S&P assigns BBB to Sartorius, notes

S&P said it assigned BBB ratings to Sartorius AG and its planned euro-denominated unsecured notes. Subsidiary Sartorius Finance BV will sell the notes. The outlook is stable.

“Sartorius benefits from an established position in a fast-expanding market. With leading market shares in its main product categories (fluid management, filtration, and fermentation), Sartorius is well positioned to capture expected industry growth. Despite a temporary slowdown in 2023 driven by biopharma companies' build-up of extra stocks over 2022 and the dissipation of pandemic-related revenue, we expect the bioprocessing (BPS) market to expand 10% per year over the medium term.

“This will be supported by demographics, the increasing need for drugs, and the expanding role of biotechnologies and biopharmaceuticals in the development of new therapies and vaccines. The share of biopharma is currently 30% of the total drug market and is expected to reach 35% by 2026,” S&P said in a press release.

The agency said it projects Sartorius’ S&P Global Ratings-adjusted leverage (with a pro-rata contribution from Polyplus) will top out at about 5x in 2023, but expects swift deleveraging to about 3.5x in 2024 and below 3x in 2025, buoyed by revenue and margin growth and strong free operating cash flow.

“The stable outlook reflects our expectation that Sartorius' revenue will increase 16%-17% in 2024, bolstered by customers' progressive restocking and the integration of Polyplus' complementary product offering. We expect S&P Global Ratings-adjusted EBITDA margins to increase 300 basis points (bps)-400 bps in 2024 versus 2023, supported by a recovery in volumes and continuous focus on cost efficiency,” S&P said.

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