Sartorius Vz Aktie

Ladies and gentlemen welcome to the Sartorius and Sartorius Stedim Biotech Conference Call and Live Webcast on Q1 2026. I'm Moritz, your Chorus Call operator. [Operator Instructions] The conference must not be recorded for publication or broadcast. I would now like to turn the conference over to Petra Muller, Head of Investor Relations of Sartorius. Please go ahead.

Thank you. Hello, and a warm welcome also from my side. I'm joined today by our CEO, Michael Grosse; by Florian Funck, our CFO; Rene Faber, Head of the Bioprocessing Division and CEO of Sartorius Stedim Biotech; and by Alexandra Gatzemeyer, Head of our LPS division.

As always, we will start with prepared remarks followed by the Q&A session. [Operator Instructions]. Please note that management comments during this call will be include forward-looking statements that involve risks and uncertainties. For a discussion of risk factors, I encourage you to review the safe harbor statement contained in today's press release and the presentation.

And with that, I'm pleased to hand over to Michael Grosse, CEO of Sartorius. Michael, please go ahead.

Thank you, Petra, and a very warm welcome from my side as well. We are happy with the start of 2026, which is again sort of a transition year. Before turning to the key messages for the quarter, I would like to briefly reflect on the strategic context following our Capital Markets Day a few weeks ago. At the CMD, we provided an update on our strategy and outlined our new midterm financial targets. Since then, the focus has been and is very clearly shifting to execution.

The real work begins by consistently translating strategy into tangible results and actions, and the work has already started in line with the evolving needs of our customers and the broader biopharma and life science markets. Our shared vision remains unchanged to simplify progress in biopharma and life science research, enabling better health for more people.

With that context in mind, let me now turn to the key messages we would like to share with you today. We are off to a good start in 2026 and are very pleased with our performance in the first quarter of the year. Sales developed well with a continued strong recurring business in both divisions. At the same time, underlying EBITDA developed positively year-on-year and profitability remained resilient.

This once again underlines the strength and resilience of our business model as well as the benefits of our disciplined operational execution. In Bioprocess Solutions, sales increased by around 8%, reflecting robust underlying demand. Consumables momentum remained strong, while equipment was soft as expected, but is anticipated to improve in Q2. Lab Products & Services showed around 5% sales growth, continuing the positive momentum that started in the second half of 2025 already. This development was driven primarily by lab consumables and our bioanalytical portfolio, also including the MATTEK acquisition.

While instruments demand remains cautious overall, we continue to expect at least stable development in 2026. Cash flow development was strong year-on-year. At the same time, we continue to make progress on deleveraging, underlining our clear commitment to financial discipline and a strong balance sheet.

In light of our solid start into the year, we confirm our full year 2026 guidance for the group, and we expect sales revenue growth in constant currencies of around 5% to 9% and an underlying EBITDA margin slightly above 30%. Let me now briefly highlight a few innovations launched in Q1 that demonstrate the strong customer demand for Sartorius solutions across the biologics value chain.

Starting with cell therapy manufacturing. With Eveo, our new cell therapy manufacturing platform, we are addressing one of the key bottlenecks in autologous cell and gene therapy, scalable and reliable manufacturing of highly personalized therapies. Eveo enables fully automated multi-parallel production, allowing customers to run up to 8 patient batches in parallel and achieve up to 4x higher yield compared to conventional approaches.

By automating critical process steps and reducing manual handoff, Eveo also shortens manufacturing cycle times, helping customers move faster from vein to vein and ultimately accelerate time to patient. At the same time, Eveo helps to reduce footprint, capital intensity and over manufacturing complexity, supporting both centralized and decentralized production models.

Turning to cell line development. We introduced 2 complementary innovations aimed at significantly improving speed and efficiency early in the biologics development. The latest generation of our CellCelector platform, the CellCelector CLD for cell line development enables significantly faster and more reliable cell line development by combining automated imaging, monoclonality verification and gentle clone isolation in one single system. This reduces manual efforts and uncertainty early in the development, shortens time lines from months to weeks and strengthens regulatory readiness through integrated documentation and traceability.

In parallel, our genetically engineered [ CHO ] host cell line allows for faster clone development and up to 3x higher productivity, supporting robust and scalable manufacturing as biologics pipelines continue to grow in complexity. These innovations once again highlight how Sartorius systematically removes bottlenecks across the biologics value chain from early development to manufacturing by helping customers shorten time lines, increase yields and improve overall process efficiency and cost structures.

Well, with that, I'll now hand over to Florian to walk you through our Q1 financials in more detail.

Thank you, Michael, and a warm welcome from my side as well. I'm happy to take you through our numbers that reflect a continuation of consistently strong performance from the year 2025 into 2026. Let me begin with top line performance at group level. In the first quarter of 2026, sales revenue increased by 7.5% in constant currencies and 1.8% reported, reaching EUR 899 million.

Looking now at our divisions in more detail. In Bioprocess Solutions, sales increased by 8.1% in constant currencies and 2.4% reported, reaching EUR 735 million. Growth was driven by the high-margin recurring consumables business. Equipment performed in line with expectations with a softer Q1 due to delivery schedules of customers and revenue recognition more loaded towards Q2.

We anticipate stronger Q2 equipment sales and expect BPS equipment to deliver at least prior year levels in H1 in constant currencies, supporting a healthy first half performance. In Lab Products & Services, sales increased by 4.9% in constant currencies, reaching EUR 164 million. MATTEK contributed 2.8 percentage points to LPS growth in constant currencies. And based on reported figures, LPS posted a slight sales decline of minus 0.6%, which is purely FX related.

Growth was driven by a robust contribution from our recurring business, supported by positive momentum in our bioanalytics portfolio. Let me also quickly elaborate on our regional performance. Overall, the first quarter showed healthy growth momentum across all regions, supported by continued strength in consumables.

Starting with EMEA, sales increased by 8.0% in constant currencies in the first quarter. In the Americas, sales grew by 6% in constant currencies, and the growth was solid, particularly considering the stronger comparison base from last year. Asia Pacific delivered the strongest regional performance with sales growth of 8.9% in constant currencies, with China contributing nicely to the region's BPS growth.

Let me now turn to profitability, which deserves a bit more explanation given the offsetting dynamics in the first quarter. The group's underlying EBITDA increased slightly by 1.6% to EUR 267 million in the period from January to March compared to prior year. Positive volume effects and economies of scale were offset by mix effects within BPS consumables and tariff impacts as well as continued investments in future growth initiatives, especially in LPS.

Against this backdrop, the corresponding EBITDA margin remained resilient at 29.7%, almost fully absorbing negative tariff effects of around 40 basis points. Similar developments as on group level were also recognized at divisional level. In Bioprocess Solutions, the underlying EBITDA margin developed positively.

Margin expansion was driven by increased volumes and operating leverage, overcompensating tariffs and some mix effects within consumables. As a result, underlying EBITDA increased to EUR 233 million, and the margin improved by 30 basis points to 31.8% in the quarter. In Lab Products & Services, as already flagged in early February, we are executing a multiyear investment program to scale future growth areas. This is already well reflected in our margin development over the past couple of quarters and is fully in line with our full year 2026 expectations. Consequently, the underlying EBITDA margin was 20.7% unchanged compared to the level in Q4 2025 and also, of course, negatively impacted by tariffs.

Now let us look at performance below underlying EBITDA, where both net profit and free cash flow developed well in the first quarter. The development of underlying net profit is mainly driven by the same effects we discussed at the underlying EBITDA level. On top of that, it is also mirroring higher depreciation caused by our CapEx programs over the past few years as we highlighted at our Capital Markets Day a few weeks ago.

While depreciation effects are recognized immediately with go-live of a building, as usual, the corresponding volume revenue contributions materialize progressively as the additional capacity utilization is ramped up. Furthermore, we saw financing costs slightly increasing as cheap financing from early pandemic times ran out in H2 '25. Reported net profit increased by 16% year-over-year to EUR 56 million, thanks to lower extraordinary items that were last year mainly driven by our S/4HANA changeover, and we talked about this also at Q1 conference call '25.

As you know, these extraordinaries are excluded from our underlying profit KPIs. Turning to cash-related items. Operating cash flow increased strongly to EUR 189 million, up almost 36% year-on-year. This improvement was driven by EUR 20 million higher reported EBITDA and lower tax payments versus high prior year base compensating for the growth-related increase in working capital.

Looking at working capital, I would like to emphasize that the working capital dynamics can mainly be explained by higher accounts receivable at quarter end, reflecting strong sales activity towards the end of the quarter. Customers received shipments and were invoiced late in the quarter, but due to timing effects and the Easter holiday season, many of these invoices had not yet converted into cash by quarter end and therefore, sitting in AR. Based on the higher operating cash flow and relatively constant CapEx spending, also free cash flow increased significantly to EUR 113 million. The CapEx ratio of 8.6% was at prior year level, reflecting continued disciplined investment in support of future growth, but we continue to expect full year CapEx of around 12.5% of sales for the full year period.

To conclude our discussion of the first quarter financials, let me briefly turn to our balance sheet-related key figures. We maintained a solid equity ratio of 39.4% at the end of the first quarter. The slight change compared to year-end reflects the dividends already offset from equity after the AGMs of Sartorius AG and Sartorius Stedim Biotech S.A. in March 2026.

Net debt decreased slightly to EUR 3.727 billion, reflecting continued deleveraging despite ongoing investment activity. At the same time, we continued to actively manage our gross debt profile. This makes the reduction in net debt particularly notable as it was achieved despite the dividend payout to Sartorius AG shareholders for fiscal year 2025 on March 31, underscoring our continued focus on disciplined deleveraging. As a result, the leverage ratio defined as net debt to underlying EBITDA improved slightly to 3.53x, down from 3.55x at year-end 2025.

And this confirms that we are progressing as planned on our deleveraging path. Taken together, these developments underline our continued commitments to financial discipline and to maintaining a strong investment-grade credit profile. And with that, I would like to hand back over to Michael.

Thank you, Florian. Based on the solid performance in the first 3 months of the year and the overall market development, we are confirming our full year 2026 guidance and continue to view 2026 as a transition year toward our midterm ambitions as outlined at our Capital Markets Day in March.

For Sartorius Group, we expect sales revenue growth in constant currencies of around 5% to 9%. For Bioprocess Solutions, we anticipate growth within a range of approximately 6% to 10%, primarily driven by recurring business, while the equipment business is expected to remain at least stable.

In Lab Products & Services, we expect sales growth of around 2% to 6%, reflecting continued strength in the recurring business and the stabilizing instruments environment. At group level, sales growth includes around 1 percentage point contribution from the MATTEK acquisition and the U.S. tariff-related surcharges, while LPS revenue growth includes approximately 1.5 percentage points from MATTEK.

Turning to profitability. We expect the underlying EBITDA margins to be slightly above 30% for the group. For Bioprocessing Solutions, the margin should be slightly above 32%, while in Lab Products & Services, we expect the margin to be slightly below 21%.

The CapEx ratio is expected to remain around prior year levels as we continue to invest selectively and with discipline in our global research and manufacturing footprint. We also expect net debt to underlying EBITDA to decrease to slightly above 3x by year-end, reflecting our continued focus on deleveraging, as Florian said before.

Given the recent volatility in FX rates, we would also like to share some additional color on the expected foreign exchange impact for the second quarter. We currently anticipate a headwind in the region of minus 2.5 percentage points in Q2, respectively, minus 4 percentage points for H1 cumulated, while we continue to expect FX effects for the full year to be around minus 2 percentage points.

We remain mindful of an increasingly complex external environment. Current geopolitical tensions, particularly in the Middle East, are driving increased uncertainty, especially the longer the situation persists. However, we feel comfortable with our guidance as defined in early February and reiterated today.

We expect the second half of the year to be stronger than the first half in absolute numbers. Our confidence is based on the positive underlying development of the biopharma market, a strong order book and our ability to navigate the continued volatility and uncertainty caused by the geopolitical and macroeconomic tensions.

Looking ahead, Sartorius has a clear vision and strategy, and we are firmly committed to executing it with discipline, consistency and a long-term perspective to deliver sustainable value creation. With that, I would now like to hand over to Rene, who will walk you through the financials of Sartorius Stedim Biotech in more detail.

Thank you very much, Michael. Also from my side, welcome, and thank you for joining our Q1 results call today. Sartorius Stedim Biotech delivered a strong start in 2026, supported by our high-margin consumables business as well as continued operating leverage. In the first quarter of 2026, sales revenue increased by 7.9% in constant currencies, reaching EUR 762 million. Growth in reported currencies amounted to 2.3%. Our recurring consumables business was fueled by strong underlying demand. Equipment, as Florian mentioned before, performed in line with our expectations with a softer Q1 due to the delivery schedules of customers and revenue recognition more geared towards Q2.

We anticipate stronger Q2 equipment sales, which should deliver at least prior year levels in H1, supporting a healthy first half performance. Looking at profitability, we observed similar developments to those at Sartorius AG, as Florian elaborated earlier on. While earnings continued to improve in the first quarter, the underlying EBITDA margin remained largely flat.

Positive volume effects and economies of scale were offset by a less favorable product mix within the consumables portfolio and tariff impacts. Additionally, it has to be noted that there was a technical margin drag of 25 basis points due to an increase of the Sartorius brand name fee charge from Sartorius AG to SSB. As a result, underlying EBITDA increased to EUR 233 million, and the margin remained resilient at 30.7% for the quarter. All regions -- looking at the regional performance, all regions contributed to positive business development in the first quarter, supported by continued strength in consumables.

Starting with EMEA, sales increased by 9.1% in constant currencies. In Americas, sales grew by 5.6% in constant currency, reflecting a tougher prior year comparison, but remaining positive overall. Asia Pacific delivered the strongest regional performance with sales growth of 9.4% in constant currencies, with China contributing nicely to the region's growth.

Looking now at net profit and cash flow, profitability and cash generation developed solidly over the year. Starting with earnings before EBITDA, all metrics improved slightly. Underlying net profit increased slightly disproportionately to underlying EBITDA, mirroring higher depreciation caused by our CapEx program over the past few years. Reported net profit improved by 3% to EUR 88 million, thanks to lower extraordinary items, which are excluded from the underlying profitability measures and were therefore, supportive. Turning to cash-related items now. Operating cash flow increased strongly to EUR 193 million, up more than 61% year-on-year, driven by higher EBITDA and lower taxes compensating for the growth-related increase in working capital.

As a result, free cash flow rose significantly to EUR 124 million, supported by the strong operating cash flow and stable CapEx at the prior year levels. Accordingly, the CapEx ratio increased slightly to 9.1%, reflecting continued disciplined investment in support of future growth, but we continue to expect full year CapEx of around 13% of sales for the full year period.

A quick look at our balance sheet metrics. At the end of the first quarter, we continued to show a very strong equity ratio of 50.6%, reflecting our solid capital structure. Compared with year-end, the slight decrease mainly reflects the dividend, which was offset from equity following the AGM end of March. Net debt decreased slightly and the ratio of net debt to underlying EBITDA progressed as planned. The net debt to underlying EBITDA ratio improved further to 2.28x, down from 2.38x at year-end, confirming that we remain well on track on our deleveraging path.

Overall, these developments underline a strong balance sheet position of Sartorius Stedim Biotech and provide a solid foundation to support future growth while maintaining financial flexibility. Before we move into Q&A, let me quickly elaborate on our confirmed outlook for full year 2026. Based on the solid performance in the first 3 months and the year-end overall market development, we are confirming our full year 2026 guidance.

We expect to stay on our profitable growth path and for 2026 sales revenue growth in the range of 6% to 10% in constant currencies, including 1 percentage point contribution from U.S. tariff surcharges. Growth will be mainly driven by recurring business, but again, against higher comps, while the equipment business should remain at least stable.

Based on our order book, we continue to expect a stronger second half compared to the first half at Sartorius Stedim Biotech. This reflects the expected gradual normalization and improvement in the equipment business throughout the year. The underlying EBITDA margin should increase to slightly above 31%.

Our CapEx ratio is expected to stay around previous year level of around 13%, reflecting our ongoing investments into research and resilient production footprint. Our commitment to deleveraging remains unchanged. We anticipate the leverage ratio, the net debt underlying EBITDA to decrease slightly to slightly above 2x at year-end.

Given the volatility we have seen in the currency exchange rate over the past few years -- few months, let me also share some FX assumptions for the Sartorius Stedim Biotech Group. We currently anticipate a headwind of approximately minus 2.5 percentage points in the second quarter, while we continue to expect FX effect for the full year to be around minus 2 percentage points.

Michael highlighted earlier for Sartorius AG and without repeating this in detail, the same considerations also apply to Sartorius Stedim Biotech. We feel comfortable with our guidance and as defined in early February and reiterated today. Our confidence is based on positive underlying development of the biopharma market, our strong order book, our ability to navigate the continued volatility and uncertainty driven by geopolitical and macroeconomics tensions.

With this, I will hand over to the operator to begin the Q&A session.

[Operator Instructions] And the first question comes from Zain Ebrahim from JPMorgan.

I'll stick to one. And my question is on the demand activity you're seeing at the moment in equipment. Can you comment on what the latest is from customers based on your latest conversations with them?

Yes. Thank you for that question. So yes, let me first reiterate what we have just explained how the equipment is developing. So for Q1, we have seen a bit softer development in sales, more or less as expected, and we see the revenue recognitions being moved or was moved more towards the Q2. So what we anticipate to see for the H1 is, first of all, stronger Q2 equipment sales and H1 to be then at least at the level of the prior year.

So overall, I would say equipment develops as we have expected. The positive start in the year coming from a quite strong or relatively strong H2, we have seen already in H2 last year. Q3, Q4, particularly were quite positive quarters in equipment, and we're benefiting from that in the beginning of the year as well. So overall, we are confirming our view on the equipment moving forward. As I said, H1 positive at least at the prior year level and same for the full year. Overall, H2, as we can say today, we would expect based on the discussions we have with customers and the funnel we see, which is positively developing as well for H2, we expect to be stronger than H1 from today's perspective.

And the next question comes from Doug Schenkel from Wolfe Research.

It sounds like you expect bioprocessing equipment growth in Q2, which I think is what you were clarifying in the last question, but I just want to make sure that's right. And I want to also confirm that based on trends in backlog that you're expecting bio equipment growth to continue into the second half? And then I guess the last part to this question would be, are there any areas that you would call out that are notably driving recovery in equipment? And conversely, are there areas that you're still awaiting some recovery?

Yes. So absolutely. Thanks for the question. Confirming, yes, we're expecting Q2 growth in equipment sales, as I mentioned. And also, I think second part of your question was H2 above H1 -- that's our current view indeed. On the -- how we -- where is this happening? How is overall equipment developing looking at different parts of the portfolio or regions.

Honestly, I think it's quite all over the place. We don't see really a special pockets of growth or still muted development. Definitely we have seen a good traction on bioreactors. Now as you remember, we talked about the consumption of bags and consumables, which we see going with the equipment that is still well on track and continues nicely growing. And here and there, we see already new installations happening. I mentioned bioreactors, but it's growing also in downstream with very successful initial placement of our new innovative Pionic platform going supporting process intensification as well, some larger projects in area of peptides in chromatography. So it's kind of across the board.

And the next question comes from Subha Nambi from Guggenheim Securities.

At the Capital Markets Day a few weeks ago, you mentioned that biotech has been improving. The capital markets environment remains strong for biotech. Are you seeing any change in behavior? And is that a potential source of upside relative to your full year target if trends continue?

Yes. I may start just briefly. Yes. So I think if we've -- as indicated there at the Capital Markets Day, I think we've already started really to see signs of -- I mean, yes, the funding environment has improved progressively in the second half of the year. Towards the year-end, we already could see some more activities and interest and lead generations as well from the biotech side.

I think overall, it remains as well -- I mean, if we look now as well as the LPS portfolio remains probably still on a more rather stable and lower levels. At the same time now, as we said, I think as we expect overall order situation opportunity generation for the second half of the year to be a great foundation.

Again, given the lead times for these orders that will be generated as well from that part of the business, again, I think you need to be mindful that earliest realization of those sales will be rather at the very tail end of 2026 and rather create now the potential bench for revenue realization in 2027.

And the next question comes from Charles Pitman King from Barclays.

Can I just -- and I apologize if I missed this clarification, but just coming back to your 2H being greater than 1H on both an equipment specific and a broader BPS dynamic. Can you just confirm that what you're expecting when you say absolute is actually a continued growth in the organic line? Or is this primarily reflecting the removal of the FX headwind?

Like is that what gives you the confidence of absolute being greater in 2H than 1H? I'm just trying to get an idea that the equipment sales are, in fact, expected to improve over the course of this year.

Charles, first, let me talk to the question regarding FX. All that we are talking here, which is sales related is FX corrected. So it's in constant currencies. And what we have been saying is that we are expecting a higher H2 versus H1 in absolute million euro currency adjusted.

And just in terms of the organic growth rate on equipment in the second half sales versus orders?

No, we have said that we are expecting H1 sales currency adjusted to be at least on the level of prior year. And still also for the full year, we have said that we are expecting full year equipment sales to be at least on prior year level.

And the next question comes from Charlie Haywood from Bank of America.

Charlie Haywood, Bank of America. A question on BPS consumables actually and the contribution to the guide. So I think Rene at the full year suggested low teens consumables growth is a reasonable expectation for a normal year. And then you haven't called out many specific headwinds to the consumables side other than acknowledging '25 is a tougher comp.

And then obviously, tariffs is actually a slight tailwind to that. So is it fair to think of all of those factors that consumables growth in the roughly low teens range for this year would be a sensible answer?

Well, let me tackle that, Charlie, and Rene, maybe to comment on that. First of all, please bear in mind, we have said that the year '26 is a transition year. So please do not apply the kind of normal growth rate that we've given in the midterm guidance also as the kind of anchor point for the year '26.

Additionally, on top of that, I think what we also said clearly is that we are expecting clear base effect because of the very high comps. So that growth rate that we've seen in the year '25, where it was in the teen-ish area is not one by one to be expected to continue. It will be still a healthy and strong growth. That is our expectation. But I think it would be wrong now to nail us down on a double-digit consumables growth for the full year.

And the next question would come from Charles Weston from RBC Europe.

In terms of China, you both -- you and Rene both spoke quite constructively at the Capital Markets Day, saying that there's more activity and recovery from China companies looking to expand globally. I think one of your U.S. peers reported double-digit growth in China bioprocessing in Q1 and said it was in recovery mode. So can you just perhaps give us any further color about what you're seeing from that market in Q1 and in Q2 so far, please?

Yes. I can get started. I mean, as outlined, I think overall, we are encouraged to see that there is a growth contribution from China after 2 rather difficult and the reasonably weak years overall. I think I still would like to make the comment upfront that the tendency that we see and a bit the muted demand when it gets to the equipment and instruments business, that remains there.

And hence, with the bigger impact that we have in that business, particularly for the Labs Products & Services division, it is indeed the fact that here, the contribution is lower and it remains rather soft on that side. However, I would say it's great to see the Q1 development there on the BPS consumer business side, where we basically see an overall group level performance of around close to 30% on that basis.

So I mean, on this perspective, we take a look that the growth contribution overall from China is positive on the consumable side, as we mentioned.

And the next question comes from Oliver Metzger from ODDO BHF.

It's about the full year guidance. So Q1 experienced still some headwinds and also had from the Q1 last year, let's say, a higher comparable base for the consumable side. So momentum from the consumables over the next quarters should not meaningfully deteriorate just from the base effect or remain similar. As you said, equipment demand is seem to improve. And also, we observed now a gradual improvement or recovery of LPS. So would you describe Q1 as a trough with regards to growth rates for the current year, if not any unforeseen headwinds pop up?

I would not do that. It is a solid start into the year. It is very much in the midpoint of our guidance. And I think we have, especially when issuing the guidance, have also communicated about the drivers of the guidance, what might lead to the lower end, what might especially lead to the high end. And you know that we said that the lower end would be more the kind of not so much expected scenario and the higher end would require quite healthy dynamics also in the equipment area to take place, whereas the midpoint would see an equipment business rather on prior year level.

I think we have seen now in Q1, a healthy start in the consumables business. We are going to see, at least this is the current point of view that H1 from the equipment side will be at least on prior year level. And with that, I feel very comfortable with the overall guidance and to frame Q1 as a trough, I would be cautious.

The next question comes from Odysseas Manesiotis from BNP Paribas.

I also had a question on phasing throughout the year. Is it fair to assume Q2 could be the strongest growth quarter given the easier comps here? I mean I remember you had some fluid management related U.S. customs delays that made Q2 '25 a bit weaker. Could you confirm whether that's a sensible way to think about it?

Thank you, Odysseas. So if you look at absolute numbers, you've seen that the year -- or that Q2 and the year '25 was somehow standing out. It was above Q1 in absolute terms, and it was above Q3. It's true that the tariffs were ramping up with the implementation of the tariffs middle of April Q2 took some time.

And of course, the tariff effects are more pronounced in H2 '25 and not so much in Q2. Nevertheless, I would say that Q2 is a not too low comp if we look forward into Q2, as I said, was higher in absolute terms than Q1 and Q3.

Then the next question comes from Thibault Boutherin from Morgan Stanley.

I just want to come back on the comments on equipment and I guess, the sustainability that you expect from this. So I guess, first of all, to what extent your conviction of improvement in Q2 is coming from the order book versus just expectations and discussions and sort of what lead time do you have on the order book in equipment giving you that confidence?

And then related to that, are you confident this is the beginning of a recovery cycle that we've been waiting for, for some time? Or could we still be in a period of fluctuations where we could see equipment order and equipment sales being a bit more volatile for the next few quarters?

Yes. Thank you. And let me quickly start on the visibility on equipment for Q2. Making the statements requires support by order book, and this is exactly what we're seeing. So we are feeling quite confident looking at the order book. Of course, there might always be late adjustments from the customers indicating they want to have certain orders in June and then maybe, I don't know what happened at their site requesting something in July, but the general volume is clearly in the order book already for Q2.

Yes, absolutely right, Florian. What I would add to that is that I'm not sure it's like a as we expect at least flat full year sales equipment, I would rather call it still a transition year. We, however, are quite positive with the outlook that orders in the year, full year on equipment will be above the -- in H1, above the H1 last year and also for the full year above 2025.

So yes, as I mentioned before, funnel is there. The discussions we have with customers indicate that positive development, but it's still a positive but transition year regarding that.

And the next question comes from James Vane-Tempest from Jefferies..

I just got a question on underlying profitability, just to understand the construct because if margins are basically flat year-over-year, the other operating income seems to have had a 2.5 percentage benefit because, I guess Q1 last year was minus 12%, and that's moved to plus 10%. And I was just wondering if you can help us understand what's contributing to that level and if that's sustainable.

And so if that actually has had such a big benefit and a swing, it looks as if the underlying margins have gone from over 31% to sort of less than 29%, of which the largest driver seems to be at the gross margin level, which is down 2.7%, I think it is.

So the second part of the question then is, you clearly talked about mix, but can you also help us understand the inventory write-downs, which happened last year and when that's supposed to start to improve over the coming years? And if that math sort of makes sense, what's happening in the underlying profitability?

Yes. Thank you, James, for your question. Let me start with that. So yes, of course, well spotted when we're looking at gross margin. The one really big driver in gross margin is FX. And -- as you know, we have a rolling forward hedging strategy on FX, but the positive hedging effect on FX on that margin are rolling in other income.

So there is a kind of mismatch if you're looking at that. And therefore, it is in a consequence, clear that you observe a healthy other income margin and the pressure on gross margin.

Now regarding inventory, what we have been talking was more kind of general statement to give you a feeling for possible support for further margin increase rather than giving you a concrete number that you can bring on a time line. And please accept my apologies for not going deeper on this for your modeling.

So just so I understand, what you're saying is the swing is just due to that sort of mismatch in FX. So should we really be considering gross margins looking at your gross profit is with an adjustment for what we see in the other operating. Is that correct?

So if we've seen this big swing, is that the sort of the level of anticipation we should have for this year? Because I also noticed that the same number in Q4? Or is the type of thing which should then roll off in the second half of the year?

The reason I'm asking is because it is sort of material to the overall margin overall. So it would just help us sort of build the complete corporate picture.

Yes. James, we are guiding on underlying EBITDA margin, not on gross profit margin. Therefore, we've taken appropriate measures to secure that level of profitability. There is that FX swing. And there is another point that we also communicated in this call here that is around the mix effect that, of course, also had a certain slide drag besides tariffs on the gross profit margin.

So please always bear in mind, Q1 last year was free of any tariffs, Liberation Day tariffs. And please also bear in mind that we have that kind of mix effect within BPS consumables.

The next question comes from Naresh Chouhan from Intron Health.

A couple of bigger picture ones, please. We calculate the underlying demand for mammalian biologics is low double-digit, obviously, which you returned to last quarter. If we -- and I heard your comments just now that we should caution that we may not see that this year. If the underlying demand is low double digits, can you help us understand the delta between your sales growth? Is this a share issue? Is it yields? What's happening? Why are you not growing at the rate of demand?

And then secondly, as yields continue to improve, this is more of a question around equipment. As yields continue to improve, are you seeing customers increasingly shifting to smaller batch bioreactors over the last few -- compared to the last few years? And therefore, could it be that you -- in equipment that your share can improve?

Yes. Thanks for that question. So I agree with what you said on the demand. However, this is something you need to consider over a longer period of time. So looking at a year, there might be fluctuations. But overall, this is what we see and expect. So when we talk about market fundamentals and growth, we see that and expect the biologics demand will grow and continue to grow low double digit is a fair assumption.

At the same time, improvements happen. That has also impact, as you indicated on then what consumables equipment are used. And yes, we have seen, but it's now -- we are more than -- for more than a decade that this yield or efficiency improvements lead to more and more smaller volume processes, more and more single-use adoption.

And if you listen to our Capital Markets Day, this is also the expectation we have and what we do and drive as an innovation industry is further improvement of the efficiency so that even more especially commercial drugs will be manufactured in that smaller more flexible single-use equipment and facilities, which, of course, will positively impact and drive our market position and the growth of the business.

I just ask a follow-up. Should we then assume on the basis of that, that your equipment sales should hold up pretty well, but consumables will grow slower than underlying demand over the kind of short to medium term?

No.

And the next question comes from Falko Friedrichs from Deutsche Bank.

I have one question, please. Is it fair to assume that the group adjusted EBITDA margin in Q2 is likely still below the full year guidance range, just like it was in Q1, given the incremental tariff headwind and more equipment in the mix?

Could be. It depends also on the other components of mix, Falko.

Then the next question comes from [ Theodore Rowbieedel ] from Goldman Sachs.

Can you talk to how you're managing the current geopolitical risks and energy price increases? And what are the key mitigating strategies that you have in place?

Yes. Thank you very much. So when we are talking about the Iran crisis and energy prices, first of all, it has to be noted that Sartorius is not to be considered as a kind of energy-intensive company. If we purely talk about electricity, it is a very low single-digit percentage of cost of goods sold. And in recent years, we have also invested in expanding renewable energy capacity at our sites worldwide to become more independent, of course, over time from fossil-based energy.

We are not using short-term hedging instruments, but what we are using our rolling contracts, longer-term rolling contracts. So even if we see on the spot market hikes in gas or electricity, this should not have any larger impact on our P&L in '26 and in '27.

On the other hand side, there might be indirect or second round effects from rising energy and/or gas prices on cost, for example, higher freight costs or oil-based components in raw materials, so plastic, for example. And this is, of course, somewhat more relevant, and we are watching the supply and the sourcing situation very carefully.

We have a task force on top of that. This might lead already in the year '26 to an increase of our cost base. And on the other hand side, most of our supply contracts are longer term. And even if we have higher price levels, they will also be mitigated by internal moving average prices based on inventory in place.

And furthermore, currently, we have no significant component shortages that have been identified by the task force that I was mentioning. And of course, even if there were some cost effects, and if I had to put a risk number, it would be, I don't know, around about EUR 10 million for the year '26, we would then act and implement countermeasures, including price increases or freight surcharges, and this is all currently evaluated.

And of course, if the conflict is prolonged and we're seeing persistently higher oil prices that, of course, could have an impact on cost in 2027, but this is now too early to tell. But I can tell you that we have overall the instruments in place to fare our way also in an inflatory environment.

And the next question comes from Charles Weston from RBC Europe.

I just had one, please, on the comps. I know the question has been asked before, but you've talked about there being tougher comps in 2026 on the consumables side. But I thought that 2025 was effectively described as a more normal situation in absolute revenue terms. So if there was additional sort of restocking by customers in '25, making the comps tougher, perhaps you could just discuss that. But if not, and it was more normal, then why would 2026 consumable growth be lower because of tough comps?

I'm not sure I really got the question because what we've seen in prior year in consumables was a growth in consumables that was definitely above average market in a still transitioning year. And based on that, I would simply assume that -- or simply say it is not fair to assume that these high kind of growth rates will persist in the year '26 and that we will see base effects. When I was talking about comps, it was based on the question regarding Q2, where I just said that Q2 stood out in absolute volume against Q1 and Q3.

And the next question comes from Delphine Le Louet from Bernstein.

Just to be back into the mix effect and specifically at BPS, Rene, can you clarify a bit more the impact in between the volume and the price, if any, or in between the consumable or the service versus the rest of the line when it comes to the equipment. Can we have a bit more granularity here, please, for us to clearly understand?

Yes. Thank you for the question. So yes, we've seen that in the quarter. We see it more as a quarter effect, nothing to be continued and move forward. It's really a short-term mix shift to a certain part of the portfolio, so nothing structural.

Okay. And there is nothing on the price? Nothing specific, just regular price increase?

No, no, there's nothing to do with the price aside from...

Ladies and gentlemen, this was the last question. I would now like to turn the conference back over to Petra Muller, Head of Investor Relations, for any closing remarks.

Thank you, operator. This concludes today's call. Please reach out to the Investor Relations team in case of any open questions. We thank you for joining today's call. Wish you a pleasant rest of the day and see you next time. Operator, you may now disconnect.

Thank you.

Ladies and gentlemen, the conference has now concluded, and you may disconnect. Thank you for joining, and have a pleasant day. Goodbye.

Welcome to the presentation of Sartorius and Sartorius Stedim Biotech on the Preliminary Results 2025. Please note that the call is being recorded and streamed on Sartorius' website. Your participation in this implies your consent with this. A replay will be available shortly after the call.

I would now like to turn the conference over to Petra Müller, Head of Investor Relations of Sartorius.

Thank you, operator. Hello, and a warm welcome from my side. I'm joined today by our CEO, Michael Grosse; by Florian Funck, our CFO; by René Fáber, Head of our Bioprocessing Division and CEO of Sartorius Stedim Biotech; and by Alexandra Gatzemeyer, Head of our Lab Products & Services division. As always, we will start with prepared remarks followed by the Q&A session.

As the call is scheduled to 1 hour, please limit your question to 1 so that as many participants as possible can take part.

Please note that management's comments during this call will include forward-looking statements that involve risks and uncertainties. For a discussion of risk factors, I encourage you to review the safe harbor statement contained in today's press release and presentation.

With that, I'm pleased to hand over to Michael Grosse, CEO of Sartorius. Michael, please go ahead.

Thank you very much, Petra, and a warm welcome also from my side, and thank you all for joining us today for our preliminary full year 2025 results. Before we begin, I would like to sincerely thank all of our colleagues across Sartorius for their commitment and dedication over the past year. Their passion, professionalism and strong focus on execution are clearly reflected in our results we are presenting today.

I would also like to personally thank everyone who has made it such a smooth and rewarding experience for me to step into my role as a CEO, and particular thanks as well to my colleagues here, Alexandra, René and Florian from the executive team. It has been really a great journey up to now, fantastic work on the strategy and great things to come. And I don't want to miss out as well on saying thank you to the team here from Investor Relations, Communications and Finance because I think the workload over the last couple of weeks and days have been tremendous in order to get us all prepared and get our reporting in place. Thank you all for that.

Now let me briefly summarize key messages that we would like to share with you today. First of all, 2025 was characterized by return to normal demand behavior for consumables and continued cautious investment activities by our core customers. Combined with an active operational management in a still challenging environment, we delivered improved operational and financial performance.

Okay. All right, supported by the improvement -- improving demand trends, mainly on the consumable side and the operating leverage inherent in our model, Sartorius achieved considerable profitable growth. For the full year, we delivered results slightly ahead of our upgraded full year 2025 sales guidance. Profitability landed in the upper half of our initial guidance from April and exceeded our October EBITDA target, with a margin of 29.7%. This performance reflects growing volumes, operating leverage and strong execution.

Now growth was once again driven by our recurring business across both divisions. In Bioprocess Solutions, strong double-digit growth in recurring revenue more than offset continued softness in equipment, which, however, stabilized over the year. In Lab Products & Services, performance improved gradually as expected. Growth in H2 was driven by recurring business, while instruments showed positive momentum also supported by product launches in bioanalytics. Our operating performance allowed us to further reduce our leverage ratio, underscoring our commitment to financial discipline and a strong balance sheet.

Overall, in 2025, we laid a solid foundation for the year 2026. For the group, we expected sales growth of around 5% to 9% with an underlying EBITDA margin slightly above 30%.

Let me now turn to actions we are taking to enable future growth. Let's talk about innovation and partnerships. We have made tangible progress in 2 key areas: innovation and the expansion of our resilient global R&D and production capacity. We launched several new solutions across both divisions. In Bioprocessing, we made progress in more sustainable product design with the launch of Sartopore Evo, a PFAS-free filtration solution, which addresses growing regulatory and customer expectations around the elimination of persistent substances while maintaining the high performance and reliability our customers require. We also launched the Sartocon cassettes, further strengthening our offering for efficient and scalable downstream processing, particularly for viral vector purification.

Now on the equipment side, we introduced the Pionic Continuous bioprocessing platform developed with Sanofi, which faces high customer interest. This platform supports the industry's transition from traditional batch production to continuous processes, enabling faster, more efficient and more sustainable manufacturing workflows. And our teams advance our bioanalytical portfolio, including the only live-cell imaging system with confocal microscopy inside an incubator, a really important step forward for the work with complex 3D cell model.

We further strengthened this area also through the acquisition of MATTEK, expanding our portfolio of advanced 3D cell models that more closely mimic human tissue, deliver more predictive and reproducible results and help reduce the need for animal testing. And we entered into a partnership with Nanotein Technologies, enhancing our capabilities in cell expansion and activation to support next-generation biologics.

In parallel, we continue to invest in a resilient global manufacturing footprint. We completed the expansion of [ Aubagne ] and progressed with the expansion in Germany, as well as with the construction of our greenfield site in Songdo, South Korea, ensuring scalability, supply reliability and proximity to our customers. Taken together, these actions strengthen our ability to support customers as markets normalize and position for Sartorius for sustainable innovation-led growth over the coming years.

With this, let's take a closer look into our numbers. Florian?

Yes. Thank you, Michael, and a warm welcome also from my side to everybody out there. I'm happy to take you through our numbers that's reflected, in my perspective, a consistently strong performance in the year 2025. So let's start with top line performance. Our sales revenue increased by 7.6% in constant currencies and 4.7% in reported currencies, reaching slightly more than EUR 3.5 billion. This positive development was driven by mid-teens growth in our recurring business in 2025, which represents, by far, the largest part of our business, as you know.

Our nonrecurring business remains soft on a full year basis, but clearly stabilized in H2 and was above H1 in absolute numbers as respective. The difference between constant currency and reported growth was primarily driven by U.S. dollar weakness, which represents a headwind of almost 300 basis points to reported sales growth in fiscal year 2025. Our full year performance was also influenced by U.S. tariffs. The successful implementation of tariff surcharges contributed approximately 1 percentage point to sales revenue growth.

Order intake developed strongly, growing faster than sales. And as a result, our 12-month rolling book-to-bill ratio remained consistently above 1 throughout the year '25, although as expected and also communicated in our last quarterly call, it declined slightly sequentially in Q4 due to a very strong prior year comparison.

In absolute terms, order intake in Q4 was roughly on par with the exceptional strong Q4 2024. You remember that above EUR 1 billion figure that we posted there. And that was the quarter with the highest absolute order intake in 2025. And therefore, we entered 2026 on the back of a strong order book.

Looking at our divisions in more detail. Bioprocess Solutions delivered another strong quarter, bringing full year sales revenue growth to 9.5% in constant currency. Growth was driven by mid-teens growth in consumables throughout the year, while equipment remained soft, as Michael already mentioned, but was clearly stabilizing with H2 '25 sales being double-digit percentage above H1 '25 sales.

Lab Products & Services delivered a resilient performance in a challenging market environment. Sales were essentially flat at 0.2% in constant currencies plus, supported by solid momentum in consumer goods and services. The acquisition of MATTEK contributed slightly more than 1 percentage point to growth. Instrument sales were impacted by constrained CapEx spending in life science research and market. However, we are seeing encouraging signs of stabilization supported by positive momentum in bioanalytics in the second half, driven in part also by the launch of several updated instruments in that market space.

Let me also quickly elaborate on our regional performance. EMEA sales performance remained robust with growth of almost 6% in 2025. As a reminder, the recovery in EMEA started earlier than in other regions and therefore, faces higher base effects compared to the Americas or APAC. The Americas outperformed, growing by 8.9%, like APAC, which also grew by 8.9%. In APAC, China continued to stabilize with early signs of improvement. Excluding China, the APAC region delivered low double-digit growth in the year 2025.

Let's now turn to our profitability. In addition to robust growth momentum, we achieved a strong improvement in profitability over the past 12 months. Underlying EBITDA increased overproportionately by 11.2% to EUR 1.052 billion, with the margin expanding by 170 basis points to 29.7%. This margin improvement was driven by positive volume and product mix effect as well as economies of scale, further underpinned by cost discipline, more than offsetting FX and tariff-related headwinds of around 1 percentage point.

Looking at the divisional profit distribution, profitability in our BPS division developed strongly. Underlying EBITDA increased by 15.2% to EUR 907 million, and the margin improved by 240 basis points to 31.7% based on the effect just mentioned also for the group.

In LPS, margin declined year-on-year to 21.5%, roughly 50-50, reflecting an unfavorable product mix on the one hand side as well as FX and tariff-related impact on the other hand side.

Now let's take a look at the performance below underlying EBITDA, where both net profit and cash flow developed well. The strong increase in underlying EBITDA of 11% translated into overproportionate growth and underlying net profit of 18% and reported net profit of 84%. As a result, underlying EPS also grew at a very strong 18%.

Turning to cash-related items. Operating cash flow amounted to EUR 837 million, below the exceptionally strong prior year level of EUR 976 million, which was positively impacted by significant one-off inventory reduction measures in the year 2024. While business volume improved strongly in 2025, working capital remained largely unchanged. Going forward, we remain committed to keeping net working capital growth below our sales growth.

Free cash flow amounted to EUR 390 million, reflecting the development of our operating cash flow. In addition, free cash flow is also reflecting the slightly increased CapEx spending from EUR 410 million to EUR 441 million. Accordingly, the CapEx ratio was 12.5%, which is exactly in line with our guidance throughout the year.

To conclude our section on 2025 financials, let us now look at the development of the balance sheet-related key figures. We see a strong equity ratio of 39.8%. The increase versus year-end '24 is mainly due to some repayments on financial instruments using our strong cash position and therefore tightening the balance sheet total.

Net debt remained largely unchanged, while gross debt has been reduced by EUR 277 million and despite payout of the acquisition of MATTEK in summer 2025 of EUR 70 million. The leverage ratio, defined as net debt to underlying EBITDA, improved as expected from 3.96x to 3.55x in 2025, despite the acquisition of MATTEK, which added approximately 0.1 turns to the ratio. So we are well underway on our planned deleveraging path. And as you can see in the title, we stay committed to our investment-grade rating.

With that, I would like to hand back over to Michael.

Thank you, Florian. So overall, we are very pleased with the strong performance Sartorius delivered in 2025, supported by improving demand trends, mainly on the consumable side. In addition, the results demonstrate the resilience of our business model and confirm the attractive long-term opportunities in the biopharma and life science markets. We will remain focused on disciplined execution, targeted investments in innovation and capacity and operational excellence. Looking at 2026, it is clear that our industry is back on track, but has not yet fully reached its long-term growth level, especially in terms of demand for equipment and instruments.

Since the year is still young, we have deliberately set a broad guidance range to account for continued high macroeconomics and industry-specific volatility. The lower end of the range reflects the cautious scenario in which market conditions weaken. However, we currently expect market dynamics to continue normalizing and positive trends to continue.

For 2026, we expect to continue our profitable growth trajectory with a continued positive development in the Bioprocess Solutions division and a recovery in the Lab Products & Services division. For the group, we expect sales growth in constant currencies of around 5% to 9%, including a positive effect from the market acquisition and U.S. tariff-related surcharges totaling approximately 1 percentage point. And for the underlying EBITDA margin, we expect an increase to slightly above 30% in which a technical margin dilution of around 50 basis points from tariff surcharges is already reflected.

In Bioprocess Solutions, we anticipate sales growth of around 6% to 10%, mainly driven by the recurring business, while we expect equipment business to remain at least stable. The underlying EBITDA margin should be slightly above 32%.

In Lab Products & Services, sales growth is expected at around 2% to 6%, including a growth contribution of 1.5 percentage points for MATTEK. This reflects the continued growth recurring business and an at least stable instrument business. We expect underlying EBITDA margin to be slightly below 21%, mainly influenced by deliberate investments in advanced cell models with additional headwinds from unfavorable mix, ForEx, and the dilutive effect of the existing tariffs.

CapEx ratio should be around the prior year level as we will continue to invest selectively and with discipline in expanding our global research and manufacturing footprint. Net debt to underlying EBITDA should decrease to slightly above 3x at year-end. As usual, we will provide some additional information for modeling purpose. As you can see, with the Euro-U.S. rate of 1.2, there, we would be a headwind of around 2 percentage points on the reported versus constant currency growth in full year 2026. In Q1, the headwinds would be around 4 percentage points at Euro-U.S. rate of 1.2.

Taken together, we are confident that Sartorius is well positioned to benefit from continued recovery.

With that, I would now like to hand over to René, who will walk us through the financials of Sartorius Stedim Biotech in more detail. René, over to you.

Thank you very much, Michael. Also from my side, welcome, and thank you for joining us on the call today. In 2025, Sartorius Stedim Biotech achieved considerable profitable growth driven by improving demand, particularly for consumables and operating leverage. This allowed us not only to achieve our updated October 2025 guidance, but also to exceed our top line expectations.

Overall, we are very pleased with the results and would like to sincerely thank our all colleagues across the Sartorius Stedim Biotech for their commitment, dedication and really hard work in making 2025 a success.

Looking at the numbers. Sales for the Sartorius Stedim Biotech Group increased by 9.6% in constant currencies, reaching nearly EUR 3 billion. Growth in reported currencies was 6.7%, primarily due to the weaker U.S. dollar, which represented a headwind of almost 300 basis points. The successful implementation of tariff surcharges contributed approximately 1% of sales revenue.

Our high-margin recurring consumables business remained very strong, delivering mid-teens growth more than offsetting the soft but increasingly stabilizing equipment business. Order intake grew faster than sales, keeping our 12-month rolling book-to-bill ratio consistently above 1, while the ratio declined slightly sequentially in Q4, as Florian explained, due to a very strong prior year comparison. Q4 order intake was roughly on par with the exception of Q4 2024, making it the highest absolute order intake quarter in 2025. We therefore entered 2026 with a strong order book.

Underlying EBITDA increased by 17% to EUR 914 million, driven by volume, product mix and economies of scale. Consequently, the underlying EBITDA margin improved significantly to 30.8%, an increase of 2.8 percentage points compared to the previous year.

Looking at the top line performance from a regional perspective, EMEA made a solid momentum, delivering 7.3% growth. This robust performance came despite a higher comparison base resulting from an earlier recovery cycle. The Americas grew by almost 12% followed by Asia Pacific growing almost 11%. In APAC, China stabilized and was only slightly dilutive to the overall growth. Excluding China, the growth the region delivered was in the low double-digit range for 2025. I'm also quite pleased with the more recent development in China beyond stabilization as the year progress, we are now seeing really early signs of recovery.

Looking at the net profit and cash flow, underlying EBITDA growth of the strong 17% translated into an overproportional increase in underlying net profit of 26.7% to EUR 428 million and reported net profit of nearly 52% to EUR 266 million. Underlying EPS rose by 26% to EUR 4.4.

Operating cash flow remained solid at EUR 692 million, although below the high level recorded in the prior year, which was positively influenced by the pulling of inventory that Florian already touched upon. Free cash flow stood at EUR 295 million, and the CapEx as a percentage of sales came in at 13.3%.

A quick look at our balance sheet metrics. Our equity ratio improved to 51.7% in the end of 2025 with the increase being driven by some repayment of financial liabilities and therefore, tightening the balance sheet total. Net debt decreased by EUR 18 million versus year-end 2024 and gross debt reduction. Deleveraging is progressing as planned with the net debt to underlying EBITDA ratio improving to 2.38 by the end of 2025. So we are very well on track on our deleveraging path.

Now before we move into the Q&A, let me also quickly elaborate on our full year guidance for the Sartorius Stedim Biotech Group. As mentioned earlier, we are very pleased with the strong performance of Sartorius Stedim Biotech has delivered across all key financial dimensions. The 2025 results demonstrate the resilience of our business model and confirm the attractive long-term opportunity in biopharma market. We will remain focused on disciplined execution, targeted investments and innovation and capacity and operational excellence.

Looking in 2026, same is true for Sartorius Stedim Biotech and for Sartorius AG when it comes to the overall environment and industry trends. Therefore, we also have deliberately set a broad guidance range with the lower end of the range reflecting a cautious scenario in which market conditions weaken. However, we currently expect market dynamics to continue normalizing and positive trends to continue.

We expect to stay on our profitable growth path and for 2026 sales revenue growth in the range of around 6% to 10% in constant currencies, including a 1 percentage point contribution from the U.S. tariff surcharges. Growth will be mainly driven by the recurring business, but against high costs, while the equipment business should remain at least stable.

The underlying EBITDA margin should increase to slightly above 31%, in which a technical margin dilution of around 50 basis points from tariff surcharges is reflected. Our CapEx ratio is expected to stay around previous year level at around 13%, reflecting our ongoing investments into research and resilient production footprint.

Our commitment to deleveraging remains unchanged. We anticipate the leverage ratio, the net debt to underlying EBITDA to decrease to slightly above 2 at year-end. Our modeling assumptions, Michael already explained, expected headwind from FX on Sartorius AG level, same is true for Sartorius Stedim Biotech.

With this, I will hand over to the operator to begin our Q&A session.

[Operator Instructions] The first question comes from Subbu Nambi from Guggenheim.

What does your guidance assume in terms of U.S. onshoring build-outs in 2026? What could drive upside to these expectations?

Yes. So I'll take that. Subbu, thanks for the question. I mean, right now, as we've been seeing that there is a lot of plans, some of them really committed, some of them still a bit on the horizon. As we see as well the lead times for order particularly on the equipment on a larger system side for greenfield or for larger expansions, we think that the impact from large -- from relevant reshoring activities will most likely not contribute with revenue in 2026. So we've not baked anything of that in our current expectation and assumptions. This would rather be for the year 2027 and beyond where this may have a larger impact. However, we are very closely connected, of course, with all our customers, supporting them on their plans, discussing opportunities as we move forward. It goes up from this, of course, very short near-term activities on brownfields and expansions of existing capacity.

Perfect. And a quick follow-up. How did equipment orders for BPS and LPS, respectively, trend for the quarter for Q4? And are you starting to see any early signs of recovery? You spoke about comparison and orders, but I was just trying to figure out what about equipment orders separately for LPS and BPS.

Thank you for the question. Although we are not giving further information on that very detailed level. But what I can tell you is, on the one hand side, we have been talking about H2 sales being much stronger than H1 sales. And the same holds true when we look at order intake where the order intake in H2 was also well within double digits above H1, which, of course, then speaks to the quality of the order book and therefore, our cautiously optimistic outlook then also into '26.

Next question comes from Richard Vosser from JPMorgan.

One question, please. So you talked about market conditions not fully back to normal for equipment. So just a little bit of elaboration on changes of customer sentiment here. You've talked a little bit just now about equipment orders suggesting improvement. So just thinking about, first, your confidence in the stabilization of equipment revenues, what's underpinning that in '26? But also, when do you think equipment could move more back to normal levels? We've seen that happen for consumables in '25. What's your thinking there?

Yes. Thank you for the question. I'll take it. Let me first get back to 2025. You will remember when we talked about stabilization of equipment like in Q3, we said for H2 '25, we expect to be in revenues for -- with equipment at least on the levels of H1, maybe slightly above. And you could hear from Florian that H2 came out as stronger, so confirmed the stabilization stronger compared to the H1. So I think that's a clear kind of confirmation of our view and expectations and visibility and the discussions with our customers that the equipment is stabilizing. And now looking, of course, into the 2026, we continue to see the positive discussions and have positive discussions with customers. They are tangible projects, sizable projects on the horizon. The order book is healthy as we mentioned in the -- a few minutes ago.

So as Florian [indiscernible], cautiously optimistic looking into the 2026. We believe that the portfolio we have is well positioned to help customers quickly adjust their capacity, single-use technologies are designed to make -- to do -- to provide flexibility. So yes, we're very encouraged about the current -- the sentiment as well as the -- our position and discussions we had with our clients.

I would like to expand even that from Rene's perspective, I think the similar situation is true as well for LPS division on the basis of equally, I would say, strong development interest levels in needs and opportunities, particularly on the biolytical instrument side, as well a trend that we see in the second half of the year, particularly in Q4, coming and resulting into a good level of contribution in both sales and order intake.

And again, so same sentiment for us. But again, I think it will take, for sure, the full quarter Q1 for us to have simply better visibility, better understanding the continuation of the order intake trade in order to have a better view whether this requires further refinement of our perspective for the full year at that point in time.

The next question comes from Doug [indiscernible] from Schenkel.

It's Douglas Schenkel from Wolfe. I'm going to try to do 3 really quickly. One, I just want to confirm, based on your responses to the earlier questions that your 2026 guidance does not currently assume an improvement in bioprocessing equipment demand. So that's the first one.

The second, can you please bridge to your margin guidance for the year? Specifically, what would be helpful is, what's the impact of foreign exchange, tariffs and operating efficiencies as you incorporate those into your guidance?

And then third, [Technical Difficulty] many companies in your peer group have taken a more conservative approach to guidance than had been the norm given market challenges over the past several years and given ongoing policy uncertainty.

With that in mind and also recognizing that this is issuance as CEO, how would you describe your initial guidance philosophy?

So maybe I start to give a little bit more perspective on the margin guidance here. So what we know as of now, of course, is roughly the impact of the tariff on the year 2026, which is to be around 50 basis points. What we do not know is the full FX impact. The weaker the U.S. dollar the higher this impact might be, although we think we are in a good position to a certain extent also to compensate certain headwinds on the FX side in the margin.

The, let's say, broad improvement in margin that we are seeing, if we are taking out tariff and FX impact, is definitely a 3-digit basis point number, so above 100 basis points and should be driven to a majority from ongoing operational leverage that we've seen.

Yes. Maybe to add to Florian's point there just because you may have really in mind as well our fantastic margin contribution that we delivered in 2025. And of course, there are other effects that I think are relevant in my mind to keep in mind there. Of course, on the operating leverage, since we are now already throughout the last year on a different level, the effect of this is, of course, diminishing to a point. Keep as well in mind that when it gets to our activities that we launched in the year even before on our cost reduction programs that the main effect there as well was visible, particularly in 2024 and 2025, still continues in 2026, but less so. So with this and as well a bit of the question mark, how much of the equipment will be there in the year 2026. If that is a higher degree of recovery, of course, the margin mix, the mix effect that we have seen in 2025 was probably as well a bit more favorable compared to 2024 than it may be in 2026 compared to 2025.

Then you talked as well a bit about the guidance philosophy. Yes, I think we try to express that in our wording already. On the one hand side, it's early in the year. We felt like, okay, we're feeling confident enough in order to quantify our guidance. But given the fact that it's early in the year, given the still the level of uncertainty that we have there in terms of macroeconomical and geopolitical aspects, as you mentioned, I think we want to as well, therefore, be prepared for this and the lack of full visibility for the full year on the basis of order intake and the book and the market trends, we felt the philosophy is indeed that we have decided for a wide range with the 4 percentage points we have there. We don't feel that we are neither over aggressive nor over conservative with what we put out there. However, we feel that we will not celebrate if we achieve only a 6% growth for 2026. That's equally clear. At the same time, the level where we will land on versus the mid or even beyond the midpoint is so much dependent now on what will happen. So I think we will be in a better position after the first quarter to give more clarity as the year progresses. And that is why I think the philosophy remains, I would say, remains balanced, remains balanced.

The next question comes from Harry Sephton from UBS.

[Technical Difficulty] consumables. So we're seeing a more comfortable high single-digit to low double-digit growth across the big players in the industry on the consumable side. Based on your guidance, that you're expecting to be more in line with market growth. So what do you see in terms of potential upside or downside risk to market share in the near term on the consumable side?

Yes, I take it. So a question on consumables. As you will know, the consumables is very much -- the majority represents the majority of our revenues for the -- I'm talking for the Bioprocess division. You will know that most of that recurring revenues, consumables revenues are linked to commercial manufacturing and consumption of our customers of the products in making commercial drugs, adding late-stage clinical material production, it comes to around 80% of the consumables revenue are linked to that late-stage plus commercial manufacturing. So -- and that's more or less kind of also gives you an idea about what dictates the growth of consumables. Looking forward, it's very much about the volumes, manufacturing volumes of our customers. We can do little about that, of course. But then once new drugs are being approved or enter these late-stage clinical phases, yes, that drives additional volumes for these consumables. So looking forward, I think we have been working consistently over the years with the teams in all regions to make sure we are early with customers and place these consumables spec in, validate when the decisions are made and validations are done and also working hardly with customers to convert wherever possible in an ongoing and existing processes towards our products. The highlight of that was, of course, during the pandemic where mainly due to our ability to supply and the customers, we gained market shares and kept or we were able also to protect roughly 1/3 of this gain moving forward. So we are, I think, on a very healthy and successful track record to drive that above market -- above drug volume growth of our consumable revenues. Of course, as we mentioned in presenting our 2025 results, we have seen a strong mid-teens growth of our consumables in 2025. So comps are higher now looking in 2026, but we are very confident that these fundamentals and the volumes driving the growth of consumables are there are intact and are positive about the outlook in '26 and beyond.

The next question comes from James Quigley from Goldman Sachs.

I've got one on China, please. So you said in the slide and in the comments that China is starting to show some encouraging signs of growth. I think some of your peers at a recent conference still sounded a bit muted on China growth. So what are you seeing here in the region that's driving those encouraging comments from you across the BPS and the LPS divisions?

So I mean I can get started a little bit. I mean, highlighting perspective again, I think China has really a few years back that I think we've seen a really difficult market environment with as well, very strong level of guided preference with regard to local players and for local production. We feel now that a little bit this notion of rebaselining the market has come to an end. We feel now that we are able to, right now, keep market shares in China and benefit from probably the still modest level of the growth that the China market demonstrates.

At the same time, there's, of course, a lot of innovation activities that we are part of and want to equally, I think, being asked by customers to be part of the rollout of out-licensing and bringing some of their pipeline development into other regions and markets.

Our expectation for the market, however, overall is still a rather flattish or rather very modest level of degree of growth expectation given as well the prior year performance that we've seen. So we don't see and we don't expect naturally a big turnaround of that momentum. It's still probably there to come later. At the same time, there's a big overhang and a high capacity buildup on the equipment side. So particularly on the equipment side, we feel as well that China will, in the year 2026, be a rather muted market. But on consumables, we think will be part of the game. And yes, as we said, we are -- we have modest expectations here on the market.

The next question comes from Charles Pitman-King from Barclays.

A quick question, please, on just the guidance again. Just trying to relate the kind of 2 separate statements of the low end of your guidance range, reflecting kind of deteriorating market outlook. But also your commentary around the strong order book and equipment being at least stable. Can you confirm, therefore, that the low end of your guidance range reflects equipment being stable, supported by your existing backlog and other market deteriorations impacting consumables?

And then just a quick clarification on margins. Just wondering why you're only providing a kind of bottom end of that range. And is it the implication that at the top end of the range, you have rising equipment, which will offset the margin such that your only confident to provide at the bottom end of the range? I'm just trying to -- yes, just thinking about how you're setting this out.

So first part, yes, I mean...

Charles, you broke up a little here technically. That's why we are a little puzzled. Could you repeat the first part of the question?

Sorry. My question relates to trying to triangulate the 2 guidance commentary, one being that your sales could be at the low end of the range upon worsening market conditions, but did you separately expect equipment to be at least stable? I'm just wanting to confirm that your order book means that you have this confidence in your equipment being at least stable, and that in the scenario where you hit the low end of the range, that's driven by consumable deterioration more so than any downside to your equipment outlook?

Okay. So I mean, yes, I mean, again, I think on the lower end of our guidance as we try to express, we see some level of, I would say, market situation overall. So we would see that there is no impact, no positive contribution there from the equipment and possibly as well a slight deterioration even on the consumable side. We see the total mix. It depends on how you see the 2 elements of that coming together.

But as we say, I mean, if we see the momentum that we've seen right now based on, as you said, the order intake generated in equipment, and at least, stable situation plus the continuation of the current trajectory of the consumables that would be slightly above the bottom part of the guidance. So we would assume some level of deterioration of that condition. Then I think the other question was on the margin.

Yes. While we have not given a range for the margin, we have said that we want to reach slightly above. So this is in a way open to one side. Now let's assume we would be on the lower end of our guidance range. The 5% for the group, we would definitely aim to see margin improvement against prior year, but we might not fully reach that. So the margin corridor that we are indicating to was slightly above -- the 30% was more towards the midpoint of the guidance. If we then come to the upper part of the guidance corridor on top line, of course, there's way more potential on the back of more operational leverage.

The next question comes from Charlie Haywood from Bank of America.

Charlie Haywood, Bank of America. I have 2. So first one in '26, is it fair to expect typical seasonality on the bioprocessing side? So I think you've previously commented to 4Q, 1Q, 2Q, 3Q. Or given equipment phasing and what looks like a strong fourth quarter for those orders and a 6- to 12-month order book, might that distort to possibly fueling a stronger second half?

And then the second question is just a bit more on midterm. Now that you spent a bit of time in the business. You previously sort of commented to Merck's 9% to 10% market outlook not far from your thinking. I guess how are you currently seeing the bioprocess midterm market growth in the end markets there?

Thanks for the question. So I think we can maybe kick off a little bit on the basis. I think, as you know, we don't really break down and guide on the basis of quarterly perspective. So I think in this case, we would like to leave a little bit the breadth of the way of how we look at the year to come in more the total perspective. So we will not provide any specifics as we see the quarters moving forward.

Again, I think it is probably more in the nature of the business. If you think about -- and it's probably a similar pattern that we've seen during the last year, given the lead times of equipment orders, particularly we now see that, okay, we generated the order intake in the second half of the year, Q4. So things now with the lead time, 6 to 12 months on the Bioprocess side, of course, then we would expect sales realization in all these orders to rather hit the second half of the year than the first half of the year. So that's natural by the lead time of those orders.

Yes. Then in terms of the market. Yes, I think we hold to that. I mean we basically took a look at the market. We'll get back a little bit more interesting insight on the market analysis that we've done for the capital market that we will provide and bring up in March. However, as we said, we think that the assumption there for the market to be around a 9% growth, I think, is something that's very much in line with our views and with our analysis. Again, depending a little bit also on the specific market segment and then the exposure to the market segments. But that corridor is well in line with our analysis that we've done. And that is well what we believe that in our minds, we will measure us against from a mid- and long-term perspective.

The next question comes from James Vane-Tempest from Jefferies.

Just on LPS, actually. You mentioned in the presentation that the rolling book-to-bill is now more than 1, but now you specifically stated in both divisions. So I was just kind of curious whether the LPS book-to-bill turned in Q4 to be above 1? And if so, where you're seeing accelerating orders from either certain customer or product groups?

And then related to LPS, I mean the guidance that you've given is marked the fourth year of margin decline in a row. I know we're going to hit more in March. But conceptually, how realistic is it from here to get back to levels seen a few years ago? And what would it take to get there?

Okay. So the first part of the question was about the book-to-bill. Sorry, do you want to take that?

Exactly. James, as you know, we would not like to go specifically into that. But let me put it that way. We were quite pleased with what we have seen than in Q4. Let us leave it on that level.

And then one was related to profitability.

LPS margins, yes, in terms of the fourth year of decline and just thinking about what it would take to get back to where it was?

Yes. I think this is a question that we should discuss more in detail around the Capital Markets Day, if you don't mind.

Okay. No, that's fine. One quick follow-up, if I can. And that is just about the business flow within BPS. Historically, you've kind of alluded to consumables equipment normalized being 75%, 25% approximately. And I know at 9 months, I think you sort of said it was around 85%, 15%. So just as an approximation, I was just kind of curious where that sort of number for the full year.

Okay. Just maybe a short point of clarification. So I think, let's say, the numbers you're referring to on the 75%-25% would be on the group level. If we look at BPS, I think we see the rough proportion over the last half year, we've more talk about 80%-20% on that ratio. And again, I think, yes, that is where we see the current state. We don't necessarily believe as well, given the discussion earlier that, that will be as well roughly the level that we will see as we continue into the year 2026 now.

The next question comes from Charles Weston from RBC Europe.

You've talked about Europe being ahead or EMEA being ahead in terms of the recovery curve. Does that also mean it's ahead in terms of the equipment order recovery curve? So have you got sort of proof of those orders turning into -- that interest turning into orders and revenue in Europe?

And just a clarification question. You said you have good discussions with your customers to understand their CapEx plans. Can you give us any insight into whether the big investments that they're making is more about them shifting CapEx from other parts of the world into the U.S. or whether they are genuinely adding additional capacity into the U.S. over and above what they would be normally planning?

No, thanks for the question. On EMEA, I think the situation is not that we see any difference here. Yes, the recovery overall happened earlier there, but we cannot now say that we have data that suggests on the equipment recovery that EMEA is ahead of the other regions. So that's not really the case.

Yes, and the discussions we have with customers on the equipment, they are mostly not today related to the onshoring or reshoring in terms of tangible projects, investments, either replacing old instruments or adding capacities.

The discussions are with -- around onshoring, it's more about understanding really what is relevant of the -- what has been published from the headlines from our customers, what is of relevance for us, of course, you will see a lot of R&D investment being included in these headlines. You will see also investment in classical pharma facilities, final field drug product facility, so all less relevant for us. So trying to understand what's really in for Sartorius, and then also trying to understand really what the timing will be and when the discussions about the equipment, the providers will start. So this is more about where the onshoring discussions are today. So the very tangible projects are still less related to that topic.

Next question comes from Odysseas Manesiotis from BNP Paribas.

First, to better understand the growth deceleration in Q4. I have EMEA around 4% CER for Stedim. Could you give us a feeling of how that's different between equipment and consumables or just whether that's the growth we should be expecting for the region as the new normal?

And secondly, in order to have a better feeling of the conservative business embedded in your guide, is it fair to say that your book-to-bill for the entirety of the year was pretty much close to your pre-pandemic average of around 1.05?

And last quick one, biotech funding has been -- has been quite strong. What's the usual lag that you see between a biotech funding recovery and a pickup in your order intake?

So let me maybe start with the growth regarding BPS recurring versus nonrecurring in H2 because I think really looking only at 1 quarter doesn't make sense in looking at the matter, it's already really short term. But just to give you a feeling, the growth that we've seen in the nonrecurring business was very similar to the growth that we've seen also in the consumable business in H2. So this is also a reason besides the effects that we've seen in the order intake while we are taking that confident stance towards 2026.

When it comes to book-to-bill, we are not communicating on the level of book-to-bill. Sorry.

[Operator Instructions] The next question comes from Thibault Boutherin from Morgan Stanley.

Just to come back -- can you hear me?

Yes. It's okay.

Just to come back on the topic of onshoring and the last CapEx plan that has been announced. There is a question that comes back often from investors, which is, is there a risk that because we see CapEx being skewed towards the U.S. in the next few years to see an imbalance between you and your competitors? So I think the idea from some investors is maybe U.S. peers would be better positioned to benefit from CapEx being skewed to the U.S. So just wanted to know if you could comment on your competitivity in the U.S., the market share relative to other regions and give an answer of how a shift of investments to the U.S. in terms of equipment and CapEx for biopharma would impact you?

Yes. So I'll take that question. Look, the -- in our industry, and I think it's been always the case, still is the case. The main decision criteria is the technology and the performance. Their customers don't make really compromises when it comes to how they equip their facilities, if it's for preclinical small scale manufacturing or even commercial. So I think there we -- and this is where we really see ourselves being ahead with a lot of focus on innovation.

So I think for us, the positioning to benefit and participate in the potential onshoring wave is very strong. We have a facility to assemble equipment in the U.S., in the Boston area, in Marlboro, as well to be close to customers in case of the factor acceptance that and so on for more complex equipment. So I think, yes, we are ready to take all the opportunities, the feedback from customers is strong, so positive about the outlook here.

Next question comes from Oliver Metzger from ODDO BHF.

It's one more structural question on equipment. So we know from the past, normally, equipment and consumables should grow at a similar rate over the cycle. So we now see consumable demand healthy for a while, while equipment is at least lagging behind. Can you comment about the reasons for this reluctancy? Is it more like still an overhang from, let's say, the time during the pandemic or post the pandemic? Or could it be that there is a more structural change as higher quality consumables might have increased the efficiency of the tighter of a production process and therefore, some structural lower or slower demand for equipment might be the case for a quite longer period of time before we see more expansion or new manufacturing facilities? So that's, to say, upgrades and lower expansion.

Yes. Thank you for the question. I try to kind of give you more color to think about why this reluctancy to invest, you addressed or you asked how much of that is coming with kind of a post-pandemic would call macroeconomic cash-driven impact or development. I think that's very much more on that side, plus the overcapacities, which have been built during the pandemic in some areas versus how you call it kind of a structural change in a way that by technologies improving, it would require less of this equipment.

Actually here, over years and decades, we have seen exactly the opposite. The better the technology gets, the more of it will be used, especially in single-use manufacturing, the [ cake ] of what you can address with single use increases or grows, the better the technology, the higher the titers, the better the yields are. So I think that's very much a positive ongoing trend with this improvement.

So again, back to your question, I think it's very much on the cash post-pandemic macroeconomic impacts rather than any different structural technology-related.

The next question comes from Falko Friedrichs from Deutsche Bank.

My question is on the LPS margin. When do you expect these investments in Advanced Cell Models to begin contributing positively to the margin of the segment again? And then just a very quick housekeeping one. Is a 27% tax rate a fair assumption again for the Sartorius Group in 2026?

Yes. Let me start with the housekeeping question. We currently think that the 27% is still okay for the year '26. And on the margin, as I said, it's connected a lot, of course, to our engagement in Advanced Cell Models, which is an emerging business, but should not be impacting on a sales side very soon, but rather we are building up for the more long-term perspective, more to elaborate on at our Capital Markets Day.

Next question comes from Harry Gillis from Berenberg.

I have one clarification regarding an earlier question on guidance. I'm sorry, I didn't quite catch that. Does the 6% guidance at the low end of your for BPS growth, does that assume a further decline in equipment sales, sorry? Or does your expectation for at least stable equipment hold here and it's deterioration in growth in consumables?

And secondly, could I just ask you. Do you expect your CapEx ratio to remain stable at around 12.5% into '26? How should we think about that over the midterm as some of your larger projects start to roll off?

Should I start with the last question on the CapEx rate. So of course, you are asking more the midterm perspective, but I think we have always quite consistently communicated that we are -- we should see from the year '27 onwards, an overall reduction in our CapEx ratio. '26 is, therefore, the last year, where especially also driven by our expansion projects in Korea. We are seeing elevated levels of our CapEx ratio to then come down afterwards, more on the Capital Markets Day.

Then again, on the guidance, just to repeat, we said at least flat, so we are not considering any decrease in equipment revenues for 2026 in our guidance.

Next question comes from Shubhangi Gupta from HSBC.

So just a clarification for your guidance or the upper end of your sales growth, does it assume recovery in equipment sales? And if yes, what is the time line? And how should we think about the phasing of growth in 2026, given H2 have tough comps, especially from strong growth in consumables?

Yes. Again, so now the question is about the upper range of the guidance. Here, as we said, of course, in that case, we would expect the contribution of both consumables, continued healthy growth as knowing and considering the higher comps coming from this -- from 2025 as well as at least a moderate growth in equipment revenues. So that's kind of our current thinking. And again, very positive what we have seen so far, the order book, the trends we see. So quite confident we are heading there. But as Michael said in the introduction, still early in the year and more to come with our Q1 results.

Yes. Give us a bit more time on that, please. So on that. However, I think just to add on, I mean, as we said at the other stage, given a bit as well if we think that one of the contributing or deciding factors towards the upper end, it will indeed be a more strong recovery and growth contribution as well from the equipment instrument side. Again, on the lead times that are there, of course, assumption is probably fair to say that this is something that happens rather later in the year than earlier. So it's something that we would expect to rather beyond Q1 to happen, if it happens in the degree that we may hope for, but we don't know.

And just a quick follow-up, can you comment...

I'm sorry, Shubhangi, but we have 3 more people in the queue. I'm sorry, we have to head on because we are over time already. Sorry about that. Happy to take your question afterwards.

The next question comes from Anna Snopkowski from KeyBanc.

This is Anna on for Paul Knight. I just was wondering, you mentioned on your last call, you were having some early conversations with small CDMO customers. How has this progressed in the quarter? And are those early conversations around equipment broad-based or concentrated in any customer group or certain types of equipment like those that help your customers reduce costs?

Yes. Thank you for the question. So yes, absolutely, that was a kind of an ongoing development we have seen in 2025. Towards the second half, we've seen the smaller CDMOs also becoming more and more active. We've seen them, their pipelines filling, their projects coming and discussion started, and it's both really about -- its equipment and consumables. So preparing for delivering on the project, it's all about getting ready to make the batches, preparing to get an order in consumables to be -- to have them on -- to build inventories as well as where needed, add equipment to prepare the capacity as well. So that's been the development we've seen with them, and it didn't change so far. So also kind of contributes to our positive outlook.

The next question comes from Naresh Chouhan from Intron Health.

Just on BPS. When you talk about double-digit consumable growth, can I confirm that this is more like low teens if we exclude China, just to give us a sense of where underlying demand is in Western market and the kind of state of the Western market recovery?

Yes. So consumables kind of, yes, low teens is a fair assumption in a positive outlook, right? And yes, that's how we are looking forward, not only '26 but ahead as well. Yes, so you're right.

The last question comes from Delphine Le Louet from Bernstein.

Yes. I'm sorry because I really don't understand the guidance regarding LPS when it comes to the margin. And so I know when you're trying to push back about the CMD and probably you're right, but that makes me think, is there anything and especially when we look at the Q4, where we had the margin gain versus the Q3, is there anything more structural that you're planning? And this is a new way where probably we should think about the division in the future, meaning a complete reorg internally of the LPS division that could justify not having any execution gain coming over the sales growth even at the midpoint of 4%, which is quite nice for that division, by the way. So any more clarity on that? How should we think about that margin in the context of back to growth and a scenario, which is not that bad at the end?

So Delphine, maybe I'll start, and then Michael, especially to add on, on that. But first of all, we definitely think that the LPS business is a 20% plus margin business going forward. On the other hand side, on the current position that we are at, at a margin of 21.5%, knowing that the tariff impact overall in the group is roughly 50 basis points in 2026, knowing that there are unknown on the FX side and knowing that we are ramping up our investment through the P&L into ACM, we thought it is appropriate to guide then for the year '26 with a slightly below 21%.

Yes. And over and above what Florian said, of course, we want to give you an incentive to join the Capital Markets Day here, very clearly, any strategic type of consideration about how we see the business, the divisions as we move forward. You're welcome in March to our Capital Markets Day.

There are no more questions from the phone. I would now like to turn the conference back over to Petra Muller, Head of Investor Relations.

Yes. Thank you very much, Valentina. This concludes today's call. Please reach out to the Investor Relations team in case of any open questions. We thank you for joining us and wish you a pleasant rest of the day. Take care and see you next time. Thank you. Goodbye.

Thank you. Bye-bye, all. Many thanks.

You may now disconnect.

Ladies and gentlemen, welcome to the Sartorius and Sartorius Stedim Biotech H1 2025 Conference Call and Live Webcast. I am Mathilde, the Chorus Call operator. [Operator Instructions] The conference is being recorded. This call is scheduled for 60 minutes. Presentation will be followed by a Q&A session. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Michael Grosse, CEO. Please go ahead.

Thank you, Mathilde, and good afternoon, everyone, and thank you for joining today's call on our H1 results of the Sartorius AG as well as Sartorius Stedim Biotech. Today, I'm together with Florian Funck, our CFO; with René Fáber, our Head of Bioprocessing Division and CEO of Sartorius Stedim Biotech; and also Alexandra Gatzemeyer, our Head of the Lab division.

But before I walk you through our financials and the full year outlook of the Sartorius AG, I would like to take the opportunity to introduce myself and share how excited I am to step into the role of the CEO at Sartorius. Maybe very briefly on my vitae, you may have seen that I hold a degree in mechanical engineering and a Ph.D. and spent the last 20 years in the processing and packaging industry for pharmaceuticals and for food most recently as CEO of Syntegon, a spin-off of Bosch. And before that, I spent many years in executive roles in Sweden, in Switzerland, in the Executive Board of Tetra Pak and before that, in the automotive industry with BMW and Ford Motor Company.

And now I joined Sartorius actually 22 days ago and truly look forward to working not only together with my colleague and the team here and our customers, but also with you. It's actually a great privilege to lead this exceptional company with this outstanding team. Sartorius has an incredibly strong foundation in the scientific excellence world around innovation, uncompromised quality and trusted partnership with our customers in the life science industry. I'm deeply energized by this opportunity and by all the opportunities that lie ahead of us.

Now in the recent weeks and months, I have been rather busy and connecting with all the colleagues, customers and partners around the world to understand their expectations and perspectives of the industry. These conversations have only reinforced my view of Sartorius as a company with tremendous strength and highly respected position in the industry. It's been an overwhelming start in the truly best sense of this word. My goal is to build on the successful trajectory that has been set by my predecessor, Joachim Kreuzburg, while empowering our teams in order to accelerate innovation and performance, delivering even more impactful solutions to our customers and ultimately to patients.

Together, we will continue evolving our strategy to stay closely aligned with our customer needs and to drive the broader industry development. And as we move forward, we remain guided by our shared vision to simplify progress in biopharma and life science research, eventually leading to better health for more people.

And now let me start walking you through the highlights of the first half year of 2025. Now looking at the results for the last 6 months, we are pleased with our business performance. And as expected, we saw a strong growth in consumables, which remains the most relevant driver for our overall business. Revenue grew by 6% in constant currencies, which translated into significant margin expansion driven by volume, product mix and economies of scale. The underlying EBITDA increased by a strong 12% year-over-year, bringing our underlying EBITDA margin close to 30%.

Our Bioprocessing Solutions sales revenue grew by nearly 9% year-over-year on a constant currency basis, driven by the growth in consumables. The equipment business remains soft, however, but we see a positive development in the opportunity funnel as we are engaging in a number of promising conversations with customers considering new investments.

Lab Products & Services with a strong focus on instruments delivered a solid performance as well in the recurring business with lab consumables and services. This could, however, not compensate for the continued hesitation around larger capital investments by our customers. Sales revenue hence declined by 4% in constant currency. Now the MatTek acquisition was closed on July 1 and sales and earnings contributions will be included in the division's financial results from the second half of the year onwards. We launched several new products in both divisions to enhance the efficiency and productivity of our customers' drug development and manufacturing processes.

I would like to briefly mention and highlight only 2 examples here that I found exceptional. As you know, we have developed a platform for incentivized bioprocesses in collaboration with our customer, Sanofi. We have now launched in the first 2 modules, which automate and intensify several purification steps. The system is designed to deliver savings in production costs, higher productivity, shorter time to market and lower CO2 emissions. Two additional modules for further production steps are now scheduled to follow in 2026.

In LPS, we enhanced our biological -- our bioanalytical offering with new generations of 3 established instruments that enable customers to achieve better research results faster. One is our IncuCyte a market-leading instrument that allows researchers to continuously observe and analyze living cells in real time. The new model is the only one on the market that enables confocal imaging directly inside an incubator. Confocal imaging is particularly suitable for analyzing organoids and micro tissues. These complex 3D cell models mimic human tissue, delivering more accurate and reproducible results and thus accelerate the development of new drugs. In addition, they reduce the need for animal testing and research.

And now let's turn to the numbers. We generate free cash flow, enabling us to reduce our leverage ratio as planned. And based on our strong half year performance as well as our orders on hand, our expectations for the second year, driven as well by our dialogue with our customers, we are confirming our full year 2025 guidance as we feel very comfortable with the numbers provided.

Now with this, I would like to hand over to Florian, who will walk us through the details in the presentation. Florian, over to you.

Thank you very much, Michael, and also welcome from my side. And I'm very happy to take you now through our set of numbers, reflecting a continuation of the positive business dynamics that we've seen since some time. Starting with sales, which is up by 6.1% in constant currencies and 5.2% in reported currency to EUR 1.767 billion. This positive development is driven by a double-digit growing recurring business, which is the dominant part of our business, as you know, while the nonrecurring part continues to be soft and down double digit. Looking at the differential of constant currency growth and growth in reported currency, it is obvious that the FX situation changed from Q1 to Q2. So contrary to Q1, where we had some FX tailwinds, especially the weakening of the U.S. dollar in Q2 generated some headwinds of 90 basis points to our H1 performance in reported currency.

So obviously, if the U.S. dollar to euro exchange rate stays on the current level, the negative FX impact will be higher in H2 versus H1. But please note that all our sales revenue guidance figures are in constant currencies. Besides the swing in foreign exchange developments, Q2 also marked the beginning of tariff challenges for our industry and started with Liberation Day on April 2. We have taken several measures, as you know, to limit the tariff impact on our business with one of them being the successful introduction of tariff surcharges to our U.S. customers.

As most of the U.S. demand for Q2 is either coming and produced in the U.S. or was already available in our warehouses, the effects on top line in Q2 and H1 of the tariffs were minimal. So it was a mid-single-digit million euro figure with no effect on our profitability. But we are expecting the effects to somewhat increase over H2 even if the tariff rate stays at the current 10% level. The scope of this increase, of course, is depending on the final tariffs being imposed. We will, of course, talk about this going forward in our publications to create sufficient transparency for investors and analysts, but we don't want to speculate on tariff settings going forward.

Order intake in H1 also developed as expected and grew more than sales. As you know, we have stopped giving quarterly order intake numbers as this is neither standard in this industry nor in our perspective in this current market setting, helping to analyze the short-term business. We rather think that the 12-month rolling number better reflects the underlying trend of business. And here, we can report that this number is above 1 and constantly improving for quite some quarters. The positive top line development is also reflected in underlying EBITDA and EBITDA margin. Underlying EBITDA grew overproportionately by 11.9% to EUR 527 million. Margin increased by 170 basis points to 29.8%. This margin expansion was driven by positive volume and product mix effects and economies of scale. Also, underlying EPS grew nicely by around 30%.

Let's have a look at the regional performance. Looking at the regions, all 3 regions reported a very solid growth with the Americas showing the strongest growth in H1, also based on easier comps. Growth in all regions was driven by consumables, while the equipment business was soft across the board. Let's move on to our divisions, starting with BPS. It has been a very strong H1 for BPS with sales growth in constant currencies of around 9% to EUR 1.435 billion. Growth was driven by recurring business that showed strong double-digit growth, compensating for the soft equipment business being double-digit down. We are seeing a good level of customer interaction with regards to our equipment business, especially around manufacturing technologies that allow for significant efficiency and yield increase on the customer side. But still, in this overall phase of uncertainty, customers are reluctant to sign orders at this point in time.

BPS last 12 months B2B shows, as for the group, a consistent growth over the last 2 years with values of above 1 since Q2 '24. Looking at underlying EBITDA and margin, we see underlying EBITDA growing by around 17% to EUR 453 million. Margin is up by 240 basis points and comes in at 31.6% very healthily in H1 '25. This was driven by volume and mix effects and economies of scale on a leaner cost base after our efficiency program implemented last year.

Let's move on to LPS. With its high exposure to nonrecurring and CapEx-driven business, LPS continues to be confronted with a challenging market situation. Sales were down 4 percentage points in constant currencies and 4.8% in reported currency, and this was driven by the nonrecurring business that developed double-digit negatively, while the recurring side of the business largely grew across all regions. Especially our business with bioanalytic instruments is suffering in the situation where customers are pushing out their investment decisions. This has also an impact on the margin that went down from 23.6% in the prior year to 22.3% in H1 '25. And drivers here, of course, was volume first and then, of course, also mix, as you know that the bioanalytical instruments are, from a margin perspective, the best performing ones.

Let me also comment on the performance below the underlying EBITDA, looking at net profit and also cash flow metrics. As you can see, the underlying EBITDA growth of EUR 56 million or 11.9% translated into an overproportional growth in underlying net profit of 13.7% and especially reported net profit of 33%. Operating cash flow came in solidly with EUR 289 million. And this is below the EUR 347 million we were able to report last year, but please bear in mind that we were pulling the inventory and accounts receivable lever heavily in H1 '24. And as you know, you can only pull these levers once. And therefore, we are seeing here in the operating cash flow, a reduction of 16.6%. And furthermore, commenting on net working capital, we wanted to ensure delivery reliability to our customers alongside the overall nicely growing business.

It states our ambition and clear target to increase the net working capital under-proportionately to the sales growth in 2025, just to reconfirm that. Combined with the low H1 CapEx ratio and the corresponding investing cash flow of minus EUR 167 million, free cash flow grew by EUR 14 million to EUR 122 million. These do not multiply the investing cash flow of H1 x2 to become to our 2025 forecast assumption. There will be some CapEx seasonality with H1 showing higher CapEx numbers than H1. CapEx ratio as a percentage of sales dropped accordingly in H1 to 9.1%. And as guided, we are expecting to be at a CapEx ratio for the full year '25 of around 12.5% of sales.

Now looking at the balance sheet-related key figures. We firstly see an ongoing strong equity ratio of 37.8% and the reduction in equity and equity ratio is only due to FX effects and the approved dividend that we paid out in the beginning of Q2 '25. Net debt slightly increased mainly due to some noncash positions such as leasing and also accrued interest for our bonds, which is then payable in September this year. Net debt to underlying EBITDA improved from 4.0x to 3.8x in H1. So we are well underway on our planned deleveraging path. And as you can see in the title, we very much also stay committed to our investment-grade rating.

And with that, I would like to hand over to my colleague, Michael Grosse, again.

Thank you, Florian. Very appreciate it. Now let us turn to our outlook for the full year. Again, for the group, we are expecting an increase in constant currencies by 6%, for BPS by 7% and for LPS by 1%, all at the midpoint and all with a guidance range of plus/minus 2 percentage points. Our recent acquisition, MatTek, should add approximately 1 percentage point to the LPS full year revenue development. And for now, we leave the plus/minus 2 percent points of bandwidth at this point untouched due to the fact that we still believe that volatilities in the market globally remain reasonably high.

Our EBITDA margin guidance is 29% to 30% for the group, 31% to 32% for BPS and 22% to 23% for LPS. Now let me be clear. I mean, we looked into our perspective of the coming half year with a specific focus and I want to be clear that we are feeling comfortable, really comfortable with the full year guidance on the group level, recognizing, of course, that the comfort level on the BPS side is stronger than it is, and there is on the same point in time for LPS, a higher level of ambition and a higher level of leeway that we will have to come with. Nevertheless, I want to be very clear that our comfort level overall for our guidance remains really strong.

So with this, I would like to hand over to René, who will walk you through the financials of the Sartorius Stedim Group.

Thank you, Michael. And also from my side, a warm welcome to everyone on the call. Let me do a quick walk through the H1 results of Sartorius Stedim Biotech. We are very pleased with our operational and financial performance in H1. While customers remain cautious with investment in equipment, the underlying growing customer demand for single-use solutions is visible and our high-margin recurring consumables business continues to perform strongly across all regions and showed high double-digit growth.

During the first half of the year, sales of Sartorius Stedim Biotech Group increased by more than 9% in constant currencies, reaching nearly EUR 1.5 billion. Growth in reported currency was 8.5%. Florian highlighted the book-to-bill ratio measured in as a rolling 12-month average remained above 1 and continued to improve. Underlying EBITDA rose significantly faster by a strong 19.3% to EUR 462 million, mainly due to volume and product mix effect. The corresponding EBITDA margin grew to 31%, up by 2.8 percentage points versus previous year, and the underlying EPS rose by nearly 37% to EUR 2.34.

A brief look at the regional insights. Looking at the development, all regions grew strongly driven by the continued demand for consumables. The Americas region reached a substantial gain of 11% in constant currencies over the prior year period. EMEA grew by 8.7% and sales revenue in Asia Pacific region was up by 8.1%. Looking at the net profit and cash flow, the underlying EBITDA growth of a good 19% translated into an overproportional increase in net profit of 45% to EUR 154 million and underlying net profit of 38% to EUR 228 million. Operating cash flow remained solid at EUR 245 million, although below the high level recorded in the previous year, which was positively influenced by the reduction of -- in the pandemic-related inventories on our side. Positive effect from the higher operating income and lower tax payments in the first half of this year were offset by the growth-related increase in the working capital to ensure our delivery capability.

Free cash flow was up EUR 203 million due to lower CapEx in H1, leading to CapEx ratio of 9.5% for Sartorius Stedim Biotech Group. As Florian mentioned, our CapEx plan for the full year assumes a significant increase in the investment activity during Q3 and Q4, which will bring our CapEx ratio up for the full year. Quick look at our key financial indicators, a strong ratio, equity ratio remained stable at nearly 49%. The increase in net debt is mainly attributed to higher lease liabilities and interest accruals, deleveraging progressing as planned with the net debt to underlying EBITDA ratio improving now to 2.7 by end of the first half.

With that, let me now turn to our confirmed full year 2025 guidance for the Sartorius Stedim Biotech Group. Michael outlined that for SAG Group, we continue to project a revenue growth of approximately 7% with the guidance range, plus/minus 2 percentage points to reflect the volatilities we see in the market globally. Underlying EBITDA margin should be in the range of 30% to 31% and the CapEx ratio to be around 13%, and we anticipate the net debt to underlying EBITDA ratio to improve to approximately 2.5, down from 2.8 in the previous year. Additionally, you will find some data for financial modeling on that slide as well.

And that concludes our presentation here. Now we welcome your questions in the Q&A session. Thank you very much.

[Operator Instructions]

The first question comes from the line of Harry Sephton from UBS.

So on the book-to-bill ratio, the change in messaging from well above 1 at the first quarter to this rolling 12-month average above 1 and consistently improving has created some concern that sequential orders have weakened. So can you maybe provide some reassurance on new order trends? And if they have weakened, do you see this driven by some pull forward in demand early in the year? And then my second question, just on the guidance. You were comfortably above sales growth guide for Stedim at the midyear and are at the top end range of the margin guide. So why the conservatism for the second half of the year?

So maybe I'm taking your first question on the book-to-bill. And as you know, we are refraining from giving order intake numbers for individual quarters, but rather think that the B2B sequential 12 months rolling is a better reflection. But as you have been also asking around the point of pulling forward or if we have seen pull-forward trends, I can underscore that we are not aware of any pull-forward trends neither in Q1 nor in Q2.

Yes. Let me maybe just briefly as well build on what Florian said here. I think we want to really reemphasize our way of transporting messages in line with the way how we are actually really steering and judging the business performance backwards and forward. Now again, I think you asked Harry on the forward-looking perspective. I think we took quite some time in order to penetrate and understand the quality of the orders that are at hand, looking at the opportunity pipeline and as well take the inputs from the various discussions with our customers on larger projects and thereby define the quality of the outlook. And this is really where we take our strong confidence that indeed, we reassure ourselves in terms of the overall guidance and -- as you have mentioned, we see potential upside opportunities on the BPS side, while the work on the LPS side is more challenging for us. However, we see both of that still within the guidance that we've given and with the level of uncertainty that we are expressing as well given a bit the macroeconomic and regulation headwinds that we are facing here.

And then for the second part, maybe, René, you can add some light to the perspective.

Yes, absolutely. So again, I think it's really promising and visible to see the overall trending in the bioprocessing revenues, and we mentioned that during the presentation that the continued growth of consumables and strong growth on consumables, both in order intake and revenues is very encouraging, and that makes us, as Michael said, makes us feel really comfortable with that we are on the right track and we are comfortable with the guidance confirmation here.

The next question comes from the line of Doug Schenkel from Wolfe Research.

So my first question is on guidance philosophy. So bioprocessing consumable momentum continues to build. On the other hand, demand for LPS instruments continues to lag expectations. With that in mind, I'm just wondering why not increase BPS guidance and reduce LPS guidance? And then my second question is really on the AAV category. Clearly, this is an area that remains under pressure. What is your exposure as a percentage of sales? What are you seeing in terms of customer demand in this category across different geographies? And how should we think about this category moving forward?

All right. So maybe I take -- start with the second question on the AAV adenovirus based therapeutics. So it's one of the -- what you can call newer modalities in our market next to like cell therapies, gene-modified cell therapies or nucleic acid-based therapies, one of new modalities, which as we are looking at the new upcoming market, a promising additional set of modalities, which will drive the growth -- future growth of the bioprocessing business.

So important one, maybe due to the recent developments in some clinical results, a bit under pressure, but still continues to be one of these major new modalities looking forward. I think what is encouraging from our perspective is that we have a strong position in not only viral vector-based gene therapies or therapeutics, but across all these new modalities being spec-ed in, in quite a significant number of the assets which are being developed in the customers' drug pipelines. So overall, still positive outlook, maybe even with the short-term headwinds, which we are seeing. But I think those underline the need for innovation in this type of applications and our strong position makes us very optimistic about the overall future outlook.

Thank you, René. Back to your -- to the first part of the question, I mean, we really try in our outlook and perspective to balance, I would say, the underlying dynamics of the market itself, given the strong focus and the demand that we've seen on the fact that the hardware and the bioprocess utilization is increasing, production is there. So we see the trend in the order patterns when it gets to the consumer part of the business and actually both business areas, while as we expected, the dynamic on the hardware investments and the CapEx is still hesitant and will remain so.

I would say, despite the optimism from what we see in our order books and in our opportunity pipeline and based on our customer dialogues, we still face the level of uncertainty given as well by the fact that we have the uncertainty given by the tariffs, the funding situation overall -- that's the reason why I think we feel the comfort on not only the guidance as such, but equally leave for the time being the range in there. And that is the reason why we believe in both businesses and divisions on the overall group level, we have, I think, a great comfort level to meet this range. And while we progress throughout the year and hopefully, you see the uncertainty to slow down and go down, we should be able as well to be able to see a more narrow perspective on the businesses and more clarity about the indeed opportunities that we may have in one part of the business and the challenges that we may face in the other part of the business.

We now have a question from the line of Nambi Subhu from Guggenheim Securities.

Looking forward to working with you, Michael. My first question is LPS instrument demand remains under pressure, ostensibly due to a pause in investment in earlier-stage research. Looking more broadly, are you seeing any increase in activity when it comes to potential demand for new line build-outs on the bioprocessing side? And secondly, is there any slowdown on development stage bioprocessing consumables demand? I just want to make sure that bioprocessing consumables strength is balanced across commercial and pre-commercial initiatives.

Yes. So I take the question -- the 2 questions. Not sure about the first part, if I got it right. So you're asking if the early research fundings somehow impacts the bioprocessing business. So if I got that question right, then actually, as you may know, the majority of the bioprocessing business and the revenues, especially consumables, recurring revenues come from commercial manufacturing. So our estimates around 60%. And then when including the late clinical trials, Phase II, Phase III, it's maybe well above 80% of the revenues coming from there. So limited exposure to that early stages for the bioprocessing business.

And the growth we see to the second part of your question, the growth we see in the consumables, I think it's across the board, also, again, reflecting the split in commercial versus earlier clinical or clinical manufacturing. But I think here, it's -- and that's really encouraging to see the across the board, and we mentioned that across the regions, continued ongoing increase in the recovery in consumables. So that makes us really positive about regarding the outlook here as well.

And can I quickly ask a follow-up? Can you remind us of how 3Q is typically seasonally slower in bioprocessing? What drives the seasonality?

Yes. Look, if at all we can talk about seasonality in bioprocessing, I would rather call it quarter-to-quarter volatility, and it goes back to why we are rather looking at right now 12-month moving average numbers because this quarterly volatility is really not reflecting any kind of dynamics in our business. So maybe fair to say that typically, Q4 tends to be a stronger quarter and not really driven by any demand peaks. It's rather the ordering scheme of the customers than a seasonality in any demand for our products.

The next question comes from the line of Dylan van Haaften from Stifel.

Welcome, Michael. So maybe first question, just on continuous manufacturing. I think you mentioned 2 modules. Maybe zooming in on that, could you tell us sort of where you place those? How traction is lately and also how you're feeling about that segment and your competitive positioning? And then I have a second question after.

Yes. Thanks for the question. I take that. So continuous manufacturing, how we look at that is being the leader in single-use manufacturing in our market, we continuously are working on improvement of this type of manufacturing, making the footprint smaller, making -- lowering the manufacturing costs. So it's an evolution of single-use manufacturing. With this improvement, we expect that more drugs, larger indications will be possible to be manufactured by single-use. So kind of increasing the potential and the scope of the market -- potential market. And yes, right, we have launched 2 -- first 2 modules with which we have or been developing with one of our key clients, plus a number of other clients who quickly joined the group of customers who I would call early adopters in the market to move to that type of manufacturing.

So I think with that, quite ahead leading, it's important for us to be with innovation early in the market to be early with customers, helping them to adopt that innovation. So this is kind of the phase we are in. Now there is certain additional modules coming and other developments in our R&D pipeline, which now heading into the same kind of efficiency improvements in single-use manufacturing. So yes, thanks for the question. I think it shows that we continue to invest in the future of biomanufacturing and making sure that we keep and build on our leading position here.

Perfect. And maybe just another question, maybe opportunistically, just jumping in. Stock is down, I think, 10% or 12% right now. You guys aren't really giving us a lot of clarity on the order book, but I think you guys have really telegraphed as much that you wouldn't be. Like to what extent and maybe reflecting on the current share price reaction, to what extent do you feel that anything has really panned out differently in the second quarter relative to what you guys were expecting at the start of the year? And I think, Michael, you already said you were comfortable and very comfortable, but maybe anything to kind of squash concerns to some degree.

So Dylan, of course, now with having the second quarter also in the books that is very much aligned to our overall annual guidance and looking at what we have in the order book, I can only once again mirror to what Michael has said, we are feeling really confident and well with our guidance.

We now have a question from the line of James Quigley from Goldman Sachs.

James Quigley from Goldman Sachs. So my first question is for Michael. Firstly, welcome. I appreciate it's just been over 3 weeks, but what are your first impressions of the group? What are you going to be most focused on as you start your strategic review process? And when and in what format should we expect to hear from the initial review, particularly as I note that third quarter results is just over your first 100 days. So that's the first question.

And the second question, maybe for Florian. Tariff surcharges for the U.S. customers. So could you confirm that the guidance doesn't include any tariff impact as it stands? Do you have an estimate of what proportion of your U.S. sales could potentially be impacted by tariffs in the second half? Just to give us a bit of color of how to think about the potential tariff impact on the top line, which would probably be additive to the constant exchange rate guidance, but obviously not make a difference to the margin. So any color on what you expect the impact to be -- would be or at least some color and guidance of how we could potentially calculate that would be awesome.

Yes. Thank you so much for your question. And I think the way I look a little bit at my first impressions and a bit of where and how to set focus. I mean, first of all, as I mentioned upfront, I'm truly impressed by the clarity of the direction in the company by the foundation when it gets to depth of knowledge of the people, a focus on the customer and the customer workflows and challenges and their need for solutions, the innovation, creativity and can-do mindset of the people to accelerate now innovations and solutions in order to strengthen our value and even further relevance to our customers' challenges and opportunities and needs.

At the same time, I think it's probably too early in order to highlight focus areas for the strategy process that we are now diving into. But of course, I see for sure, the continuation of the strong agenda as defined by my predecessor, Joachim Kreuzburg, with a particular focus on accelerate value-driven innovation, technology acquisition and application and stay focused on our customer base and customer needs. While at the same time, I see as well that complementary in addition to the focus on innovation and technology, there will be remaining pressure in the market in terms of the health system, cost pressure on the broader pharma industry.

So the focus and our own, I would say, ability in order to drive speed of our innovations to market and our ability in order to deliver and strengthen operational performance and live up to our promise to customers to simplify progress for the customers through our solutions, but equally for ourselves, making sure that we remain and stand out to do business [indiscernible] business with. These will for sure be elements of driving customer experience, focused innovation and success in operational performance and resilience as we move into the strategy cycle.

And then with that, I hand over to Florian on the tariff question.

Yes, James, thanks for your questions on tariffs. And first of all, I can confirm that the guidance that we have given is pre-tariffs. And of course, it's in constant currencies, as I already referred to. Now you have been also asking about what is our view on the possible tariff impact, what might that act? And currently, we are operating in a 10 percentage point blanket tariff environment. And given that environment, as I said, the impact on the H1 and Q2 numbers were quite low, mid-single-digit million euro amount to increase in H2. And over the full year of 2025, we are in this kind of 10 percentage point blanket tariff expecting a tariff impact of around about 1 percentage point additional sales.

And as we have also talked about in our Q1 call, simply by that inflated top line, there might be some dilution effects on the profitability, not less absolute EBITDA, but of course, the margin might see smaller dilution effects, and we are estimating these dilutionary effects on the underlying EBITDA margin to be 30 to 40 basis points based on that additional 1 percentage point in top line.

The next question comes from the line of Richard Vosser from JPMorgan.

Two, please. First of all, when I look at your 12-month rolling orders up to the end of Q2 and the revenue development in H1 for BPS or Stedim, it suggestive of double-digit growth for the entirety of '25 including the first half. I understand necessary conservatism and volatility, but is there anything particular that stands out in terms of the drivers, given what the orders are on that 12-month rolling basis and the first half orders that leads to that sort of a slowdown?

And then the second question, we've seen that you had a system upgrade in around April, I think, and early May that led you unable to take orders maybe for around 4 days. So we're wondering if that had an impact on orders in the quarter? And also wondering whether we should be anticipating the rolling 12-month book-to-bill to consistently improve in Q3 as well.

Yes. Thanks very much, Richard. And once again, you have been asking about order intake. I think we have already talked a lot about that. I also stated that the order intake in H1 grew stronger than sales did in H1. And you were also then using the word slowdown, while I don't see how on our rolling 12-month basis, where we report consistent increase, I would not use slowdown, but rather this is a positive development of the underlying business. You were also talking about our system upgrading. And honestly, this was a massive system upgrade because we transferred all of our systems worldwide to S4/HANA. And we used, of course, this -- yes, in Germany, it's Labor Day 1st of May, as you know, this longer weekend to drive and shut down all our systems, get the new system in place and then ramp the system back up.

This has had no real impact on the customers. That process went super smooth. I'm very proud of all the teams that have worked on that and we were back as planned and we're even able to reduce that we had the time for HyperCel by 2 weeks. So we are now on latest tech worldwide using these 4 ways. Not expecting that to have any reflection in our numbers in H1 or Q2.

Excellent. And my first question was trying revenue developments in BPS or Stedim. I know I mentioned orders, but I was just wondering revenue development, if possible, and that was what I was referring to in the second half.

Yes. And I would say with the kind of statements that Michael and also René did about their comfort level with the guidance given this is giving you the right direction how positively we are thinking here going forward.

We now have a question from the line of Charlie Haywood from Bank of America.

Charlie Haywood, Bank of America. Just one, given the underlying dynamics you're seeing and I guess, fairly confident commentary today, would it be reasonable to think you could achieve a full year bioprocess book-to-bill close to your prior long-term average of 1.008 and where you're trending at first quarter? Or would it be more reasonable to think of full year '25 as a transition year for the book-to-bill from your 1.0 in 2024?

Yes. So I take that question. Right, we have been talking about that 1.08 book-to-bill like being in normal times kind of average book-to-bill ratio we would expect. What I would say is we are well on track to get there moving in the right direction. As we said, the positive continued development, so all heading towards that -- or close to that number.

The next question comes from the line of James Vane-Tempest from Jefferies.

James from Jefferies, if I can. Firstly, you mentioned you haven't seen any pull-forward demand, but several industry surveys of procurement officers at CDMOs and pharmas have pointed to some of this behavior ahead of potential tariffs. So what gives you confidence there hasn't been some impact from this?

And then my second question is, again, you mentioned confidence in guidance, but more BPS versus LPS. I understand the uncertainties, but with LPS at minus 4% in first half, what are the building blocks to get to the top line LPS guidance, which assumes a steeper acceleration in the second half?

So I take your first question on the pull forward. Yes, so we heard the questions from investors and analysts, of course, a few months ago already, and we talk to customers, we try to understand, is there anything relevant happening in terms of pulling orders to kind of pre-produce drug materials to avoid or to reduce the impact -- potential impact of tariffs. So honestly, I would not say we can talk about a trend here. In the most of our discussions with customers, we hear not is not the case. Maybe in single cases here and there, some customers might have done that, but it's not a scale or relevance which would impact in any way our development of our numbers, both order intake and sales in H1.

Thank you, René for that part. I'll just take a short perspective there on your question with regard to the LPS guidance and indeed, the performance in the first half of the year. Let me take and bring a bit broader flavor and perspective and context to the LPS business as such. I think you will all remember that there had been a significant expansion of laboratory capacities in '21, '22 and even partially '23. That was accompanied by substantial investments in instruments, followed by a period of, I would say, rather muted demand. We believe that the market may have reached now a floor with the performance expected to gradually improve in the coming quarters. We had several new products, as I mentioned earlier, in Q1, some of them really rather unique, some of them really in the bull's eye of the growth areas. And we see very encouraging customer feedback and reaction to those introductions, which indeed does strengthen our confidence both not only in the consumables, lab consumables and services, but equally into the instrument sales as we move into the coming quarters.

Now -- well, at the same time, I talked a bit about the analysis that we've done, not necessarily on seasonality, but more on, I would say, sales and order patterns. We can say that for LPS, but I think overall broadly, the second half of the year is stronger than the first one. I think we really think that we should have a very strong fourth quarter. And yes, we realize that the LPS guidance is somewhat ambitious and for sure, more ambitious than what we have noted already on the BPS side and the group side, but still realistic. And that's the reason why we want to hold on to it at this stage.

We now have a question from the line of Thibault Boutherin from Morgan Stanley.

My first question is just on the BPS equipment outlook. If you could come back a little bit on what is the incremental versus the message in the first quarter because this seems to be quite similar with discussions with customers, but no orders materializing. So I guess the question is, what's your expectations for H2? And when you think about the BPS guidance, do you need a recovery of BPS equipment to do the top end of the BPS guidance? Or can you get there with just a strong recurring BPS business?

And then second question is just a general capital allocation question for both Michael and Florian. There was at some point in the full year '28 guidance, which may or may not still be relevant, but that guidance included inorganic contribution. So I guess if you could just tell us what the balance is between the focus on deleveraging versus any inorganic growth ambition in the midterm would be helpful.

All right. So let's take the first question on the equipment BPS. So what -- as already mentioned, we have seen a slowdown in equipment over the last number of quarters, stabilizing, again, still continuing very positive encouraging discussions with customers. And I think Florian and Michael mentioned that still there's this hesitance to sign the orders. Overall, we can -- we see that more capital stronger companies are easier. So here, we see quite a promising development. Overall, I think what is also important to see and how we look at the installed base and the utilization of installed base, I think that's an important indicator of the activity level, how customers are using the installed equipment. We see continued increased utilization.

So the consumables, which are linked kind of to the -- to the equipment installed are growing well, double digit across -- on average across the years, showing that the underlying demand for single-use technology is there, is growing. That makes us very positive that we are approaching the point of where installed equipment is utilized and new will be installed. We see replacement of equipment also happening. And I think part of your question was how much the guidance relies on the equipment in H2. I think we have well calculated in the moderate development of equipment into our guidance. We don't see any risk coming from equipment to achieve the guidance.

Yes, Thibault, let me comment on your question regarding capital deployment and M&A. First of all, let me say that we are not seeing any strategically white spots that we would need to fill in the short to midterm at this point in time. After the Polyplus acquisition, we have set clear course on deleveraging. We are well underway on this path and deleveraging also stays a high priority on the agenda. Having said that, you have also seen that we have done in Q2 now with closing beginning of Q3, a small acquisition around organoids and cell tissues with the acquisition of MatTek and LPS, which is a smaller acquisition to complement our portfolio in certain interesting and growing fields. But this is, of course, not transformational. I would rather regard this as add-on. And also on the deleveraging, this acquisition will have an impact that is below 0.1x on the leverage ratio that we're having.

So of course, we are looking at market. We are watching the market. We are also from time to time, looking into certain possibilities coming up. But we stay also committed to deleveraging to our deleveraging part. And I can tell you that there are currently no larger M&A projects that we are actively working on.

The next question comes from the line of Charles Weston from RBC Europe Ltd.

It's about the regional difference that you've reported in Q2. The Americas, I appreciate this is a reported number, but was up 1% in Bioprocess, which is significantly lower than EMEA and Asia Pacific. and was up 1% in LPS, which was significantly outperforming EMEA and Asia Pac. So just wondering if you could give us some flavor around the recovery cycles and the demand cycles across the different regions. And when touching on Asia Pacific, could you call out anything we should be thinking about in terms of China?

Thank you for that question. I'll start with the BPS, the regional development. I think it's fair to say that the recovery, especially in the consumables side happens across the regions. We mentioned that in the sales growth across the regions, you're referring to U.S. or Americas, the quarter view, which I would say that indeed reflects the quarterly volatility we have, and that's why we don't think it's right to look at single quarters. Overall, the robust across the regions recovery is happening and maybe a little timing effects we see in different regions, but overall, robust one.

China, before I hand over to Alexandra to comment on the LPS side, China is a region where also there, we see the positive trend and recovery in consumables that's very encouraging. So the destocking over or getting towards the end in that country as well. On equipment, low level, stable, which, yes, we'll see how it moves forward. We see China as a really high potential region. There is a strong innovation power to develop new drugs. So overall, long-term optimistic today, rather stable first positive trend on consumables recovery for BPS.

Thank you very much, René, commenting on LPS, and I will start from China specifically. China for LPS play quite a significant role. We know that it's in a low teens contribution of China to total LPS, and we would say that at the moment, we are kind of stabilizing on the bottom -- on a rather low level performance in the region. We have strong presence in the regions. We have several production plants, and we produce instruments there for local market. And we see that government is very much base buying decision for China made in China instruments, and that's why we also, as René mentioned, for bioprocess side, seeing certain opportunities in the future to drive performance there from the bottom line where we are now.

Looking at the quarterly performance, you're absolutely right. In Q2, we saw that Europe on comparison to 2024 were rather low versus North America, but it's you could say is kind of onetime effect because if you look on 2024 for North America, Q2 was the weakest quarter, which is absolutely unusual for Lab Products business. We have very quarterly driven seasonal performance. We have Q4 the strongest then Q2, then usually Q1 and Q3. But last year, Q2 in North America was slow. That's why on this comparison, you see that North America kind of stronger than Europe, but this is just because of 2024 results.

[Operator Instructions]

The next question comes from the line of Charles Pitman-King from Barclays.

Welcome Michael. Just a quick clarification before my question. Just when you said that the order intake in 1H '25 grew more than sales, I just want to confirm that you're not implying the 1H '25 book-to-bill was also, therefore, above 1x, and that's just the base effect on the numbers. And then my key question is just on the conversion of orders to sales. Did you see any change in the conversion of customers taking in their orders in 2Q '25? Did this -- has this been impacted by the tariff uncertainty? Or has this remained consistent over the past few quarters?

Yes. So on the second question, not really. No changes we would see in the ordering pattern, how we call it, by our customers over the last few quarters. So nothing special to mention here.

And honestly, the first question I didn't get.

Just -- so what you said earlier was that orders grew more than sales in 1H '25. I just want to confirm that, that does not imply book-to-bill for 1H '25 as a half was greater than 1x.

Yes. I think we've said that we will not communicate about individual quarter or part year book-to-bills, but rather would comment on the rolling 12 months book-to-bill.

We now have a question from the line of Oliver Metzger from ODDO BHF.

One question on the equipment orders. So you said in an answer a few minutes ago that you see the current level as a trough. I also recognize you mentioned some higher expectations for the last quarter. Are these higher expectations linked to annualization or basically also a base effect or also the link between that equipped orders -- equipment follows consumables at one point of time. And so the whole equipment cycle should improve. That's my question.

Let me comment or start with the comments and my colleagues to chime in. First of all, generally, normally, after you have built capacity, which was the case during the pandemic heavily, you then see a, first of all, a consumables-led recovery. And then at some point in time, if the capacity utilization raises after a recovery in consumables, you normally can also expect an increase in equipment orders to build additional capacity on top because, as you know, we are operating in an industry that has strong fundamental underlying growth drivers.

Secondly, now looking a little bit more into the shorter term. I think the confidence that we're having about the trough in the equipment business is also related to what we are currently seeing in the order books.

The next question comes from the line of Odysseas Manesiotis from BNP Paribas.

A quick one for Florian first. So on inventory write-downs, looking at 2024, these were quite high compared to pre-pandemic at around 5% of your sales versus around 1.5% pre-pandemic guessing due to volatile demand environment and supply chain issues at the time. So where do you expect to land this year on that metric?

So we are still seeing an increased level of inventory write-downs, as you have said. And of course, this also had a somehow dampening impact on our profitability. But we are seeing that these write-downs are coming down, not, of course, at this point in time, fully back to normal, but we are expecting a continuous reduction of that level over the course of the year, but also then going further into 2026.

And one quick one. So on the seasonality or as you put it earlier, René, on the quarter-to-quarter volatility in both Q2 '24 and in '23, book-to-bill was actually the weakest something that wasn't the case pre-pandemic and potentially making this quarter look like an improvement to the past couple of years. I just wanted to know whether there's any change in customer mix or market-wide ordering trends that is making Q2 a generally weaker book-to-bill quarter than historically.

No, I think, again, previously commented on that, that it's rather now, I would call, a normal level of volatility we see not linked to any specific demand volatility on the customer side.

The next question comes from the line of Delphine Le Louet from Bernstein.

I will focus for Florian some question, please, and considering the operational performance that we've been seeing over the course of H1. I'm trying to think about what's going to be the future when it comes to the level of the margin and specifically to the gross margin and to the adjusted EBITDA margin with the recurring business? And how should I think about H2 versus H1, considering the hype we've been seeing? Any insight on that, that you want to share with us?

Thank you, Delphine. So you've seen that we had a very healthy start into the year where our margin at H1 is already close to the upper end of our margin corridor now for the group. We are seeing also looking forward, of course, also based on the fact that the recurring business will be the driver for performance also going forward, good signs to have a further on healthy margin development going forward.

Okay. And so you don't see any particular seasonality. I mean it's really much driven by the recurring proportion within the business, if I'm assuming correctly?

Yes. We have always oftentimes in the past seen that Q3 because of the summer months might be slower in terms of turnover, of course, has then some negative operational leverage versus Q4. But on an H1 to H2 basis, I'm confident and positively looking into the second half of the year.

All right. And a follow-up, if I can, and specifically, sorry, for the -- regarding the new product launch and modalities. Can we get a sort of revenue ambition when it comes to this new sort of offering you're proposing to the clients? And when are we going to see that the traction is going to be visible into the revenue? Is it something to play for '26, '27? Or already -- I mean, you were talking in the press release regarding MatTek incremental to growth. But is these new 2 modalities you were alluding to are going to be contributors to the growth into already '25?

Yes. I'm sorry to say we are not giving any concrete targets for the sales or the sales ramp-up. But as you can imagine, of course, there will be a ramp-up over time. And for us, it is important that it's not a one-trick pony that we are talking here about, but it's a constant flow of new products coming through the pipeline.

We now have a question from the line of Tom DeBourcy from Nephron Research.

Just in terms of your capacity investments, I know the multiyear expansion is still ongoing, but I had a question just around sort of also related to tariffs. And I think it was the last earnings call, you talked about there was maybe 33% opportunity to co-locate or relocate some products. Are you using some of, I guess, the expansion, Puerto Rico or other locations for other markets also to kind of hedge yourselves or maybe future-proof yourself as you think about potential additional tariffs or reactionary tariffs that are really hard to forecast?

So first of all, let me repeat what we also said in the Q1 call that we are well above 1/3 of the products that we're selling in the U.S. that are also produced in the U.S. where we see an additional around about 10 percentage points that we can ramp up. We have started to take decisions into this direction, be it in product lines like filters, but also in cell culture media kind of things. So this is going on and it's one part of the toolbox that we are having to limit the impact of the tariffs. There's even more possibility, of course, to increase capacities in the U.S. That's not only [ Yalco ] It's also at other locations where we are present. And of course, the longer and the stronger these kind of tariff environments are, the more adoption muscle we will build up to counterbalance these effects.

Ladies and gentlemen, that was the last question. Please refer to the Sartorius IR team for open questions. I would now like to turn the conference back over to Michael Grosse for any closing remarks.

Yes. First of all, many thanks. It's been a real pleasure to e-meet you. And as I said in the beginning, I remain very excited about the opportunity in order to start together with my colleagues to write the next chapter of our Sartorius growth and success story. I look forward to meet you and to work with you, as I said earlier as well, and I thank my colleagues for the tremendous preparation and as well the tremendous business focus that we remain focused as well on the second half of the year in order to fulfill and continuously say what we do and do what we say.

I want to end here as well in order to recognize very briefly an extraordinary individual with Petra Kirchhoff who has unfortunately decided to leave Sartorius. But at the same time, I want to make absolutely clear that we're absolutely tremendously grateful for Petra's outstanding contribution over the last more than 2 decades, I would say, of being the voice of the company, the image of the company and very much shaped, I think, the recognition and reputation of our company in the internal and external world in the capital market as much as for the media. And I want to thank you for your tremendous contributions, for your sense of finding the right words, telling the right stories, for your personality, for your warmhearted perspective, for your deep insight into the industry and okay. Petra, I cannot take all of that. So again, in front of all of us and in front as well of the analysts from the capital market, really, really a big thank you for your great contribution. We will dearly miss you.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.