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Life Science

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Life Science
Key figures
      Change
€ million 2019 2018 € million %
Net sales 6,864 6,185 679 11.0%
Operating result (EBIT)1 1,280 1,036 245 23.6%
Margin (% of net sales)1 18.7% 16.7%    
EBITDA1 2,070 1,755 315 17.9%
Margin (% of net sales)1 30.2% 28.4%    
EBITDA pre1 2,129 1,840 289 15.7%
Margin (% of net sales)1 31.0% 29.8%    
Business free cash flow1 1,375 1,393 -18 -1.3%
1 Not defined by International Financial Reporting Standards (IFRSs).

Development of sales and results of operations

In fiscal 2019, Life Science posted a strong organic sales growth of 9.0%, assisted by a favorable foreign exchange impact of 2.6% and offset by a negative portfolio effect of -0.6%, resulting in a total growth of 11.0% compared to the previous year. All three business units contributed to organic growth, with the largest contribution coming from Process Solutions, followed by Applied Solutions. Taking these effects into account, Life Science net sales increased overall to € 6,864 million (2018: € 6,185 million).

The development of sales in the individual quarters in comparison with 2018 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 %
1Not defined by International Financial Reporting Standards (IFRSs).
2Quarterly breakdown unaudited.
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Life Science
Net sales by business unit1
€ million 2019 Share Organic growth2 Exchange rate effects
Acquisitions/divestments
Total change 2018 Share
Process Solutions 3,003 44% 15.1% 3.0% 18.1% 2,543 41%
Research Solutions 2,176 32% 3.9% 2.4% 6.3% 2,046 33%
Applied Solutions 1,685 24% 5.9% 2.0% -2.3% 5.6% 1,596 26%
Life Science 6,864 100% 9.0% 2.6% -0.6% 11.0% 6,185 100%
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 pharmaceutical production value chain, gen­er­ated organic sales growth of 15.1%, which was the highest rate within the Life Science business sector. Assisted by a favorable foreign exchange effect of 3.0%, sales amounted to € 3,003 million in 2019 (2018: € 2,543 million). Therefore, Process Solutions accounted for 44% of total net sales in the Life Science business sector. Nearly all businesses contributed to the sales increase with double-digit growth rates. In regional terms, all regions except Middle East and Africa experienced double-digit growth within Process Solutions.

The Research Solutions business unit, which provides products and services to support research for pharmaceutical, biotechnology, and academic research laboratories, recorded an increase in organic sales of 3.9%. Supported by favorable exchange rate effects of 2.4%, sales totaled € 2,176 million in fiscal 2019 (2018: € 2,046 million). Organic growth was driven by all business fields. Research Solutions thus accounted for 32% of Life Science net sales. In regional terms, Asia-Pacific was the strongest organic growth driver for Research Solutions.

The Applied Solutions business unit, which accounted for a 24% share of Life Science net sales in 2019, delivered strong organic sales growth of 5.9% with its broad range of products for researchers as well as scientific and industrial laboratories. The negative portfolio impact was attributable to the divestment of the flow cytometry business. Assisted by favorable exchange rate effects of 2.0%, sales totaled € 1,685 million in 2019 (2018: € 1,596 million). The sales performance of Applied Solutions was driven by all business fields and in all regions.

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

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Life Science
Net sales by region
€ million 2019 Share Organic­
growth1
Exchange­
rate effects
Acquisitions/­
divestments
Total change 2018 Share
Europe 2,277 33% 6.7% 0.4% -0.5% 6.6% 2,136 35%
North America 2,474 36% 8.9% 5.6% -0.6% 13.8% 2,173 35%
Asia-Pacific (APAC) 1,743 26% 11.8% 2.7% -0.7% 13.8% 1,532 25%
Latin America 278 4% 13.6% -4.9% -0.2% 8.5% 256 4%
Middle East and Africa (MEA) 92 1% 5.7% -0.4% -0.4% 4.9% 88 1%
Life Science 6,864 100% 9.0% 2.6% -0.6% 11.0% 6,185 100%
1 Not defined by International Financial Reporting Standards (IFRSs).

The following table presents the composition of EBITDA pre for 2019 in comparison with 2018. The International Financial Reporting Standards (IFRS) figures have been modified to reflect the elimination of adjustments included in the respective functional costs.

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Life Science
Reconciliation EBITDA pre1
  2019 20182 Change
€ million IFRSs Elimination of adjustments Pre1 IFRSs Elimination of adjustments Pre1 Pre1
Net sales 6,864 6,864 6,185 6,185 11.0%
Cost of sales -2,962 5 -2,957 -2,723 38 -2,685 10.1%
Gross profit 3,903 5 3,908 3,463 38 3,500 11.6%
Marketing and selling expenses -1,924 2 -1,922 -1,777 2 -1,775 8.3%
Administration expenses -341 34 -307 -335 52 -282 8.9%
Research and development costs -276 -276 -251 1 -249 10.7%
Impairment losses and reversals of impairment losses on financial assets (net) -7 -7 -4 -4 56.1%
Other operating income and expenses -75 19 -56 -60 14 -46 21.8%
Operating result (EBIT)1 1,280     1,036      
Depreciation/amortization/impairment losses/reversals of impairment losses 789 789 719 -23 696 13.3%
EBITDA1 2,070     1,755      
Restructuring expenses 13 -13 3 -3  
Integration expenses/IT expenses 36 -36 86 -86  
Gains (-)/losses (+) on the divestment of businesses 9 -9 -8 8  
Acquisition-related adjustments 2 -2 2 -2  
Other adjustments 3 -3  
EBITDA pre1 2,129 2,129 1,840 1,840 15.7%
thereof: organic growth1             14.4%
thereof: exchange rate effects             1.5%
thereof: acquisitions/divestments             -0.2%
1 Not defined by International Financial Reporting Standard (IFRSs).
2 Previous year’s figures have been adjusted, see Note (45) “Effects from new accounting standards and other presentation changes” in the Notes to the Consolidated Financial Statements.

Adjusted gross profit increased by 11,6% to € 3,908 million (2018: € 3,500 million). The strong increase was driven by organic sales growth across all business units and production capacity utilization. The gross margin of Life Science, i.e. gross profit as a percentage of net sales, amounted to 56.9% (2018: 56.6%). Marketing and selling expenses increased by 8.3% to € 1,922 million (2018: € 1,775 million) while research and development costs increased by 10.7% to € 276 million (2018: € 249 million). Other operating expenses (net) increased by 21.8% to € 56 million (2018: € 46 million). After eliminating adjustments, amor­ti­zation, and depreciation, EBITDA pre rose by 15.7% to € 2,129 million (2018: € 1,840 million). This double-digit increase in the most important key figure used to steer the operating business was mainly organic (14.4%) and included a positive earnings contribution of € 59 million due to the first-time application of IFRS 16 “Leases.” The result margin, i.e. EBITDA pre as a percentage of net sales, increased in 2019 to 31.0% (2018: 29.8%). This reflects the strong performance of the combined Life Science busi­nesses along with continued focus on driving sales and managing costs.

The development of EBITDA pre in the individual quarters in comparison with 2018 is presented in the following overview:

Life Science 

EBITDA pre1 and change by quarter2

€ million/change in %
Not defined by International Financial Reporting Standards (IFRSs).
Quarterly breakdown unaudited.

Development of business free cash flow

In 2019, business free cash flow amounted to € 1,375 million (2018: € 1,393 million). Higher EBITDA pre was primarily offset by the build-up of inventories supporting the sales growth, increased capital spending, and an increase in trade accounts receivable fol­low­ing the underlying sales development.

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Life Science
Business free cash flow1
      Change
€ million 2019 2018 € million %
EBITDA pre1 2,129 1,840 289 15.7%
Investments in property, plant and equipment, software as well as advance payments for intangible assets -384 -315 -69 21.8%
Changes in inventories -232 -116 -117 >100.0%
Changes in trade accounts receivable as well as receivables from royalties and licenses -81 -17 -65 >100.0%
Lease payments2 -56      
Elimination first-time consolidation 1      
Business free cash flow1 1,375 1,393 -18 -1.3%
1 Not defined by International Financial Reporting Standards (IFRSs).
2 Excluding payments for low-value leases and interest components included in lease payments.

The development of business free cash flow items in the individual quarters in comparison with 2018 is presented in the following overview:

Life Science 

Business free cash flow1 and change by quarter2

€ million/change in %
Not defined by International Financial Reporting Standards (IFRSs).
Quarterly breakdown unaudited.