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Life Science

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Life Science

Key figures

Change
€ million 2018 2017 € million in %
Net sales 6,185 5,882 304 5.2%
Operating result (EBIT)1 1,036 834 202 24.2%
Margin (% of net sales)1 16.7% 14.2%
EBITDA1 1,755 1,580 175 11.1%
Margin (% of net sales)1 28.4% 26.9%
EBITDA pre1 1,840 1,786 54 3.0%
Margin (% of net sales)1 29.8% 30.4%
Business free cash flow1 1,393 1,402 – 9 – 0.7%
1
Not defined by International Financial Reporting Standards (IFRSs).

Development of net sales and results of ­operations

In 2018, Life Science posted organic sales growth of 8.8%, partially offset by negative foreign exchange effects of – 3.6%. Net sales rose overall by 5.2% to € 6,185 million (2017: € 5,882 million).

All three business units of the business sector contributed favorably to the organic sales growth of Life Science. Process Solutions generated double-digit organic sales growth of 14.8%, attributable to high demand across the portfolio and was thus again the business sector’s main growth driver in 2018. Applied Solutions continued to perform very well, posting organic growth of 6.3% and the Research Solutions business unit reported an organic sales increase of 4.1%.

The development of sales in the individual quarters in comparison with 2017 as well as the respective organic growth rates are presented in the following graph:

­LIFE SCIENCE

Net sales and organic growth1 by quarter2

€ million/organic growth in %

1 Not defined by International Financial Reporting Standards (IFRSs).
2 Quarterly breakdown unaudited.
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Life Science

Net sales by business unit1

€ million 2018 Share Organic growth2 Exchange rate effects Acquisitions/ divestments Total change 2017 Share
Process Solutions 2,487 40% 14.8% – 3.5% 11.3% 2,234 38%
Research Solutions 2,048 33% 4.1% – 3.6% 0.5% 2,038 35%
Applied Solutions 1,650 27% 6.3% – 3.8% 2.5% 1,609 27%
Life Science 6,185 100% 8.8% – 3.6% 5.2% 5,882 100%
1
Previous year’s figures have been adjusted due to an internal realignment.
2
Not defined by International Financial Reporting Standards (IFRSs).

The Process Solutions business unit, which markets products and services for the entire pharmaceutical production value chain, generated double-digit growth of 14.8% and net sales of € 2,487 million (2017: € 2,234 million) in 2018. This means that Process Solutions accounted for 40% (2017: 38%) of Life Science net sales. All business areas of Process Solutions contributed to this strong performance. The key driver was the BioProcessing business unit, particularly in the Asia-Pacific and North America regions.

The Research Solutions business unit, which provides products and services to support life science work in pharmaceutical, biotechnology and academic research laboratories, recorded a moderate organic sales increase of 4.1% in 2018. Strong performance by both Lab & Specialty Chemicals and Reagents & Kits in particular led to the growth in net sales of Research Solutions, which increased to € 2,048 million (2017: € 2,038 million), representing 33% (2017: 35%) of the business sector’s net sales. In regional terms, Asia-­Pacific was the strongest growth driver for Research Solutions in 2018.

The Applied Solutions business unit generated strong organic sales growth of 6.3% with its broad range of products for researchers as well as scientific and industrial laboratories. Net sales increased to € 1,650 million (2017: € 1,609 million). Accordingly, the business unit contributed 27% (2017: 27%) to net sales of the Life Science business sector. The sales performance of Applied Solutions was driven by all business fields, and primarily by the North America and Asia-Pacific regions.

Net sales of the business sector by region developed as follows:

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Life Science

Net sales by region

€ million 2018 Share Organic growth1 Exchange rate effects Acquisitions/ divestments Total change 2017 Share
Europe 2,136 35% 6.4% – 0.8% 5.6% 2,022 34%
North America 2,173 35% 8.4% – 4.6% 3.8% 2,093 35%
Asia-Pacific (APAC) 1,532 25% 13.6% – 3.8% 9.8% 1,395 24%
Latin America 256 4% 10.5% – 16.5% – 6.0% 273 5%
Middle East and Africa (MEA) 88 1% – 8.7% – 1.7% – 10.4% 98 2%
Life Science 6,185 100% 8.8% – 3.6% 5.2% 5,882 100%
1
Not defined by International Financial Reporting Standards (IFRSs).

The results of operations of the Life Science business sector developed as follows:

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Life Science

Results of operations

Change
€ million 2018 in % 2017 in % € million in %
Net sales 6,185 100.0% 5,882 100.0% 304 5.2%
Cost of sales – 2,723 – 44.0% – 2,588 – 44.0% – 135 5.2%
Gross profit 3,463 56.0% 3,294 56.0% 169 5.1%
 
Marketing and selling expenses – 1,775 – 28.7% – 1,734 – 29.5% – 41 2.4%
Administration expenses – 282 – 4.6% – 261 – 4.4% – 22 8.3%
Research and development costs – 249 – 4.0% – 241 – 4.1% – 8 3.4%
Remaining operating expenses and income – 121 – 2.0% – 224 – 3.8% 104 – 46.2%
Operating result (EBIT)1 1,036 16.7% 834 14.2% 202 24.2%
 
Depreciation/amortization/impairment losses/reversals of impairment losses 719 11.6% 746 12.7% – 27 – 3.6%
(of which: adjustments) (23) (3) (20) (> 100%)
EBITDA1 1,755 28.4% 1,580 26.9% 175 11.1%
 
Restructuring expenses 3 5 – 2 – 45.0%
Integration expenses/IT expenses 86 114 – 29 – 25.0%
Gains (–)/losses (+) on the divestment of businesses – 8 1 – 9 > 100%
Acquisition-related adjustments 2 63 – 61 – 97.2%
Other adjustments 3 22 – 19 – 86.5%
EBITDA pre1 1,840 29.8% 1,786 30.4% 54 3.0%
1
Not defined by International Financial Reporting Standards (IFRSs).

Gross profit increased by 5.1% to € 3,463 million (2017: € 3,294 million). Despite currency headwinds, the strong increase was driven by organic growth in sales across all business units. Marketing and selling expenses increased by 2.4% to € 1,775 million (2017: € 1,734 million), while R&D expenses increased by 3.4% to € 249 million (2017: € 241 million). The decline in other operating expenses and income of – 46.2% to € – 121 million (2017: € – 224 million ) was the result of lower acquisition-related adjustments and a fall in adjustments for integration expenses/IT expenses that were included in this item. In comparison with 2017, the operating result (EBIT) of Life Science rose by € 202 million to € 1,036 million (2017: € 834 million). After eliminating depreciation and amortization as well as adjustments, EBITDA pre – the key indicator to assess the earning power – increased by 3.0% to € 1,840 million (2017: € 1,786 million ). EBITDA pre improved by 7.0% over the prior year in organic terms, whereas negative foreign exchange rate effects depressed this key indicator by – 3.9%.

The development of EBITDA pre in the individual quarters in comparison with 2017 is presented in the following overview:

­LIFE SCIENCE

EBITDA pre1 and change by quarter2

€ million/change in %

1 Not defined by International Financial Reporting Standards (IFRSs).
2 Quarterly breakdown unaudited.

Development of business free cash flow

In 2018, the business free cash flow of the Life Science business sector remained stable at the previous year’s level at € 1,393 million (2017: € 1,402 million). Essentially, the inventory build-up to support sales growth was offset by higher EBITDA pre and lower investments.

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Life Science

Business free cash flow1

Change
€ million 2018 2017 € million in %
EBITDA pre1 1,840 1,786 54 3.0%
Investments in property, plant and equipment, software as well as advance payments for intangible assets – 315 – 371 56 – 15.1%
Changes in inventories – 116 28 – 144 > 100.0%
Changes in trade accounts receivable as well as receivables from royalties and licenses – 17 – 41 24 – 59.3%
Business free cash flow1 1,393 1,402 – 9 – 0.7%
1
Not defined by International Financial Reporting Standards (IFRSs).

The development of business free cash flow items in the individual quarters in comparison with 2017 is presented in the following overview:

­LIFE SCIENCE

Business free cash flow1 and change by quarter2

€ million/change in %

1 Not defined by International Financial Reporting Standards (IFRSs).
2 Quarterly breakdown unaudited.