Investing.com -- S&P Global Ratings has downgraded the long-term issuer and issue credit ratings of Sartorius AG (ETR: SATG ) from ’BBB’ to ’BBB-’ due to macroeconomic volatility and uncertainty surrounding the recovery of the biopharmaceutical market. The outlook remains stable.

Sartorius AG’s deleveraging process has been slower than expected following the Polyplus acquisition in 2023. The company’s sales and fixed cost recovery slowed drastically as biopharmaceutical manufacturing faced significant destocking and reprofiling of its output capabilities took longer than expected post-pandemic. S&P Global Ratings-adjusted debt to EBITDA was 7.3x in 2023 and 5.9x at the end of 2024, compared to the original expectations of 5.1x and 3.6x for 2023 and 2024 respectively.

As of March 31, 2025, Sartorius AG recorded a double-digit increase in its order book and a book-to-bill ratio well above 1x. The end of the destocking cycle and increasing orders for higher-margin consumables, which make up about 75% of sales, are expected to support a recovery of the S&P Global Ratings-adjusted EBITDA margin to about 25% in 2025 and 27% in 2026. However, the leverage is expected to remain well above 3x over the next two years, which is above the ’BBB’ rating threshold.

The rating revision is due to uncertainties around the biopharma market recovery, which could further delay Sartorius’ deleveraging path. The life sciences and bioprocessing market have shown high volatility over the past two years, impacting Sartorius’ top line and absorption of fixed costs. This resulted in S&P Global Ratings-adjusted leverage remaining high at 5.9x as of Dec. 31, 2024. The group’s S&P Global Ratings-adjusted debt to EBITDA is now expected to remain at 4.3x-4.5x in 2025, 3.5x-3.8x in 2026, and close to 3x in 2027.

Sartorius’s consumables business is expected to drive organic growth over the next two years, supporting a recovery in S&P Global Ratings-adjusted EBITDA margins to 25% in 2025. The company maintains an established competitive position, protected by high capital barriers to entry, large-scale production capacity, a technologically advanced product portfolio, and a skilled salesforce.

In Q1 2025, Sartorius reported a 7.7% year-on-year increase in sales, driven by its consumables business, which accounts for about 75% of the group’s total revenues. The book-to-bill ratio stood well above 1.0x, returning to pre-pandemic levels when the group’s sales were growing at a double-digit rate. Revenue growth of 6.5%-7.5% in 2025 and 8.5%-9.0% in 2026 is expected, supported by the phase-out of customer destocking.

Sartorius is expected to continue generating sound free operating cash flow (FOCF) of €300 million-€350 million over the next two years, supported by disciplined working capital management and stable capital expenditure (capex), which will be about 9.5% of sales.

In April 2025, Sartorius resumed bolt-on acquisitions by signing an agreement to acquire the microtissue business MatTek from BICO AB for a cash consideration of about $80 million (about €72 million). The acquisition aligns with the Food and Drug Administration’s (FDA’s) inclusion of cell line and organoid toxicity testing methods into its program aimed at reducing animal testing requirements in drug approvals.

Despite the downgrade, S&P Global Ratings believes that Sartorius will maintain its established position due to its competitive product portfolio and innovative technology, which will enable it to sustain positive revenue growth. The stable outlook reflects the expectation that Sartorius will manage its discretionary cash flow, primarily comprising capex and acquisitions, while maintaining debt to EBITDA between 3x-4x from 2026.

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