thank you.

Yes, sure. We typically have a – you mean earnings per share or net result, basically right?

Yes, exactly.

So, we always apply the same logic and that is also part of what our auditors look on just to make that clear. And what we do here is that we are correct for the depreciation of non-tangible assets basically.

And amortization, exactly that is the word that I was looking for. So, amortization, we are normalizing also tax rates, which – but that has no effect basically for 2018 because our defector tax rate was pretty much of our normalized tax rate, but the bigger effect is the amortization that we are correcting for, and the amortization of course plays a certain role after all the acquisitions of the recent years, but always the same way that we apply.

We also correct for the non-operational expenses, but they have been rather small this year. So, that’s not such a big effect and the reason why we do so by the way just as, maybe as a recap, because we do that for many years now already is that we wanted to provide a net result figure that is close to let's say cash relevant figure and again more, and corrected for the nonoperational and non-recurring effects be it on the tax side, be it on the business side, but the difference I think is quite standard one for us.

Okay. Thank you.

Yes, I think, I just want to thank all of you again for your interest in Sartorius and Sartorius Stedim Biotech and for the discussion that we had here today. I’m very much looking forward to our next interaction bet it on some conferences, individual calls, or in roughly 3 months’ time when we have the opportunity to report on our Q1 2019 figures.

Thanks again, have a good day. Talk to you soon.

Bye-bye.