The forecast of the Group for fiscal 2023 published in the Annual Report for fiscal 2022 comprised the forecast for the Group as well as the forecast for the three business sectors: Life Science, Healthcare, and Electronics.
Net sales
We forecast slight to solid organic net sales growth for the Group in 2023. In particular, the macroeconomic, geopolitical and industry-specific conditions changed over the course of the year. Furthermore, the Life Science business sector saw sustained high inventory levels and a reluctance to invest on the part of customers, while the Electronics business sector was affected by the ongoing weakness of the market for semiconductor materials.
Waning demand for products in connection with the Covid-19 pandemic meant that, as expected, net sales declined sharply in fiscal 2023. All in all, we reported an organic decline in net sales of -1.6% in fiscal 2023, which fell within the forecast range of between -2% and +2% that we revised in the second quarter and confirmed in the third quarter. At the start of the year, we anticipated a negative exchange rate effect totaling between -1% and -4%, especially as a result of the expected development of the U.S. dollar and the Chinese renminbi. Several currencies, including the U.S. dollar and the Chinese renminbi as well as some currencies of emerging economies, saw less favorable development than expected as the year progressed. The negative exchange rate effect in 2023 as a whole was -4.1%, thus falling within the range of -3% to -6% which we most recently revised in the second quarter and confirmed in the third quarter. The slightly positive portfolio effect was negligible at +0.1%. All in all, net sales amounted to € 20,993 million, representing a year-on-year decrease of -5.6%. This was below the mid-point of the forecast range of € 20,500 million to € 21,900 million and thus was consistent with the more specific forecast issued together with the figures for the third quarter (trending slightly below the mid-point).
Life Science
Our Life Science business sector reported an organic decline in net sales of -7.9% in fiscal 2023. This was at the lower end of the forecast range of between -8% and -2%, which we adjusted in the second quarter and confirmed in the third quarter, meaning that Life Science fell below our original forecast of slight to moderate organic growth. All of the business units – Process Solutions, Life Science Services and Science & Lab Solutions – recorded a downturn in organic net sales. As expected, Process Solutions and Life Science Services saw the most pronounced organic decline in net sales, whereas the downturn in the Science & Lab Solutions business unit was only slight. All in all, net sales in the Life Science business sector fell by -10.6% to € 9,281 million including a negative exchange rate effect of -2.7% and a positive portfolio effect of 0.1%. This was in the lower half of the forecast range of € 9,100 million to € 9,950 million, which is consistent with the more specific forecast issued at the end of the third quarter (trending in the lower half of the forecast range).
Healthcare
We originally forecast moderate to solid organic sales growth for our Healthcare business sector compared with the previous year. We then quantified this organic sales growth forecast at between +5% and +9% when we published the figures for the first quarter. We raised this forecast range to between +6% and +9% with the publication of the figures for the second quarter and confirmed this at the end of the third quarter. With full-year organic growth of +8.5%, the business sector achieved the forecast for fiscal 2023. This development was driven in particular by the significant growth of the oncology business and, above all, the strong performance of our recently approved product Bavencio®. Neurology & Immunology made a substantial contribution to full-year organic sales growth in fiscal 2023 thanks to our recently approved product Mavenclad® in particular. Sales growth was also driven by our established portfolio, especially fertility products. Taking into account the negative exchange rate effect of -5.8%, net sales in the Healthcare business sector increased by +2.7% to € 8,053 million in fiscal 2023, thereby falling within the upper half of the forecast range. This was consistent with the more specific forecast issued together with the report on the third quarter (trending slightly above the mid-point).
Electronics
Despite the economically and geopolitically difficult conditions in the market for semiconductor materials, we forecast slight to solid organic net sales growth for our Electronics business sector at the start of the year based on the assumption that the semiconductor market would recover in the second half of 2023. We quantified our organic sales growth forecast at between -2% and +3% when we published the figures for the first quarter. Compared with the previous forecast, we anticipated an even more pronounced weakening of the market followed by a delayed but stronger recovery which should now only occur later in the second half of the year. We adjusted this forecast with the publication of the figures for the second quarter, stating that we expected an organic decline in net sales of between -6% and -1% in light of the further delay in the recovery of the semiconductor market. We then confirmed this forecast at the end of the third quarter. The organic decline in net sales for fiscal 2023 as a whole was -5.1%, which is in line with the lower end of the forecast range. Due to negative exchange rate effects of -4.1% and taking into account a portfolio effect of +0.3%, net sales in the Electronics business sector declined by -8.8% year-on-year to € 3,659 million, thereby falling within the forecast range of between € 3,500 million and € 3,800 million. This was consistent with the more specific forecast issued together with the report on the third quarter (trending around the mid-point).
EBITDA pre
Our original forecast for the Group’s EBITDA pre for 2023 ranged from a moderate decline to roughly stable organic development compared with the previous year. This assumption was based on the expectation of a moderate decline to roughly stable organic development in the Life Science business sector, slight to moderate organic growth in the Healthcare business sector, and a slight to strong organic decline in the Electronics business sector. We originally expected negative exchange rate effects to impact EBITDA pre by between -1% and -4% compared with the prior year. With the presentation of the figures for the first quarter, we quantified our forecast at organic development of between -5% and 0%. In response to inflation-related cost increases and the underutilization of our production capacities, especially in the Life Science and Electronics business sector, we revised our forecast to between -9% and -3% at the end of the second quarter. This forecast was confirmed with the publication of the figures for the third quarter. Due to negative exchange rate effects, we revised our forecast for the impact of exchange rate effects twice in the course of fiscal 2023, ultimately ending with a forecast of between -6% and -3%. EBITDA pre amounted to € 5,879 million in fiscal 2023, representing an overall decline of -14.2% compared with the previous year (-9.0% organic, -4.9% from currency effects, 0.3% from portfolio effects). This is in the lower half of the forecast range of between € 5,800 million and € 6,400 million, and hence is consistent with the more specific forecast range (trending in the lower half of the range).
Life Science
In contrast to the expected net sales development, we originally expected EBITDA pre in Life Science to be in a range from a moderate decline to organically about stable in fiscal 2023 due to inflation-driven price increases weighing more heavily on earnings. At the end of the first quarter, we quantified our forecast for the organic decline in EBITDA pre at between -8% and -4%. In response to the underutilization of our production capacities, we then lowered this to between -21% and -12% with the publication of the figures for the second quarter. Along with the exchange rate effect that was most recently forecast at between -6% and -2% (originally: slightly negative exchange rate effect), this resulted in a forecast range for EBITDA pre in the Life Science business sector of between € 2,750 million and € 3,200 million. The business sector achieved this forecast with EBITDA pre of € 2,820 million in fiscal 2023 (2022: € 3,760 million). This corresponded to a decline of -25.0% compared with the previous year (-21.4% organic, -3.3% due to exchange rate effects). EBITDA pre therefore also fell within the more specific forecast range issued at the same time as the report on the third quarter (trending in the lower half of the range of € 2,750 million to € 3,200 million).
Healthcare
With our new products expected to continue to deliver a substantial earnings contribution, especially Mavenclad® and Bavencio®, we forecast slight to moderate organic growth in EBITDA pre for our Healthcare business sector. Largely because of the sustained high level of prices due to inflation, this original forecast was slightly below the expected organic growth in net sales (moderate to solid organic sales growth). With the publication of the figures for the first quarter, we quantified our forecast for organic growth in EBITDA pre at between +8% and +12% in fiscal 2023. We then raised this forecast to between +14% and +19% at the end of the second quarter, especially as business performance was expected to be stronger. We confirmed this forecast range at the end of the third quarter. Along with the exchange rate effect that was most recently forecast at between -17% and -13% (originally: negative exchange rate effect in a high single-digit to low double-digit percentage range), this resulted in a forecast range for EBITDA pre in the Healthcare business sector of between € 2,450 million and € 2,600 million. With EBITDA pre of € 2,543 million in fiscal 2023 (2022: € 2,477 million), the business sector came in at the upper end of this range. This was also consistent with the more specific forecast issued together with the report on the third quarter (trending at the upper end of the range). This corresponded to an increase of +2.7% compared with the previous year (+17.1% organic, -14.4% due to exchange rate effects, -0.7% from portfolio).
Electronics
We originally anticipated a slight to strong organic decrease in EBITDA pre for our Electronics business sector in fiscal 2023. We expected inflation-driven cost increases to have a particularly pronounced impact on material costs, and that we would only be able to pass on cost increases to a limited extent in the coming quarters due to the price pressure faced by our customers. With the presentation of the figures for the first quarter, we quantified our forecast for the organic decline in EBITDA pre as ranging from -12% to -3%. Having lowered our forecast considerably to between -18% and -10% with the report on the second quarter in response to inflation-related cost increases and the underutilization of our production capacities, we reiterated this guidance at the end of the third quarter. Along with the exchange rate effect that was most recently forecast at between -10% and -7% (originally: significantly negative exchange rate effect), this resulted in a forecast range for EBITDA pre in the Electronics business sector of between € 870 million and € 980 million. EBITDA pre of € 913 million in fiscal 2023 (2022: € 1,192 million) was in the lower half of the forecast range. This was consistent with the more specific forecast issued along with the report on the third quarter (trending in the lower half of the range) and corresponded to a decline of -23.4% compared with the previous year (-17.1% organic, -5.6% due to exchange rate effects).
Corporate and Other
The expenses for Corporate and Other in EBITDA pre amounted to € -397 million in fiscal 2023. This meant that EBITDA pre was slightly below the original forecast range of between € -370 million and € -330 million. However, we specified our forecast with the presentation of the figures for the third quarter. Due to substantially lower expected income from currency hedging transactions, we have forecast that EBITDA pre for corporate costs and other is expected to be slightly below the forecast range of -330 to -370 million €. The original forecast for fiscal 2023 provided for a significant decline in the expenses in this area. Compared with the prior-year figure of € -579 million, the expenses decreased significantly by -31.5%.
Operating cash flow
We originally anticipated a moderate decline to roughly stable development for the operating cash flow of the Group in 2023 (2022: € 4,259 million). We then specified the forecast range at between € 3,700 million and € 4,300 million with the publication of the figures for the first quarter. As we expected the development of operating cash flow to be largely in line with operating performance, we lowered our forecast to between € 3,500 million and € 4,100 million at the end of the second quarter and confirmed this forecast in our report on the third quarter. The operating cash flow amounted to € 3,784 million in fiscal 2023, which was within the most recent forecast range of between € 3,500 million and € 4,100 million. This corresponded to a decline of -11.2% compared with the previous year (2022: € 4,259 million). The decisive factor for this was the development of EBITDA pre.