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Operating Activities

(9) Net sales

Accounting and measurement policies
Nature and timing of revenue recognition

Net sales are recognized when (or as) the customer obtains control of the asset. For sales of goods, the customer typically obtains control as soon as delivery is made, given that the customer is generally not able to obtain any benefits from the asset before that point in time. In the case of equipment sales, the criteria for revenue recognition are only met after installation has been successfully completed – to the extent that the installation requires specialized knowledge, does not represent a clear ancillary service and the relevant equipment can only be used by the customer once successfully set up.

For service contracts and customer-specific contract manufacturing of goods and equipment, the Group recognizes revenue over time based on the progress toward complete satisfaction of the performance obligation, if there is a contractual claim for payment against the customer for the services already performed and there is no alternative use. Input- and output-oriented methods are used to appropriately determine progress on a contract-specific basis. Although progress is ideally measured using input-oriented methods, output-oriented methods are always applied when the input cannot be reliably determined, for example. Specifically, the appropriate degree of progress is mainly calculated on the basis of milestones reached, time elapsed, units delivered, or costs incurred in proportion to the anticipated total costs.

Licenses for intellectual property are granted to a limited extent in the Life Science and Healthcare business sectors. Unlike in the Life Science business sector, these transactions do not usually form part of ordinary activities in the Healthcare business sector, meaning that the corresponding income is reported in other operating income (see Note (7) “Collaboration and licensing agreements” and Note (13) “Other operating income”).

Net sales from contracts comprising several separate performance obligations are recognized on a pro rata basis when the respective performance obligation has been fulfilled. Multiple-element arrangements of this nature only exist to a very limited extent in the Life Science business sector.

Determining the transaction price

The Group grants customers various kinds of rebates and discounts. These, as well as anticipated customer refund claims, state compulsory charges, and rebates from health plans and programs, are deducted from sales. The most significant portion of these deductions from sales is attributable to the Healthcare business sector and, in particular, sales in the United States.

Sales deductions provided on the invoice as price-reducing items, which will likely be applied by customers when making the respective payments, are recognized as reduction of trade accounts receivable. Expected refunds, such as bonus payments, reimbursements for rights of return or rebates from health plans and programs, are reported in the consolidated balance sheet under refund liabilities.

The measurement of sales deductions and refund liabilities arising from expected rebates and discounts takes account of past experience, specific knowledge of expected sales volume growth rates, contractual conditions, pricing information, and external information from distributors and industry services.

The measurement of sales deductions and refund liabilities resulting from rights of return takes into account historical rates of return for individual product groups, information from distributors on inventory levels, and publicly available information on product sales from sector-specific service providers (in the Healthcare business sector).

Contractual payment terms

Given that the Group generates the large majority of its net sales through transactions with simple structures, the company usually has an enforceable right to payment after the performance obligation has been fulfilled. The payment targets contractually agreed between the Group and its customers usually range between 30 and 60 days.

Practical expedients

The Group uses the practical expedient of IFRS 15 in which the promised amount of consideration is not adjusted for the effects of a significant financing component if the period between the fulfillment of a performance obligation and the payment by the customer only amounts to up to one year.

Significant discretionary decisions and sources of estimation uncertainty
Sales deductions

The measurement of sales deductions and the corresponding refund liabilities requires extensive estimates. Uncertainties exist in particular concerning the extent to which past experience serves as a reliable basis for estimating the future development of expected refunds, such as bonus payments, reimbursements for rights of return, or rebates from health plans and programs. External information from distributors and industry services outside of the Group’s control, which are also subject to uncertainty, are used to determine sales deductions.

Due to a lack of past experience, the estimation uncertainty referenced above is particularly relevant for product launches in the Healthcare business sector.

Any changes in estimates of the parameters listed above have a cumulative impact on the net sales for the respective adjustment period.

If the carrying amount of refund liabilities had been 10% higher as of the reporting date, this would have resulted in a € 88 million (2022: € 91 million) reduction in profit before tax.

The following tables present a breakdown of net sales by key product lines/products:

Life Science1

€ million

 

2023

 

2022

Science & Lab Solutions

 

4,706

 

51%

 

4,898

 

47%

Process Solutions

 

3,782

 

41%

 

4,540

 

44%

Life Science Services

 

792

 

8%

 

943

 

9%

Total

 

9,281

 

100%

 

10,380

 

100%

1

Prior-year figures have been adjusted owing to realignment in the Life Science business sector.

Healthcare

€ million

 

2023

 

2022

Oncology

 

1,819

 

22%

 

1,683

 

22%

thereof: Erbitux®

 

1,025

 

13%

 

1,023

 

13%

thereof: Bavencio®

 

713

 

9%

 

611

 

8%

Neurology & Immunology

 

1,665

 

21%

 

1,743

 

22%

thereof: Mavenclad®

 

956

 

12%

 

856

 

11%

thereof: Rebif®

 

709

 

9%

 

887

 

11%

Fertility

 

1,547

 

19%

 

1,446

 

18%

thereof: Gonal-f®

 

847

 

11%

 

825

 

11%

Cardiovascular, Metabolism & Endocrinology

 

2,786

 

35%

 

2,805

 

36%

thereof: Glucophage®

 

882

 

11%

 

930

 

12%

thereof: Concor®

 

571

 

7%

 

590

 

8%

thereof: Euthyrox®

 

565

 

7%

 

553

 

7%

thereof: Saizen®

 

332

 

4%

 

266

 

3%

Other

 

235

 

3%

 

161

 

2%

Total

 

8,053

 

100%

 

7,839

 

100%

Electronics1

€ million

 

2023

 

2022

Semiconductor Solutions

 

2,479

 

68%

 

2,674

 

67%

Display Solutions

 

770

 

21%

 

900

 

22%

Surface Solutions

 

411

 

11%

 

439

 

11%

Total

 

3,659

 

100%

 

4,013

 

100%

The following tables present a more detailed breakdown of net sales from contracts with customers in the individual business sectors by product type and region.

2023

€ million

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales by
nature of the products

 

Life Science

 

Healthcare

 

Electronics

 

Group

Goods

 

8,074

 

87%

 

8,004

 

99%

 

2,952

 

81%

 

19,030

 

91%

Equipment

 

411

 

5%

 

 

 

593

 

16%

 

1,004

 

5%

Services

 

778

 

8%

 

33

 

1%

 

111

 

3%

 

922

 

4%

License income

 

17

 

 

 

 

3

 

 

19

 

Commission income

 

1

 

 

15

 

 

 

 

17

 

Income from co-commercialization agreements

 

 

 

 

 

 

 

 

Total

 

9,281

 

100%

 

8,053

 

100%

 

3,659

 

100%

 

20,993

 

100%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales by region
(customer location)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe

 

3,178

 

34%

 

2,541

 

31%

 

318

 

9%

 

6,037

 

29%

North America

 

3,372

 

36%

 

1,793

 

22%

 

787

 

21%

 

5,952

 

28%

Asia-Pacific

 

2,263

 

25%

 

2,232

 

28%

 

2,440

 

67%

 

6,936

 

33%

Latin America

 

352

 

4%

 

941

 

12%

 

39

 

1%

 

1,331

 

6%

Middle East and Africa

 

116

 

1%

 

546

 

7%

 

75

 

2%

 

737

 

4%

Total

 

9,281

 

100%

 

8,053

 

100%

 

3,659

 

100%

 

20,993

 

100%

2022

€ million

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales by
nature of the products

 

Life Science

 

Healthcare

 

Electronics

 

Group

Goods

 

9,097

 

88%

 

7,804

 

100%

 

3,481

 

87%

 

20,382

 

92%

Equipment

 

463

 

4%

 

1

 

 

417

 

10%

 

881

 

4%

Services

 

804

 

8%

 

16

 

 

110

 

3%

 

930

 

4%

License income

 

16

 

 

 

 

4

 

 

20

 

Commission income

 

1

 

 

17

 

 

 

 

18

 

Income from co-commercialization agreements

 

 

 

1

 

 

 

 

1

 

Total

 

10,380

 

100%

 

7,839

 

100%

 

4,013

 

100%

 

22,232

 

100%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales by region
(customer location)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe

 

3,445

 

33%

 

2,433

 

31%

 

371

 

9%

 

6,248

 

28%

North America

 

3,931

 

38%

 

1,781

 

23%

 

649

 

16%

 

6,361

 

29%

Asia-Pacific

 

2,536

 

25%

 

2,261

 

29%

 

2,901

 

72%

 

7,697

 

35%

Latin America

 

353

 

3%

 

838

 

10%

 

40

 

1%

 

1,231

 

5%

Middle East and Africa

 

116

 

1%

 

527

 

7%

 

53

 

2%

 

695

 

3%

Total

 

10,380

 

100%

 

7,839

 

100%

 

4,013

 

100%

 

22,232

 

100%

Group net sales amounted to € 20,993 million in fiscal 2023 (2022: € 22,232 million). Around 5% of this figure was recognized over time (2023: € 1,119 million; 2022: € 933 million). This mainly related to net sales from services in the Life Science business sector and net sales from the project business of the Semiconductor Solutions business unit in the Electronics business sector.

Orders already received by the reporting date that will result in net sales in future periods amounted to around € 4 billion as of December 31, 2023 (December 31, 2022: around € 6 billion), of which around € 3 billion related to the Life Science business sector (December 31, 2022: around € 4 billion). Based on past experience, around 13% of orders received are not expected to result in net sales until fiscal 2025 or later (December 31, 2022: around 10% in fiscal 2024 or later).

The following table shows the change in refund liabilities:

2022

 

 

Rebates/Bonus payments

 

Rights of return

 

 

€ million

 

Total

 

thereof:
United States

 

Total

 

thereof:
United States

 

Total

Jan. 1, 2022

 

784

 

445

 

55

 

35

 

839

Additions due to business combinations

 

 

 

 

 

Other additions

 

2,470

 

1,902

 

56

 

40

 

2,526

Disposals due to divestments/Reclassification to assets held for sale

 

 

 

 

 

Utilizations

 

-2,270

 

-1,739

 

-43

 

-29

 

-2,313

Cumulative increase (-)/decrease (+) in net sales

 

-159

 

-147

 

-9

 

-6

 

-168

thereof: attributable to performance obligations satisfied in prior periods

 

-118

 

-115

 

 

0

 

-118

Currency translation

 

29

 

31

 

2

 

2

 

31

Other

 

-3

 

 

 

 

-3

Dec. 31, 2022

 

850

 

492

 

62

 

43

 

912

2023

 

 

Rebates/Bonus payments

 

Rights of return

 

 

€ million

 

Total

 

thereof:
United States

 

Total

 

thereof:
United States

 

Total

Jan. 1, 2023

 

850

 

492

 

62

 

43

 

912

Additions due to business combinations

 

 

 

 

 

Other additions

 

2,596

 

1,945

 

52

 

31

 

2,648

Disposals due to divestments/Reclassification to assets held for sale

 

 

 

 

 

Utilizations

 

-2,485

 

-1,855

 

-60

 

-37

 

-2,545

Cumulative increase (-)/decrease (+) in net sales

 

-121

 

-120

 

8

 

10

 

-113

thereof: attributable to performance obligations satisfied in prior periods

 

-118

 

-116

 

9

 

10

 

-109

Currency translation

 

-26

 

-18

 

-2

 

-2

 

-28

Other

 

2

 

 

 

 

2

Dec. 31, 2023

 

816

 

443

 

60

 

44

 

877

The development in contract assets and contract liabilities is shown in Note (26) “Contract assets” and in Note (29) “Other non-financial liabilities”.

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