Sartorius Stock

Ladies and gentlemen, welcome to the Sartorius and Sartorius Stedim Biotech Conference Call and Live Webcast on H1 2026. I'm Moritz, your Chorus Call operator. [Operator Instructions] The conference is being recorded [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Petra Muller, Head of Investor Relations of Sartorius. Please go ahead.

Thank you, and hello, and warm welcome from my side. So today, I'm joined by our CEO, Michael Grosse; by Florian Funck, our CFO; by Rene Faber, Head of our Bioprocessing Division and CEO of Sartorius Stedim Biotech; and also by Alexandra Gatzemeyer, Head of our Lab Products & Services Division.

As always, we will start with prepared remarks followed by the Q&A session. The call is scheduled to last 1 hour. As usual, please limit your questions to 1 so that as many of you as possible can take part. In case we have some time at the end, we are, of course, happy to take on follow-on questions.

I'd like to point out that management 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 the presentation.

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

Thank you, Petra. And a very warm welcome from my side as well. When I look back at the first half year, I'd say it's been an encouraging 6 months for Sartorius, during which we continued our profitable growth trajectory. We delivered solid top line growth. We've improved profitability and we've generated strong cash flow.

Before turning to H1 business performance, let me share one personal observation. Over the past few months, I've spent a lot of time meeting customers around the world, and what struck me was the incredible level of innovation, investment activity and optimism right across the industry. I talked to CEOs, COOs and procurement executives across all regions.

My key takeaway is that the demand for high-performance single-use products, reagents and technology to substantially improve productivity and total cost of ownership is bigger than ever before. Leveraging AI to drive a step change in speed of drug discovery and in productivity of bioprocessing is becoming a must. Those conversations have reinforced my confidence that this is an exciting time for our industry and that the long-term growth drivers for our markets remain very strong.

Our technologies play a critical role enabling customers to develop and manufacture the next generation of biologics from biosimilars and increasingly sophisticated antibody processes to antidrug conjugates as well as cell and gene therapies. Also, AI-driven solutions can help further accelerate workflows especially in the laboratory environment, and it's truly encouraging to see how open our customers are to this. I know these are exactly the areas where we are exceptionally well positioned, with the right portfolio and the right strategy to capture those opportunities and deliver profitable growth and sustainable shareholder value.

Okay. Now let's move on to the H1 performance. Group sales revenues on operational basis increased by 7.7% in H1, supported by healthy underlying demand across both divisions. Recurring business stays the main driver showing an increase of slightly more than 9%, while the equipment business was growing around 2%. This clearly demonstrates that the underlying momentum of the business is indeed intact.

In Bioprocessing Solutions, we delivered 8.3% growth on an operational basis in constant currencies, with consumables continuing to be the primary driver. Importantly, equipment stabilized and even returned to slight growth in H1. That's an important milestone because it reinforces our view that the bottom is behind us.

I'm particularly pleased with the performance in the Lab Products & Services, where momentum continued to build following the return to growth in the second half of last year. Sales increased by 5.3% on an operational basis in constant currencies, supported by value improving end markets and the contribution of 2.8 percentage points from the MatTek acquisition last year.

Let's have a quick look at profitability. On group level, higher volumes and operating leverage translated into improved profitability. The underlying EBITDA margin on group level improved to 30.3%. And Florian will go into details a bit later on.

Let me briefly talk about the recent developments related to the U.S. tariffs. Shortly before the end of Q2, we received a substantial portion of reimbursements for previously paid U.S. tariffs that had been declared not in line with existing law in February of this year. While we applied for those refunds, the timing and ultimate outcome have remained uncertain. As we work with our customers in the sense of partnership, we intend to compensate customers for tariff surcharges. Well, that's all good news. But as you can imagine, it does have an effect on reported revenue growth. However, and this is the really important point, it does not change the underlying economics of our business. Operationally, our business continues to perform well and is absolutely in line with our expectations from the beginning of this year.

Now let's move on. Beyond growth and profitability, we also made good progress on the financial priorities we laid out in the beginning of the year. Cash flow development was particularly strong with free cash flow being significantly up. Our leverage ratio improved further, underscoring our commitment to financial discipline and a strong balance sheet.

Let me spend a minute on what we are currently seeing in our end markets because this is probably one of the questions we got asked most frequently. Overall, I'm really encouraged by what we are seeing. Several areas, where demand was muted over the last 2 years, have either stabilized or are now recovering. This is visible in the equipment business, which has stabilized, and where the order book supports a credible path to slight growth throughout the remainder of this year.

It's also evident in China, where the recovery in bioprocessing continued into the second quarter, and where we are also increasingly seeing signs of a turnaround in laboratory instrument demand, supported by ongoing R&D activity. More broadly, Biotech funding remains supportive and is increasingly translating into customer spending. While uncertainty in academia has eased and business activity continues to hold up well.

Building on this, let me now turn to our outlook. Based on the current business development and the improved visibility, we confirm our guidance, which also reflects the tariff-related impacts, which I'll try to describe shortly. We expect group sales revenue to grow by 5% to 9% and underlying EBITDA margin to be slightly above 30% at group level.

Now let me share a few thoughts on innovation. I'm pleased with the progress we've made on our organic growth initiatives, including new product launches. One development I'm particularly excited about is the progress we are making with Pionic. We reached an important milestone with the launch of the 2 final modules, Pionic Quad and Cross, enabling customers to run now a fully integrated continuous downstream process.

Customer adoption continues to expand into clinical and commercial cGMP manufacturing, with systems supporting a growing range of modalities, including antibody drug conjugates, following a recent customer win across all major regions. Customer interest remains very strong and demand continues to exceed our initial expectations.

Another launch was the new vessel of our high-throughput Ambr 250 bioreactor platform, which generates structured, high-quality process data for increasingly digital and AI-supported cell therapy development workflow. This further strengthened Ambr position as the industry standard platform for process development, including next-generation therapeutic modalities.

In the lab division, we launched Cubis III, the latest generation of our premium laboratory balance platform. The new system combines best-in-class weighing performance with enhanced connectivity and digital compliance capabilities supporting increasingly automated and data-driven laboratory workflows.

And last but not least, Incucyte, which remains a strong success story with growing adoption of our AI image analysis tool across academic and pharmaceutical customers, including 3 new top 10 pharma customers this year. Recently, research at Leiden University in the Netherlands with our Incucyte further highlighted the potential of AI-driven analysis to improve drug safety testing.

Now what have these example all in common? They all show our clear focus on helping customers simplify workflows, generate better data and operate more efficiently. This is exactly the type of innovation we highlighted at our Capital Markets Day and a key pillar of our long-term growth strategy.

With that, I will turn the call over to Florian. Financial highlights. Please, Florian.

Thank you, Michael, and a warm welcome also from my side. Over the next couple of minutes, I'm going to take you through the numbers in detail. And of course, tariff-related effects, either in form of surcharges or customer compensation will play an important role in that. However, putting all the tariff impacts aside, I think there are just 3 points I'd like you to take away from today.

First, the underlying sales development is well on track. In H1, we see healthy consumables growth and the equipment business is gaining traction as expected. Second, our quality of earnings is improving. The underlying EBITDA margin is showing the expected improvement and negative extraordinary effects are heavily reduced by more than 60% versus prior year. And third, our cash performance continues to be very strong. Net operating cash flow increased by more than 25% and free cash flow even by 70% in H1.

Okay. So let's start with top line performance at group level, and this is where the U.S. tariff impact is most visible, not only the regular tariffs we are paying and passing on to our U.S. customers, but also and especially the refunds we have received just some days before the end of Q2. As Michael explained, because of the Supreme Court ruling against the U.S. tariff regime put in place last year at Liberation Day, we received refunds from the U.S. Treasury. We recognized the intended customer compensation for tariff surcharges of EUR 26 million in short-term financial liabilities as of June 30.

Revenue for H1 as well as cost of sales were reduced by the same amount. As a result, these customer compensations had a dampening effect on sales growth in constant currencies of 1.5 percentage points in H1 and almost 3 percentage points in Q2. You will see later on that our guidance is crafted in a way that allows you to distinguish underlying operational growth from the tariff-related effects. In the first 6 months of 2026, group sales revenue increased by 7.7% on an operational basis in constant currencies.

Including the tariff refund related impact, sales revenue increased by 6.2% in constant currencies and by 2.5% on a reported basis. This positive operational development was again driven by a strong consumables performance of above 9%. Furthermore, and as anticipated, the equipment business stabilized and delivered operational growth on group level of around 2%.

In Bioprocess Solutions, operational sales growth amounted to 8.3% in constant currencies. Including the tariff effects, growth was 6.7% in constant currencies and 2.8% on a reported basis.

Let me provide some additional color for the BPS recurring business. First, we delivered slightly more than 9% consumables operational growth in H1, broadly in line with our expectations at the start of the year, following the very strong recovery in 2025. Second, looking beyond quarterly fluctuations, our consumables business continues to demonstrate a highly attractive growth profile. Since 2019, consumables revenue continues to grow at a double-digit CAGR, well above market. And third, growth in the recurring business was influenced by some volatility in advanced modalities caused by delayed orders from 2 customers and project timing effects. But the important thing is underlying demand trends in our core consumables franchise remained very strong across customer groups and geographies growing at a double-digit rate.

This being said, please note that the consumable sales volume in H1 '26 exceeds the peak sales level we saw during the pandemic, and this is a pretty remarkable effect in my perspective. At the same time, operational equipment revenue delivered the expected stabilization in BPS and even returned to slight growth year-on-year, providing further evidence on the market recovery progressing.

Okay. So let's turn to the sales performance of the Lab Products & Services division. Operational sales revenue increased by 5.3% in constant currency. Considering the tariff refund related effects, FX adjusted growth reached 4.3% in the first 6 months and 0.9% on a reported basis, reaching EUR 335 million. MatTek contributed 2.8 percentage points to this performance. The growth was primarily driven by the recurring business, which grew on an operational basis by slightly more than 9%. While instruments business grew slightly, supported by positive momentum in our bioanalytics portfolio.

Now let's talk about our regional performance. Overall, H1 '26 saw a broad-based positive development with all regions contributing to growth. Starting with EMEA, sales increased by 7.2% in constant currencies driven primarily by Bioprocess Solutions and Lab Products & Services returning to slight growth.

In the Americas, which was affected by customer compensation for tariff surcharges, Sales increased by 5.6% on an operational basis with both divisions contributing. Taking customer compensation for tariff surcharges into account, sales increased by 1.2% in constant currencies and declined by 4.8% on a nominal basis. As I already explained, we see volatility in advanced modalities with delayed customer orders and project timing effects weighing on H1 performance, especially in the Americas.

Asia Pacific delivered a really strong performance with sales increasing by 12.1% in constant currencies. Growth in APAC was supported by both divisions and benefited also from the continued recovery in China, particularly in consumables. We are also seeing improving demand for laboratory instruments linked to ongoing R&D activity in the region. While comparables become more demanding in the second half, we remain confident that Asia Pacific will continue to deliver a very robust performance for the full year.

Let me now turn to profitability. I think this needs a bit more explanation given the offsetting tariff dynamics in H1. Group underlying EBITDA increased by 3.9% to EUR 548 million, with a corresponding margin improving by 50 basis points to 30.3%. Positive volume and economies of scale effects more than offset the adverse impact of an unfavorable product mix as well as the negative margin effects from future growth initiatives in LPS.

Please note, the U.S. tariffs had only a negligible effect on the margin in H1 as we recorded 2 offsetting technical effects. On the one hand, we have a negative dilution effect on the margin by U.S. tariff surcharges and on the other hand, we have a technical uplift in margin due to the negative sales revenue impact by the recorded customer compensation for tariff surcharges. As said, the net effect of both tariff-related effects on H1 margin is negligible. And therefore, the margin increase is shown here in reported figures are also mirroring the operational margin progress we have made in H1.

Overall, we are pleased with the operational margin expansion in the first half. Similar developments as on group level are also recognized on a divisional level. In Bioprocess Solutions, underlying EBITDA increased to EUR 477 million, while the corresponding margin improved by 70 basis points year-on-year to 32.3%, primarily driven by higher volumes and operating leverage. Net effects from tariff surcharges and customer compensations also had a negligible effect on the H1 margin here. And therefore, the 70 basis points is also to be regarded the operational improvement in margin.

Same applies in Lab Products & Services, where underlying EBITDA amounted to EUR 71 million while the corresponding margin was 21.2%.

As we've already discussed over the course of the year, we are investing in future growth areas, particularly within bioanalytics and advanced research solutions, which weighs on margin development and are already taken into account in our full year expectations for 2026.

So let's move on to have a look at performance below the underlying EBITDA and both earnings and cash generation developed well in the first 6 months. Underlying net profit increased by 2% to EUR 172 million, primarily reflecting the improvement in operating profit discussed earlier with some dampening effects from slightly higher depreciation and interest expenses as very cheap financing was running out in H2 '25. Underlying EPS increased accordingly to EUR 2.49 per ordinary share and EUR 2.50 per preference share. Reported net profit increased strongly by almost 51% to EUR 122 million. This was largely due to extraordinary items falling by more than 60% year-over-year.

Turning to cash flow. Operating cash flow increased substantially to EUR 364 million, up almost 26% year-on-year. This development was supported by higher EBITDA, lower tax payments and the refund of U.S. tariffs, more than offsetting the growth-related increase in working capital. And as a result, free cash flow increased by more than 70% to EUR 208 million. The CapEx ratio was at 8.9%. This is slightly below the prior year level, whereas in absolute terms, CapEx was on par with the prior year period at EUR 161 million.

And I think this reflects our continued disciplined approach and investments while remaining fully consistent with our plans to future growth supporting. We continue to expect a full year CapEx ratio of around 12.5% of sales driven especially by scheduled payments to be made in H2 for our Songdo project, which is fully in time and scope and budget.

To wrap up the financials, let me briefly turn to our balance sheet. We maintained a strong balance sheet with an equity ratio increasing to 41.6% at the end of June, up from 39.8% at the end of 2025. Net debt amounted to EUR 3.76 billion at the end of the first half. Despite continued investment activity, the acquisition of the outstanding minority interest in CellGenix for EUR 72 million and the dividend payment of approximately EUR 70 million during the period.

We remain firmly focused on disciplined capital allocation and deleveraging. Our bond issuance in May was significantly oversubscribed and allowed us to further optimize our financial profile. As a result, the leverage ratio defined as net debt to underlying EBITDA improved to 3.51x from 3.55x at the year-end 2025. This confirms that we are making steady progress on our deleveraging path. Taken together, these developments underline our commitment to financial discipline and to maintaining a solid investment-grade rating.

And with that, I'll hand back to Michael.

Thank you, Florian. Very clear. Now let's have a look at our guidance. Based on the performance in H1 and the continued positive development of the relevant end markets, we confirm our guidance for the full year. While we have increased visibility of our operational business, there are still factors of uncertainty, especially related to the U.S. tariffs.

Let's get the tariff topics out of the way first. We have applied for the refunds for IEEPA tariffs of EUR 40 million to compensate customers for tariff surcharges they paid so far and have received EUR 26 million of this in H1. So around EUR 14 million are still outstanding. However, the exact amount and the timing or if any of this will be granted at all, remains uncertain. But the more important message is the underlying business performance remains unaffected by these effects and continues to develop positively in line with our initial expectations. Customer demand, business momentum and profitability are unchanged.

Growth in H2 should continue to be supported by our recurring business as well as by the continued stabilization and recovery in equipment and instruments. However, please note that first, the contribution from MatTek will roll off from July onwards. Second, while tariff surcharges reported supported growth in H1, lower tariff rates are expected to turn this effect into a headwind in H2, largely offsetting the benefits seen earlier in the year. To provide a like-for-like comparison for our underlying performance with initial guidance framework, we are introducing an operational view that excludes customer tariff compensation.

Potential further changes in U.S. tariffs after July 24, so tomorrow, are likewise not included. On this operational basis, we continue to feel comfortable broadly around the midpoint of our guidance range for group and BPS, and we expect LPS to be in the upper half. Including customer tariff compensation, we expect reported growth in constant currencies to trend within the lower half of the respective guidance ranges for the group and BPS and broadly around midpoint for LPS.

To reflect both views and the tariff uncertainties, we keep our guidance range as is. For the Sartorius Group, we continue to expect constant currency sales revenue growth of around 5% to 9%, with MatTek contributing 30 basis points to group growth. For Bioprocess Solutions, we continue to expect growth of 6% to 10%. And for Lab Products & Services, 2% to 6%. Thereof, roughly 1.5 percentage points comes from the MatTek acquisition, which closed in July 2025. Based on this, we also confirm our profitability outlook and continue to forecast an underlying EBITDA margin of slightly above 30% for the group, slightly above 32% for Bioprocess Solutions and slightly below 21% for Lab Products & Services.

We also continue to expect our CapEx ratio to remain approximately at the prior year level and net debt to underlying EBITDA to be slightly above 3x at year-end. Foreign exchange headwinds should be approximately 2 percentage points on the reported revenue growth for the full year. And please note that besides the headwind in full year, we are expecting a tailwind in Q3 and Q4 to be slightly below 50 basis points each.

Overall, our message is straightforward. Our underlying business continues to be strong. Consumables remain strong. The recovery in equipment is progressing as expected and improved visibility reinforces our confidence in the full year outlook.

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

Yes. Thank you very much, Michael, and good morning, good afternoon, everyone. Let me start by saying that I'm very pleased with our performance in H1. The year is unfolding largely as we expected, and we continue to see encouraging developments across many parts of our business. Underlying demand for biologics remains robust. This continues to drive healthy consumables growth, particularly in monoclonal antibody manufacturing where our core product categories delivered double-digit growth on top of an already very strong prior year comparison.

We are also seeing encouraging signs in newer modalities. Activity in the earlier stages of the pipeline continues to improve while the later stages, some projects timing effects, particularly in the U.S., temporarily weighed on recurring revenue growth during H1. Let me emphasize again. This does not change our positive view of the underlying market development. Equipment is developing very much in line with our expectations. After last year's decline, the business has stabilized and returned to growth. We continue to see good momentum in process development where our customers remain focused on improving productivity and accelerating time lines.

I'm particularly pleased and encouraged by the traction we are seeing with Pionic, our intensified downstream platform. More broadly, customers continue to look for technologies that enable more efficient and flexible manufacturing, and our portfolio is very well positioned to support these needs.

Overall, I believe the first half demonstrate both the resilience of our business and the strength of the underlying market. We are seeing healthy customer activity, solid execution across the organization and continued progress in the areas that matter most for our long-term growth.

So let's now turn to our financials. Starting with the top line. As Michael and Florian explained earlier, tariff-related customer compensation created a temporary headwind to reported sales growth in H1, but it had no impact on the underlying development of our business. On operational basis, sales revenue increased by 8% compared with H1 2025. If we include the impact from tariff-related customer compensation, sales revenue grew by 6.4% in constant currencies and by 2.5% as reported, reaching EUR 1.53 billion. Our operational recurring business increased slightly more than 9% in H1.

Let me remind you what Florian said some minutes ago. First, this is in line with our expectations from the start of the year. Second, looking beyond quarterly fluctuations, our recurring business has grown at a double-digit, well above CAGR since 2019. Third, we have seen some volatility in advanced modalities caused by delayed orders due to project timing effects with 2 major customers.

So let me tell you what I see in the cell and gene therapy space. I see healthy activity levels with new molecules entering development pipelines, new companies being funded and increasing number of late-stage programs advancing. Volatility is inherent given this is a young, immature small market, where success or failure of individual programs can have a material influence. Let me be very clear here. We remain highly constructive and enthusiastic about the market's long-term potential.

Now let's turn to profitability. Underlying EBITDA improved strongly. In absolute terms, underlying EBITDA increased to EUR 479 million and the underlying EBITDA margin improved by 40 basis points to 31.4%. Margin expansion was primarily driven by higher volumes and resulting operating leverage. I think this demonstrates the scalability of our business model. Also, margin development was influenced by offsetting technical effects related to U.S. tariffs, which had a broadly neutral impact.

Furthermore, please keep in mind that we had to increase the brand name fees charged, from Sartorius AG to SSB S.A. since Q1 '26 by 25 basis points, as a result from German tax audits concluded early this year.

Looking at the regional performance. All regions contributed positively to business development in the first half. EMEA increased by 7.7% in constant currencies. The Americas on an operational basis expanded by 5.4% in constant currencies, accounting for impact of the tariff-related compensation to customers, constant currency growth was 0.8% year-over-year.

Florian highlighted before for Sartorius AG. The same holds true for Sartorius Stedim. The Americas was the region affected by customer compensation for tariff surcharges as well as by delayed customers' orders in advanced therapy space, which weighed on H1 performance.

Asia Pacific was very strong with growth of 12.5% in constant currencies, supported the continued recovery in China and ongoing strength in consumables. While comparables become more demanding in the second half, we remain confident that Asia Pacific will continue to deliver a very robust performance for the full year.

Let's move to net profit and cash flow. Both showed solid growth over the first half of the year. Underlying net profit increased by 3% to EUR 235 million, reflecting the improved operating profit we discussed earlier. Underlying EPS increased accordingly to EUR 2.42. Reported net profit increased strongly by almost 18% to EUR 181 million. This development was supported by lower extraordinary items compared with the prior year period.

Turning to cash flow. Operating cash flow increased significantly to EUR 341 million, up more than 39% year-on-year. The increase was driven by higher EBITDA, lower tax payments and the refund of U.S. tariff-related surcharges, more than offsetting the growth-related increase in the working capital. As a result, free cash flow increased substantially to EUR 199 million almost doubling compared to the previous -- prior year period. The CapEx ratio was 9.3%, slightly below the prior year level and are fully in line with our disciplined investment approach to support future growth. We continue to expect a full year CapEx ratio at around the previous year level of slightly above 13%.

A quick look at our balance sheet metrics. At the end of H1, we continue to show a very strong equity ratio of 53.6%, reflecting our solid capital structure. Compared with the year-end, the increase was primarily driven by the strong earnings performance, more than offsetting the dividend payments in H1. Net debt increased modestly during the second quarter, reflecting annual dividend payment as well as the acquisition of the outstanding minority interest in CellGenix for EUR 72 million. Nevertheless, our deleveraging trajectory remains firmly intact. As a result of net debt to underlying EBITDA ratio improved further to 2.36x and compared to 2.38x at year-end 2025, keeping us firmly on track to achieve our year-end targets.

Overall, these developments underline the strong balance sheet position of Sartorius Stedim Biotech and provide a solid foundation to support future growth while maintaining financial flexibility and financial discipline.

So before we move to Q&A, let me comment on our 2026 outlook for Sartorius Stedim Biotech. We are confirming our full year 2026 guidance based on the business performance in [indiscernible] in H1 and continued positive development of our end markets. As Michael explained, we have increased visibility in our operational business, but there are still some factors of uncertainty, especially related to the U.S. tariffs. We have applied for refunds for tariffs of EUR 35 million to compensate customers for tariff surcharges they paid so far and have received EUR 22 million of this in H1. So around EUR 13 million are still outstanding. However, the exact amount and timing of, if any, of that will be granted at all remain uncertain.

Let me emphasize that the underlying business performance continues to develop positively, in line with our expectation and is not affected by these tariff-related impacts. The recurring business remains the primary growth driver while the continued stabilization and recovery of the equipment business is also supported for growth in H2. However, please bear in mind that tariffs surcharges supported growth in H1. Lower tariff rates are expected to turn this effect into the headwind in H2, largely offsetting the benefit seen earlier in the year.

Quite a like-for-like comparison with the guidance issued beginning of the year, we also introduced an operational view for Sartorius Stedim Biotech, which does not incorporate any potential further changes in U.S. tariffs after July 24, 2026. On this operational basis, we continue to feel comfortable, broadly around the midpoint of our guidance range. Reflecting on the effect from customer tariff compensation, we, at this point in time, expect growth in constant currencies to trend within the lower half of the respective guidance range. We keep our guidance range as it is to reflect both views and the tariff uncertainty and continue to expect constant currency sales revenue growth of around 6% to 10%.

Based on this, we also confirm our profitability outlook and continue to forecast an underlying EBITDA margin of slightly above 31%. We also continue to expect our CapEx ratio to maintain approximately at the prior year level and net debt to underlying EBITDA to be slightly above 2x at year-end. FX headwind should be approximately 2 percentage points on reported revenue growth for the full year. Please note that besides the headwind in full year, we are expecting a tailwind in Q3 and Q4 to be slightly below 50 basis points each.

So putting all this together, strong underlying business continues, strong consumables business, equipment recovering as expected based on improved visibility, we are confident in our full year outlook.

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

[Operator Instructions] And today's first question comes from Richard Vosser from JPMorgan.

One question, please. Based on the underlying performance of BPS in the first half and your guidance, it seems we should anticipate a similar underlying performance in the second half. Given this backdrop and the developing order book and customer discussions, I wanted to ask how your confidence level in the 9% to 12% growth outlook for BPS in the coming years is developing?

Thank you for that question. So maybe let me start with what we see as the underlying trends in the bioprocessing and the momentum in the market. We see ongoing solid -- really solid growth of demand for commercial drugs, drugs driving consumables growth, we see healthy pipeline growth and approval rates. We start to see recovery in advanced modalities, better biotech funding. So all that, I think, as we mentioned in the call, all that supports really our double-digit growth of consumables. So looking at the 2026 H1, first, we delivered slightly more than 9% consumables operational growth.

Looking beyond the fluctuations, we are on the double-digit growth trajectory. And looking at the full year expectation, consumables, we continue to see the double-digit growth on top of strong previous year level. What is a bit diluting is a couple of late-stage advanced therapies customers with timing effect. So looking full year and with lead times for consumables being 1- to 3-months range, there are scenarios possible around high single-digit, low double-digit range for recurring revenues full year.

And the next question comes from Charles Weston from RBC.

Can I just ask a clarification question on Q2. Did the operational growth in Q2 include the tariff surcharge tailwinds? And if so, how much was that, please? But my general question, sorry for squeezing a clarification one in there, can you give us some color on those delayed programs, please, the rough scale of the headwind whether this will be a headwind in H2 as well and your confidence in those orders coming back?

Charles, let me take the first part of the question regarding the tariffs. So yes, the operational view is including the general surcharge as a fact of current business life. The positive effect of these surcharges on group growth was 40 basis points.

Okay. Rene, you will take the second half of the question?

Happy to take the second part, yes, advanced therapies. Thank you for the question. So maybe starting with the overall advanced therapy market, as I was describing that. First of all, early pipeline, positive recovery we see in the market, we have seen these 2 customers, key customers in their late stage projects, delaying those, which is impacting slightly our overall recurring revenue growth in H1 and will have an impact on the full year as well. Taking that out, nice double-digit growth continues. So overall, we remain very confident and encouraged about the overall market, long-term driver for our business. And yes, we'll see how that unfolds going forward.

So you're confident that, that will come back next year, assuming clinical results are good.

Yes, we are in close -- of course, in close contact with the customers following how the timing evolves. Yes, so we are thinking, yes, it's orders expecting coming end of the year. So revenues will most likely be seen in 2027. Some of that may be already this year. So yes, we are confident.

Then the next question comes from Subbu Nambi from Guggenheim.

In your prepared remarks, you acknowledged that there was a delay in revenue and you elaborated a little bit, but a big player, Danaher, indicated they had a similar issue with a customer. But you attributed it to advanced modalities and they attributed it to monoclonal antibody customer. Do you believe these are related even though they are different modalities altogether? We are trying to get at the scope of this issue.

I'm sorry, you have been breaking off technically. Could you repeat the question, please?

Hello. She is off. So we take the next question.

Hello, is this better now?

Yes, let's try.

Perfect. So in your prepared remarks, you acknowledged there was a delay in revenue in advanced modalities, but there was a big player, Danaher, who indicated they had a similar issue with 2 customers this week, but that was monoclonal antibody. Do you believe these issues are related even though they are different modalities? We're trying to get to the scope of this issue.

No. Well, I mean, very clearly, we don't see that, Subbu. Again, we look at our basically classical protein-based portfolio. We don't see that implication at that point in time at all. And then the comment really was isolated, as Rene said, to the 2 customers in the space of advanced therapy. So they're not related.

Perfect. So then what gives you the confidence that this is still coming back? Why couldn't this be a permanent delay?

That's our view talking to customers, understanding what's happening on the time line. It's very much the project timing on their side in the late-stage phases with the drugs. So it's, so far, nothing about stopping the programs. It's more timing delay. And we, as I said, expect that coming back end of the year, beginning next year.

And the next question comes from James Quigley from Goldman Sachs.

I've got somewhat of a follow-up on the first question from Richard. So what metrics would you point to that help to support your confidence that you're seeing strong underlying demand within BPS consumables, that again, that underscore your confidence in double-digit growth continuing that trend that you mentioned since 2019? Is there anything across different customer types, so pharma, biotech, CDMOs or even cost modalities as you sort of highlighted, with advanced modalities and monoclonal antibodies. I know you don't give details anymore, but anything you can say in terms of the development of the order book here would also be -- would be helpful.

I can take that, James. Just -- I mean, first of all, again, I think we see that broad level of growth be supported by large CDMO and large biopharma customers in basically all late-stage or commercial production, therefore, the visibility and the outlook as well for the continuation of that journey on the basic classical protein-based therapies and some advanced therapies is there and is visible, and that's the reason why we strongly believe in the continuation of that, of the journey. The specific aspect that Rene has already highlighted on the new modalities is a question of delay, and I pointed out in that way.

So yes, the visibility, therefore, is there. I think what is there -- a bit more the question about how far and what is the meaning, let's say, uncertainty that we're having is more on the Q4 perspective. Here, indeed, it's still the question and that's why we still have as well the guidance range because other than in the capital equipment, where we have clear visibility for the full year in a way, it's more about the timing and realization of revenues. Here, it is indeed just a question of how Q4 will pan out in terms of consumables.

The next question comes from Odysseas Manesiotis from BNP Paribas.

Could you please share some additional detail on why bioprocessing product groups within equipment and consumables have been relatively weaker in terms of mix, basically, which product groups have been weaker and which stronger to result in that persistent mix headwind you're seeing in both Q1 and Q2?

Odysseas, thank you for that question. Regarding the mix effect, it is not a classical mix effect like recurring versus nonrecurring because we are seeing that the recurring business remains strong. It is rather a mix effect within the different product categories, recurring and non-recurring. So as you know, there are, of course, consumables that are more profitable than others. And for example, the topic of the delayed projects in ATS, which come with very high margins is one driver to that negative mix effect that we were talking about.

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

Charlie Haywood with Bank of America. It's again back on the competitor commentary, seeming the delays for a few customers in a specific product. So sort of 2 parts here. One, to the extent you're able to quantify your exposure to chromatography resins or I guess, purification sales as a percent of BPS? And then secondly, I guess the main unknown here is that this could spread to more customers or to more products. So have you seen any changes, I guess, in the last couple of months or delays in customers based on conversations you've had, I guess, outside of the ATS you've mentioned? Or anything specific in commercial downstream manufacturing that gives any change in confidence in the drivers there for the rest of the year?

Yes. Thank you very much for that question. Our view is that looks like customer-based volatility in the market. We see that, as we described for 2 key customers in advanced modalities that happens. Other than that, we don't really see any trending here either across product groups or customer groups.

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

You have been clear that we should assume the midpoint of your EPS guidance for the full year. In terms of the phasing between Q3 and Q4, is it fair to assume that growth should be balanced between the 2 quarters at around that midpoint? Or are there any specific phasing effects that we should consider when modeling the second half?

Yes, Falko, happy to take that question. And as you know, we are not in generally providing any quarterly guidance here. I think when we are talking about phasing effects, it's mainly on the technical side, things that we have to take into account. So for example, the effects around MatTek that will roll off as a supporting factor. Also, we have been talking about the tariff surcharges, which have been a tailwind in H1, but which is turning into a headwind into H2, at least as long as tariffs stay on the currently communicated level. But on an operational level, currently, we have no reasons to comment on specific developments in Q3 or Q4 '26.

And the next question comes from Oliver Reinberg from Kepler Cheuvreux.

I was trying to get a bit of color on the push and pulls for next year. I mean, apparently, the starting point would be your midterm guide, which calls for 9% to 12% growth. But arguably, there's a kind of triple or 3 support factors. One, the tariff refunds provided kind of a lowered comp. You have also a very low comp on the kind of equipment book. And then thirdly, even these delays may probably support next year. So the question is really, is there any reason to assume not the high end of this 9% to 12% guidance for next year?

Yes. No, I mean, thank you. As you know, we will talk about the year 2027 at the right point in time. And that's not now. So in this regard, we don't want to speculate on some of the clear uncertainties that are still there on the tariff regime and everything. So therefore, you don't -- we have our midterm guidance, we talk about this year right now, and we will talk about 2027 in due time.

But is there any kind of risk factor that you see at this stage?

I mean if we take -- from an operational perspective, we don't see risk factor, from an uncertainty level in the world and whatever happens, we don't know.

And the next question comes from Harry Gillis from Berenberg.

Your underlying EPS growth accelerated to 8.4% in Q2 from 8.1% in Q1 despite the delays at the 2 advanced modality customers. All your commentary indicates end markets are improving, and you still expect equipment growth in H2. So can I just ask why is the guidance for the midpoint of the 6% to 10% range in BPS? And why does this decelerate? Is it simply an even larger impact from these 2 customers in the second half? And then sort of related to that, what are the swing factors that could drive you higher or lower within the range?

I have to chip in, once again, the technical effect, Harry, which is on the tariff. And as you know, we have that kind of tailwind in H1, also reflected in the numbers that you were referring to for Q1 and Q2, and this turns into a headwind in H2. So this is just the technical effects that we have to take into account.

And the number was 40 basis points you said?

That's what I said on Q2, right. And we are expecting if the tariffs stay on the current level, that they will even out over the year versus prior year. So there will be no growth impulse from the tariff side in a scenario where tariffs stay on the 10% level.

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

Charles Pitman-King from Barclays. I actually just have a question on the tariff dynamics and the strategy that Sartorius is taking. So just can you confirm when the potential for the tariff unwind became part of the Sartorius strategy, given it kind of caught a few people off hand, off guard today? And then just more broadly, why does it appear Sartorius is alone in announcing these dynamics in 2Q?

And given you are being so transparent, can you confirm whether or not this decision to reverse the payment is helping you differentiate versus peers when you're building your customer relationships?

Yes. Thanks, Charles. I can take that. I mean, first of all, really, I have to say we were caught by surprise. So again, I think as many of our peers in the industry have applied for the refunding when this was publicized. We did indeed as well. And again, we were very uncertain about the outcome of that application. And therefore, as well, I mean it was really rather to the tail end of June when we receive that payment, and we then had on that basis to do and reflect that in our accounting.

So in this respect, it was not -- neither part of our guidance and strategy because it was not clear at this at all when we did the guidance, nor it was clear whether it would happen and to which degree. So this is really the situation. That's why we are now dealing with that implication. We are, therefore, as well make that division into the guidance on an operational basis and the tariff refund compensation part of it.

To your second part of the question, we really think that it's our understanding of the way of how we want to operate and be seen as our customers in a true partnership. We have been transparent about this. We -- they paid the surcharges. And for us, it's really a momentum of trust and partnership that we, as well, now find the right way of compensating them for these payments.

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

James from Jefferies. Perhaps I can just ask around the acceleration we've seen in APAC. BPS constant currency growth looks like it was around 16%, 16.5% in 2Q versus around 10.5%. I mean you mentioned China, but can you give some color on South Korea and if you're seeing any customer stocking there? And maybe if I can just sneak in a follow-up just on gross margins. There was, I think, some expectation this year would see some improvement from the gross margin impact last year, writing off specialized consumable inventories, which I think had around a 200 basis point impact. So are you seeing any benefits of that in the first half?

Yes. I will take the first part of the question on the APAC, particularly China, you asked about that. So first of all, yes, we're very pleased to see the momentum in APAC, strong growth, expect that continues in H2 moving forward. China continued recovery also in the Q2. Consumables, key growth driver there. Now stocking, we have seen some pockets of that, not really meaningful for us. So overall, I think it's a healthy growth in the region.

Can I just -- sorry, just to clarify that. So we're seeing some elements of stocking. Is that China? I guess the question was sort of South Korea? Or is this just a more regional commentary on a bit of stocking?

More pockets of different customers than concentrated in any region.

James, and on your gross margin question, so we have been talking also at Capital Markets Day about that there were burdening effects coming from the higher inventory. And as this is usually effect, these things are washing out over time, not in the single orders, but rather over a couple of quarters, if not years.

But specifically looking at gross margin and comparing to prior year, I would like to point to the fact that we had a negative margin impact in the year '26 driven by FX effects and that there have been compensating positive FX hedging effects that were not visible in gross margin, but below gross margin so that there is an overall net zero effect visible on the underlying EBITDA margin, but a negative effect visible in the H1 margin.

Ladies and gentlemen, as we are already over time, we have, unfortunately, only time for 3 more questions. The next question will come from Oliver Metzger from ODDO BHF.

It's about equipment. First, at the Q1 print, you said that you expect H2 equipment growth above H1 growth. Do you reiterate that? And would you confirm that we see now consumable growth pretty strong for a while and technically every month improves visibility also on your order book that the conversion of equipment growth rates towards consumable growth is ongoing? Or do you see any pushbacks, which might lead to some bifurcation of growth rates for a longer time?

Okay. So yes, thanks, Oliver. First part of the question is really related to the growth in the equipment perspective. again, just to clarify what we said and what we see. I said that we would be at least flat across the year and starting with the H1, we confirm that indeed, we've seen that slight growth of 2%, around 2% that we highlighted. And then we said not necessarily growth rate, but we said we talk more about the absolute levels in the second half of the year versus the first part of the year. And that indeed is the fact.

So overall, therefore, we are comfortable with the guidance of the growth, as we said earlier and as well live up as well to the expectation that second half of the year will be above first half of the year.

Second part was around the -- can you just repeat the -- again, your point on the consumer...

Okay. I wanted to make it sure. So structurally, consumables and equipment should grow over the cycle at pretty similar rates. And we see now for a while that the consumer demand is very healthy ongoing partially already in the double-digit territory. So -- but equipment is still lagging and so the delta between equipment sales and consumer sales has widened more and more. And when do you see more of the inflection point that the growth rates [ converge ] closer to each other?

I think that has to do something with the increasing utilization rate, right, that's related to the kind of what you are describing. And you are right, we see the continued growth of consumables, which are linked to equipment installed base. So approaching the point, and we see these orders coming also where customers need to add additional equipment to increase capacities. We are in our communication rather now saying we want to see these orders in to then give you more color and outlook on the equipment.

The next question comes from Thibault Boutherin from Morgan Stanley.

My question is just on bioprocessing in Americas. Even if we exclude the tariff reform impact, H1 was around mid-single digits on easier growth comp in H1 last year, softest region for this first half. And H2 is facing tougher comps. So just if you could help us understand the growth trajectory of the BPS business in North America? And related to that, just if you could tell us if you're seeing anything in terms of orders related to the onshoring in the U.S.?

I think looking generally at the Americas performance in BPS, we were talking not only about the refund topic, but also about the ATS topic. And if -- just to give you a little bit more feeling, if we are adjusting for the ATS topic, we would see healthy growth rates in North America, even slightly above the European one. So underlying business is doing well.

And are you seeing anything on orders for related to onshoring? Or is it still too early?

Yes. Again, I think on the reshoring discussion, we see that indeed, there is -- we see translation now of the talks from last year more into types of projects on the brownfield side. So there's reality and realism in this. Again, when we see the related lead times and the time of ordering for our type of equipment with the lead times that we have, we see that the majority of those orders will be rather relevant for us probably in 2027, second half, and then realization then of sales of those orders to materialize in 2028 and beyond.

And today's final question comes from Charles Weston from RBC.

Quick follow-up. It was just on Iran. I think you quantified the risk of EUR 10 million for 2026 in Q1, Florian. Just wondering if you have seen that come through or whether there's been any change in that estimate, please?

Yes, Charles, no change to that. Number is still valid.

Ladies and gentlemen, this was the last question. I would now like to turn the conference back over to Michael Grosse for any closing remarks.

Thank you very much for your time and looking forward to hear you and see you all latest in the next quarter. All the best, and good luck.

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.

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.