Review of Forecast against Actual Business Developments

The forecast of the Group for fiscal 2022 published in the Annual Report for fiscal 2021 comprised the forecast for the Group as well as the forecast for the three business sectors: Life Science, Healthcare, and Electronics.

Net sales

We forecast strong organic net sales growth for the Group in 2022. In particular, the geopolitical and economic conditions changed in the course of the year. Additionally, renewed outbreaks of Covid-19 in China and the zero-Covid strategy pursued by the Chinese government meant that temporary, locally restricted lockdowns were imposed there. Driven by the sustained dynamic organic growth of the Life Science business sector in particular, we recorded organic growth in net sales of 6.4% in fiscal 2022, thus falling within our forecast range last revised to organic sales growth of between +6% and +8% with the publication of the figures for the third quarter. At the start of the year, we still anticipated positive exchange rate effects of between +1% and +4% on our net sales. However, several currencies saw more favorable development than expected as the year progressed, particularly the U.S. dollar and the Chinese renminbi. The positive exchange rate effect in 2022 as a whole was +6.1%, thus falling within the range of between +5% and +8% set out in our most recent update in the third quarter. The slightly positive portfolio effect was negligible at +0.4%. All in all, net sales amounted to € 22,232 million, representing a year-on-year increase of +12.9%.

Life Science

Our Life Science business sector generated organic sales growth of 8.2% in 2022, this falling within the forecast range of +7% to +10% that was specified in the first quarter. This meant that Life Science also achieved the original forecast of strong organic sales growth. This development was driven by all three business units, namely Process Solutions, Life Science Services and Science & Lab Solutions. As expected, Process Solutions was again the most dynamic business unit, delivering the largest contribution to the organic sales growth within Life Science. All in all, net sales in the Life Science business sector increased by 15.4% to € 10,380 million, including a positive exchange rate effect of 6.4% and a positive portfolio effect of 0.8%.

Healthcare

We originally forecast solid organic sales growth for our Healthcare business sector compared with the previous year. We then quantified this organic sales growth forecast at between +4% and +7% when we published the figures for the first quarter. Having retained this forecast, we achieved it with organic growth of +5.5% in fiscal 2022. This development was driven in particular by the significant growth contribution from oncology business and, above all, strong growth in our recently approved product Bavencio^®. Neurology & Immunology also made a substantial contribution to organic sales growth thanks to our recently approved product Mavenclad^® in particular. As we originally forecast for fiscal 2022, we returned to solid organic sales growth in the Cardiovascular, Metabolism and Endocrinology franchise. Taking into account a positive exchange rate effect of 5.1%, net sales in the Healthcare business sector increased by 10.6% to € 7,839 million in fiscal 2022.

Electronics

Since we anticipated positive development in semiconductor business, we forecast solid to strong organic sales growth for our Electronics business sector at the start of the year. We quantified our organic sales growth forecast at between +5% and +8% when we published the figures for the first quarter. In addition to various economic and geopolitical factors leading to an expected slowdown in growth in the Semiconductor Solutions business in the second half of the year compared with the previous forecast, our Display Solutions business saw weaker organic growth in the third quarter. Accordingly, we lowered our forecast for the Electronics business sector to organic sales growth of between +2% and +5% with the publication of the figures for the third quarter. The business sector achieved this reduced forecast with organic sales growth of 3.7%. Thanks to positive exchange rate effects of 7.6%, the Electronics business sector increased its net sales by 11.3% year-on-year to € 4,013 million.

EBITDA pre

For 2022, we originally forecast strong year-on-year organic growth in EBITDA pre for the Group. This assumption was based on the expectation of strong organic growth in Life Science, moderate to solid growth in Healthcare, and solid organic growth in Electronics. Because of the expected favorable foreign exchange environment, we originally expected positive exchange rate effects to impact EBITDA pre by between +2% and +5% compared with the prior year. With the presentation of the figures for the first quarter, we quantified our forecast for organic growth in EBITDA pre at between +5% and +9%. Thanks to positive exchange rate effects, especially from the U.S. dollar and the Chinese renminbi, we raised our forecast for the impact of exchange rate effects on EBITDA pre twice in the course of fiscal 2022, ultimately ending with a forecast of between +6% and +10%. EBITDA pre amounted to € 6,849 million in fiscal 2022, representing a total increase of 12.2% compared with the previous year. At +6.1%, organic sales growth fell within our forecast range of between +5% and +9%. Positive exchange rate effects amounted to +6.4%, thereby coming in at the lower end of our final forecast range. The slightly negative portfolio effect was negligible at -0.3%.

Life Science

In line with the anticipated strong organic revenue growth in Life Science, we also forecast strong organic growth in EBITDA pre in this business sector. We quantified our forecast for organic growth in EBITDA pre at between +6% and +10% in the first quarter and raised it to between +8% and +11% with the publication of the figures for the second and third quarter. In addition to reflecting the more precise forecast range for net sales growth in the Life Science business sector, this range takes account of the dynamic development of demand, the accompanying operating levers, and the product mix. With EBITDA pre of € 3,760 million in fiscal 2022 (2021: € 3,286 million) and year-on-year organic growth of 9.7%, the business sector’s earnings performance fell within the forecast range. Exchange rate effects had an additional positive effect of 5.1% on EBITDA pre compared with fiscal 2021. The slightly negative portfolio effect was negligible at -0.4%.

Healthcare

We forecast moderate to solid organic growth in EBITDA pre for our Healthcare business sector on the back of substantial expected earnings contributions from our new products, especially Mavenclad^®, as well as the decline in marketing and selling expenses and research and development costs as a proportion of sales thanks to systematic cost management and strict pipeline prioritization. Largely because of the absence of non-recurring effects from the previous year, this original forecast was slightly below the expected organic growth in net sales (solid organic sales growth). With the publication of the figures for the first quarter, we quantified our forecast for organic growth in EBITDA pre at between +3% and +5% in fiscal 2022. This forecast was subsequently retained. We ultimately recorded year-on-year organic growth in EBITDA pre of +3.3% in fiscal 2022, thus falling within the forecast range. Exchange rates had an additional positive effect of 11.7% on EBITDA pre compared with the previous year, thereby coming in at the lower end of the most recent forecast range of between +12% and +15%.

Electronics

For the Electronics business sector, we originally anticipated solid organic growth in EBITDA pre in fiscal 2022. We expected the growth in Semiconductor Solutions to more than offset falling prices for liquid crystals with the support of active price and cost management. In response to greater adverse effects from increased raw material and logistics costs, which we were only able to partially offset by taking countermeasures, we quantified our forecast range for organic EBITDA pre growth at between +0% and +4% with the presentation of the figures for the first quarter. After initially adjusting our forecast range slightly to between +0% and +3% with the publication of the figures for the second quarter, we lowered it significantly to a year-on-year decrease of between -7% and -10% when the figures for the third quarter were presented. The main reasons for this development were a higher projected downturn in demand as well as falling prices for liquid crystals. Electronics recorded EBITDA pre of € 1,192 million across 2022 as a whole (2021: € 1,128 million). This represented a year-on-year organic decline of -7.3%, which was at the upper end of our forecast range. Exchange rates had an additional positive effect of 13% on EBITDA pre compared with fiscal 2022 (most recent forecast range +13% to +16%).

Corporate and Other

The expenses for Corporate and Other in EBITDA pre amounted to € -579 million in fiscal 2022. This was in line with the most recent forecast range of between € -570 million and € -600 million but higher than the forecast range issued with the publication of the figures for the first quarter, which was between € -510 million and € -570 million. The amended forecast range reflects the changed assumptions regarding exchange rate developments and the associated expected negative effects of currency hedging transactions, which partially offset the positive foreign exchange effects in the business sectors. Compared with the prior-year figure of € -465 million, this corresponded to an increase in costs of 24.7%.

Operating cash flow

We originally anticipated a significant year-on-year increase in the operating cash flow of the Group in 2022 (2021: € 4,616 million). We quantified this forecast at between € 4,500 million and € 5,100 million with the presentation of the figures for the first quarter in order to reflect an increase in working capital as well as the expected payments within the scope of the ongoing transformation and growth programs in fiscal 2022 (especially in the Healthcare and Electronics business sectors). The operating cash flow amounted to € 4,259 million in fiscal 2022, which was lower than the quantified forecast range of between € 4,500 million and € 5,100 million. In addition to the reasons already mentioned this was mainly due to the higher tax payments.