Good day, welcome to the Sartorius and Sartorius Stedim Biotech conference call on the Q2 to 2023 results. Today's conference is being recorded. At this time, I would like to turn the conference over to Dr. Joachim Kreuzburg, CEO of the Sartorius Group. Please go ahead, sir. Thank you very much, and welcome from our side here as well. Thank you for attending our conference call on a Friday afternoon or Friday morning for some of you, hopefully. We would like to start by walking you through the results of the Sartorius Group, and then thereafter, through the results of the Sartorius Stedim Biotech Group. We will do this here by myself, Rainer Lehmann, our CFO, and René Fáber, Head of the Bioprocess Solutions Division, as well as CEO of Sartorius Stedim Biotech. Let me start by walking you briefly through the main highlights of the H1 year's results. As expected, also the Q2 was very much influenced by the temporary weak demand by quite the most of our customer groups, one can say. The most significant impact has come from the continuous reduction of inventory levels by our customers. At the same time, and this is particularly relevant for the Bioprocess Solutions Division. For both divisions, we also have seen some impact by lower investment activities by customers. Still there is also some impact from I mean, pretty much full omission of the COVID-related business. Rainer will show you also the impact of both sales revenue for both divisions in a minute. The underlying EBITDA has remained on a quite robust level at around 30% for the group. The cost containment measures that are in place are paying out here. Looking forward, let me flag that here already. Of course, it will play a role to prepare for an increasing order intake activity or increasing demand by our customers, and therefore, we are preparing for keeping our delivery times short and our delivery ability high. That's a key topic going forward. We are confirming the outlook that we have revised five weeks ago, and I also would like to confirm our midterm outlook for 2025 year. Then, quite recent news is that we closed our Polyplus acquisition three days ago. We announced that, but we will take the opportunity here today, again, to introduce the main highlights of this business, the strategic logic, and why we are doing this. René actually will do this in the Sartorius Stedim Biotech part of our today's presentation. With that, I would like to hand over to Rainer for the details of our H1's results. Thank you, Joachim. Also, first of all, welcome to today's earnings call. Let's have a look of the soft top line development actually translated into the figures for H1. Sales amounted to EUR 1.73 billion. That's a decline of 15% excluding COVID, and that's important because really this year we pretty much do not see any further or related COVID business any longer. This decline would have been in the upper single-digit only. It's always important to keep that in mind since last year was still fueled at this point in time with some COVID tailwinds. Order intake decreased substantially, but also as expected, by a third to EUR 1.45 billion. The decline, as you know, and we reflect that quite often related to the destocking, that seems to take a bit longer than we initially thought. Hence, also the update of new guidance that Joachim just referred to in the middle of June, and also some lower investments of activities at our customer side. The underlying EBITDA decreased by almost 26% to EUR 517 million. That's a drop in margin of a good four percentage points to 29.8%. Nevertheless, still, under the circumstances, a quite robust margin. Functional expenses are back actually on previous year level at this point in time. As you know, we are a volume-driven company, as we have seen tremendous economies of scale over the last two years, which led to margins, up to 34% in the group. These economies of scale, unfortunately, also play the other way around, so therefore seeing this development. Underlying earnings per share for the ordinary, EUR 2.95, a drop by 40%, and for the pref, it's EUR 2.96. Again, same drop as for the ordinaries. What's important to know, of course, stringent cost management was key for the H1. That will also continue going forward in order to achieve the guidance that also Joachim will reiterate later on. If we go to the next slide, we continue, of course, and I think it's very important to see our current development in perspective and in a broader context over the time. You see here that Q2 has a lower performance or has lower revenue than Q1. We always expected weaker H1 and H2, and we anticipate that actually Q2 now on the order intake, we also hit the bottom, and from here on, we see a recovery in late Q3 and then Q4 order intake picking up for both divisions. If we have the regional view, we see that really all regions have been influenced by the de-stocking effect and the low investment activities. The Americas our sales declined in both divisions. LPS was specifically affected here by strong comps. Keep in mind that in the US also, we had a very good success with our Biostat portfolio, and that, of course, also now with a bit more tightened environment regarding biotech funding, also plays for sure a role here in this normalization. In the Americas, we achieved revenues of EUR 646 million. That's a decline of a good 12%. In the EMEA region, we dropped a bit further, almost 16% to EUR 669 million in revenues. LPS was here pretty much stable, we have to say. It was driven by the bioprocess, which of course, has very high comparables. Most of the COVID related revenue was related to this region. Also Russia has an influence here. Basically, four percentage points of the drop are attributed to the business or basically the loss of business in Russia. In Asia Pacific, we see actually sales declines also in LPS. Here, need to also point out that a part of that, and I will come to that when we dive into divisions, but the OEM membrane business, so basic components for the COVID test, played a role. The BPS revenue decreased, mainly also due soft business in China. Yeah, in this regard, and René will add some more color later on during his presentation. When we come to the detail and have a detailed look on the bioprocessing side, we see, and I start here on the left-hand side, with the order intake. Where do you see this decrease across all regions? The loss of almost 36%, or 35.5% in constant currencies to EUR 1.1 billion, is really attributed to that de-stocking. We can't mention it enough. It took or takes a bit longer than we originally anticipated, as I said, but it's we anticipate that to really bottom out this quarter or last quarter. Sales revenue decreased by 17.5% in constant currencies to EUR 1.35 billion, excluding COVID, there would be a upper single digit percentage rate decline. When we look at the regional, also split here, we actually see that the loss was pretty much across all regions. Again, on the bioprocessing side here, it was around 20% loss in Americas, a little bit less, only 10%, and in Asia Pacific, also 25% revenue decline. Nevertheless, despite the fact that we lost quite some revenue on the bioprocessing side, we managed to have an underlying EBITDA margin of 30.8%. EBITDA amounted to EUR 414 million. I mention it below. We're really here dependent on the economies of scale, which worked or works in both ways. We have now a look at the LPS Division, Lab Products & Services, here we really continue to see robust results in a continued challenging market. Here, starting on the left-hand side with the order intake, decreased to EUR 348 million by 22.5%. mainly drive or one of the main drivers here is really the reduction in the OEM membranes, that we had some nice business the first six months of 2022. We also see here clearly the weaker, let's say, market environment when it comes to the early-stage biotech funding. Sales revenue amounted EUR 389 million, a drop of almost 7.5%. Excluding COVID here, we would have a reduction only in the mid-single-digit range. The underlying EBITDA, I mentioned before, we could continue to keep a high profitability for our LPS division here, was 26.3%, and amounting to EUR 102 million. Really stable outlook or stable performance due to also stringent cost management in that division. If we have a look at some key performance indicators, underlying EBITDA, I just mentioned, if you look at the extraordinary items, of course, they are a little bit higher with EUR 61 million. Let me put some color here. Half of them we relate to the adjustment or to organizational adjustment. Part of that is, for example, our voluntary employee program, as well as ramp-up costs in connection with expansions. Also certain one-time payments with suppliers. Really about this whole topic, that we still have the aftermath of the COVID business from last year. The rest is really integrations and also corporate projects that we normally show in this position. Financial result is influenced, as always, by the volatility of the valuation of the BIA Separations earn-out liability. Nothing new here. Of course, our interest, result or interest expense net has increased due to the funding of the acquisition of Albumedix last year, and will, of course, going forward be a lot more substantially influenced by the new acquisition. Underlying net profit amounted to EUR 202 million, with a drop of almost 40%. That is actually very happy to report that in these circumstances, with that weaker result, we actually were able to increase our operating cash flow by a good 25% to EUR 363 million. Main driver is here, that in H1, 2022, we had a substantial increase in working capital, which we now could optimize, and also going forward, I really do not expect any further negative development out of that position. Investing cash flow amounted to EUR 327 million. As Joachim pointed out at the beginning, we also continued with our capacity expansions. As you know, a lot of them are in the manufacturing or manufacturing capacities, which of course, we are adjusting on the timeline a little bit, but therefore, we are showing a quite high CapEx ratio of 17.3%. On the next slide, we have our few more indicators, equity ratio, pretty much on last year's level. It's a little bit over 38%. Net debt, slight increase to EUR 2.6 billion, which then translate to a net debt divided by underlying EBITDA of 2.1. Slight increase, but of course, with the reduction of the profitability, that's a result of that. With this, I'll give it back to you, Joachim. Yeah, thanks, Rainer. From my side now, just the outlook for 2023. The headline here says, "2023 P&L outlook confirmed as revised in June." That is because we now of course factored in the Polyplus acquisition since it's closed since July the 18th. You can see here from the first bullet point below the table, that this means that there is one additional percentage points of non-organic sales revenue growth contribution, but no impact on the outlook bandwidth here, and there's also no impact on the approximate profitability outlook that we are giving. The other effect is shown in the last bullet point, the net debt to underlying EBITDA ratio, which is now anticipated to be slightly above five by end of the year. The other numbers are as adjusted for five weeks ago. It's a very busy chart, apologies for that, but I hope it helps for providing as much transparency as possible here. Therefore, briefly, for the Sartorius Group, we are expecting a low to mid-teens decline in sales revenue. The effect or the decline, excluding the COVID-related business and the impact from that, would be mid to high single digit. Rainer has explained the numbers after H1, this is the guidance for full year. The profitability for the group that we are expecting is around 30%. It reads the same for the two divisions, and I guess I don't have to read it out here. As a, as a recap, because Rainer already mentioned CapEx for H1, we expect CapEx to be approximately on the same level for the full year. I mean, the ratio to be around 15%, but the absolute CapEx roughly on the same level. We are pretty much continuing without changes our capacity expansion program. Let me briefly reiterate why this is. One is because we leave our midterm expectation unchanged. We believe what we are seeing here at the moment is what we always have anticipated, and that is quite significant volatility around our unchanged and positive midterm growth trajectory. As we didn't change our expectation and our respective activities during a strong overamplification of order intake and sales growth because of the buildup of inventories by our customers, we do the same now during this temporary rundown of the inventory levels of our customers. Then, of course, there's also a certain impact from the necessity to build up a certain regionalization of our footprint. We actually have been working on that even before the geopolitical turmoils, but nevertheless, of course, this also adds a bit to our CapEx, as there is particularly to mention the expansion of our North American plant, but as well as the buildup of capacities in Asia. With that, I would like to hand it over for the Sartorius Stedim Biotech results to René. Thank you, Joachim. Hello, everybody. Also from my side, welcome to our H1 earning call. I will start this B part with the Polyplus acquisition we have announced in March and finally closed this week. First of all, very warm welcome to our new colleagues from Polyplus. We're very excited to join forces with that great team. Polyplus is a leading provider of transfection reagents, which are used in manufacturing of gene therapies and gene-modified cell therapies. The company expanded their offering and added both plasmid design and plasmid manufacturing capabilities, and also launched recently new reagents, which are used to make lipid nanoparticles for in vivo RNA or DNA gene delivery application. Highly relevant portfolio for us. Very important milestone in our very focused efforts to build a portfolio of cell culture media and critical materials, which are used particularly in making such new therapeutic modalities like cell and gene therapies. Products are highly complementary to our upstream and downstream and fluid management offering we have today, and supported by services like cell and cell line and process development or plasmid design and plasmid manufacturing services. These materials are highly, high quality GMP-grade ingredients, which have a strong impact on performance and economics of the manufacturing processes of our customers. They're often used in combination, media, for example, with growth factors or transfection reagents are used with cell culture media for to make viral vectors. It brings very nice cross-selling opportunities as well. Typically, they are specced in preclinical or early clinical development of drugs, and once the drug gets approved, it becomes quite sticky and recurring business. The market for cell and gene therapies is an early, relatively young market, which is becoming increasingly relevant. These new modalities represent now 1/3 of new biologics pipeline already. The market is growing with 20%-30%. The approved drugs are today rather small indications, typically with regional or country approvals. According to FDA, the expectation is that, you know, around 2025, 10-20 new approvals might come to the market per year. We have seen quite a nice pickup of approvals recently in last couple of years. The pipelines are well filled. 2/3 are early phases, providing for us the opportunity to get those materials specced in, early, in these processes. Polyplus here brings quite a nice footprint in these pipelines, both in development, but also in already approved drugs. Regarding the financing, Rainer, do you want to take that? I'll take this quickly. As you know, we basically communicated that the initial financing is done. We are a bridge facility on Sartorius AG level. We intend to re-long-term refinance this with a bond. We are in the middle of the bond preparation and will most likely go into the market at the beginning of September with the intent then to refinance it in long term. That would, of course, bring our dynamic indebtedness and net debt underlying EBITDA substantially higher. As I just said before, on an SAG level, it was 2.1, and it will be slightly above four. For the SSB dynamic indebtedness, that would be slightly below four. It was a clear deleveraging strategy, important to be under three point low until 2025. I will send back to you, René. Thank you, Rainer. With that, let's move to the H1 results for Sartorius Stedim Biotech. Again, very much in sync with what Joachim and Rainer described for the Sartorius Group. Following the exceptionally strong previous year, sales revenues declined by 18.5% in constant currencies compared to H1, 2022, to now EUR 1.4 billion. Taking COVID revenues out, the decrease was slightly above 10%. The order intake has been impacted even stronger, of course, resulting in a 37% decline, which corresponds to an book-to-bill ratio, as we have expected, at slightly above 0.8 for the H1 of the year. As expected, normalization of demand, which we have seen going on since the mid of 2022 continued. We did expect that it ends a bit earlier, so it's now a bit prolonged. We also have seen a general reluctance to invest on the part of our customers due to over capacities. Looking at the EBITDA margin, despite the lower volumes, we achieved a solid EBITDA margin at 29.7%. You know, here, price effects on both procurement side and customer sides, largely offset each other. We have been working very diligently on managing the costs during that period, decreased the headcount or adjusted the headcount to the current demand situation, and we'll continue doing that moving forward. The lower profitability is reflected in the underlying earnings per share, which was at EUR 2.62, H1 2023 versus EUR 4.4 last year. Putting the sales revenues into perspective, again, a very similar picture over the years here, like Rainer showed for the group, where sales revenues now doubled when we compare it to 2019, pre-pandemic times, which translates to a strong, almost 20% CAGR growth along this four years. We expect the higher volatilities also continue, not of course at that scale, but in 2024, 2025, there will be that's our expectation. Looking at the regions, we see similar normalization effects across all the regions. US is impacted by this talking mainly Europe below strong comps with additional negative impact. I think that's roughly five percentage points coming from Russia, business decline in Asia Pacific, strongest decrease mainly due to soft China business. What we see in China is that the effects of inventories, buildups, overcapacities, and also the challenging funding environment also apply in China, but are kind of more pronounced there compared to other regions. The recovery might take a bit longer in China than in other regions. We also see a stronger presence now of local competitors in China. Cash flows, again, very much in line with what Rainer explained. Here for the group to highlight here again, our efforts to reduce inventories, adjust to the demand normalization, resulting in low working capital in the light of the strong fundamental growth drivers of our market, which we see. We are continuing our global investment program in manufacturing capacities across all regions. Joachim mentioned South Korea. Both Asia, US, we have expanded and just opened new facility in Yauco, Puerto Rico for cell culture media and continue investing across the portfolio and regions moving forward. It resulted in a CapEx ratio at 18.7% for the H1 of the year. Of course, due to bit lower sales revenues in that time. The company continues to a very solid sound balance sheet, equity ratio was at 50.2%. Net debt stood at EUR 1.8 billion, which resulting in a ratio of net debt to underlying EBITDA of 1.2. Brings me now to the outlook for 2023. Very much again, in line with what Joachim already described. The Bioprocess Division, same dynamics here. We expecting now low to mid-teens decline in sales revenues, excluding COVID-related business, high single digits to low teens decline. Acquisitions, including Polyplus, are expected to contribute to percentage points, excluding Polyplus one percentage point. In underlying EBITDA, we anticipate margin at around 30%, where the positive margin effects now coming from Polyplus acquisition is not expected to have a significant impact here due to the timing in that in this year. The CapEx ratio for the full year of 2023, we project at around 15%, and the net debt to underlying EBITDA at slightly now below four, which includes the Polyplus acquisition already. With that, I think we move to the Q&A. Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star one on your touchtone phone. If you wish to remove yourself from the questioning queue, you may press star two. If you are using a speaker equipment today, please lift the headset before making your selection. Anyone who has a question may press star one at this time. One moment for the first question, please. Our first question comes from Vineet Agarwal with Citi. Yeah, hi. Thanks for taking my question. Just on order intake, are there any particular pockets where you are seeing better visibility for orders than others? I mean, if you peek into some of your largest customers' inventory and maybe based on product shelf lives and/or discussions with the customers, are you seeing any particular signs which you, which kind of gives you confidence of recovery in the later part of this year? Thank you. Thank you very much for the question. Indeed, as you can imagine, in this volatile times, we have, we're in very close contact with our customers with regards to the inventory levels they have and the expectations to reorder or start reordering again. We have been talking to the majority of our largest customers, of course, and what we're hearing from them is that most of them, more than 60% of them, expecting to reach their inventory levels in the target inventory levels in Q3 and start reordering in Q3. Almost every customer we talk to confirmed they're starting to reorder in the Q4 of this year. As, yeah, as Rainer said, that this is now what we expect, maybe after the summer period, to see uptake in order intakes and then continuing then in Q4. Thank you. Our next question comes from Michael Leuchten with UBS. Please go ahead. Thank you. Thank you for taking my questions. Two, please. One, just going back to the prior one, what are you doing different now to get a better handle on where we are in this time of visibility, compared to what you were doing before? Is there any difference, or is it the same processes, and it's just a little bit easier to get the visibility now than maybe it was in Q1? A question on China. You mentioned China a few times in terms of softness. Is that now softness beyond the sort of basic materials and products that always was a competitive field in China? Is the local competition now going into areas where previously there wasn't present, or is it still only in the lower tech area, not in spec and processes? Thank you. Maybe on the difference, and René will add to that. I think customers are a little bit more transparent at this point now about where they stand in this process. I think during the pandemic and shortly thereafter, it was indeed a little bit more difficult to get an overview here. I think that's exactly as you anticipated, the biggest difference. That makes it also a bit easier for us and I guess also for other players to get visibility and share that then also with you. On China, if I get it right, you are asking for in how far also the market environment has changed, and I think René spoke about that already. On one hand, maybe all the effects that we see on the global level are to be seen there as well, maybe on a little bit more pronounced level. That's one thing, but the other aspect is for sure, and also that has been mentioned, I believe, that as expected, we see now also some competition in China. I think we always shared with the market that we were expecting this to first play a particular role in, let's say, more standard fluid management applications. I think that is also something that we can confirm and see here. In general, I believe, as in other industries as well, the pandemic has been a kind of accelerator, an amplifier for those trends that were ongoing anyway. That's basically I think what we can say. The biggest maybe uncertainty here, and that is why we are always flagging also the quite high uncertainty overall in regards to China, is more of a geopolitical dimension as well. I think the potential within the Chinese market is still very, very significant. Of course, a bit of an uncertainty here for sure is also in how far business might be regulated and limited going forward. Thank you. Our next question comes from Oliver Reinberg with Kepler Cheuvreux. Please go ahead. Yeah, thanks so much for taking my questions through FMA. Can you first talk about market growth, where we currently see it, excluding any kind of stocking effect? To what extent has the funding pressure and early-stage biotech, and also the lower investment activity, lowered the overall market growth for you? Second question, just expanding on market share. In the past, you talked about your ability to gain market share. Can you just provide an update, I guess, this kind of market share gain to North America and probably also in cell culture media, are still valid. On the other side, obviously, you were able to get into some kind of accounts when others were not able to deliver, which may flip back, and also overall, there's more capacities in the industry. Can you just talk about the dynamics around market share, please? Third question, if I may, just on the midterm guidance, can you just provide us with the kind of bridge, I mean, to get to the 2025 target that requires a bit more than 20% top line growth for Bioprocess and Stedim? How you think about this kind of three components in terms of M&A, destocking, and organic growth? Thanks so much. Maybe I briefly start with the midterm targets, and then René will answer the two on market growth and market share. I think, when you ask for the bridge for from 2023 expectation to 2025 projection and target, then the first important thing to note is that we are talking about roughly half a billion EUR of consumption of products from us, and that mostly in bioprocess, i.e., in Sartorius Stedim Biotech, that we are not selling in 2023. Consumption in 2023 is approximately half a billion EUR higher than sales revenue. I think that's the most important aspect to note, that, based on, in how far we see and understand and know the market dynamics, that these are roughly the numbers. Therefore, what we are projecting from there to the year 2025, is then mostly organic growth on a relatively, let's say, average level. Of course, that then already includes also, if you, as you are asking for M&A, the acquisition of Polyplus that we have just closed. It's not that we are factoring in really, very high level of additional M&A for bioprocess here, I think you are asking for SSB and bioprocessing here. For the Lab division, there's also, of course, this certain offset effect, and here we would expect maybe in proportion, in relation to the size of the division, maybe also a little bit more relevant M&A going forward, but also, of course, again, some substantial organic growth. Again, for the first two questions, I hand over to René Fáber. Yeah, so on the market growth, of course, t he year 2023 particularly is a very difficult one to make a robust, yeah, information about the, the market growth as such, taking out the inventory activities and also the slower investment activities. I would say probably as slightly below what we have been looking at historically for equipment, tools, providers, market, low to mid-teens, digit growth rates. H ow we are looking at that rather is a mid-long term perspective and the main driver, growth driver are the, here, t he drug pipelines of what our customers are developing. Here, we expect that, you know, the majority, the largest market segment of protein, monoclonal antibodies, pipelines are continuing to grow. A growth rate in that segment of high single digits to low double-digit rates is something we would expect mid to long term. The new modalities I've mentioned, when I talked about Polyplus, cell and gene therapies, though they are growing over proportionally strong, gene therapy is maybe around 20%, cell therapy is 30%. We see that as a on top, in addition to what to the protein markets. The expectation mid, long term would be that we continue on that low to mid-single-digit growth rates for overall business market shares. We have during the pandemic been able to gain market shares due to our ability to supply at the speed of capacity expansions, I would say mostly in the US. We also see, of course, it's not surprising that we will not keep it all the market chain shares we gain, but overall, I think we are getting or got out of the pandemic with net gain of market share, sustainable market share. Mostly US, China, it's different due to the local competitors there, particularly during the COVID pandemic, you could see a preference of local players, local customers, to secure their materials from the locals, competitors. There, I would not talk about market share gains in China, definitely not. Thanks so much. Our next question comes from Paul Knight with KeyBanc. Please go ahead. Yeah, thank you on the monoclonal answer. The other is, are GLP-1s significant yet for your filter business? Then the other question is, would it be fair to say Bioprocess concluded the June quarter, kind of as expected, Lab Products, a little weaker? That would be my first two questions. Maybe the second question first, for, you know, how far the two divisions performed up to our expectations. I would say it's not much of a difference here for the two divisions. You can say that typically, You know, when you don't have any influence or overlay or from any other significant trends or larger single projects or whatsoever, then the Q2 is a bit below the first quarter, particularly when you have Easter in the Q2. It sounds maybe a little bit odd, but that is what it is. And this has been the case in 2023, both divisions basically came in end of June, where they expected them to come in. Really no, no significant, you know, difference that I would highlight here. On the GLP, of course, these are different manufacturing processes than cell culture process to make biologic drugs. You're right, the filters are used in such processes, can be sterilizing grade filters or dangerous or full filtration type of products. Absolutely. Thank you. Our next question comes from Jo Walton with Credit Suisse. Please go ahead. Thank you. I have two questions. I'd just like to go back to the confidence that you have, that things will start improving, perhaps in the Q3 and definitely in the Q4. I assume that you were speaking to your customers earlier this year. Were they just not telling you anything, and then when you called them back more recently, they were more open? Or why, when you spoke to customers, you didn't have visibility before, but now you speak to customers, you do have more visibility? I think people are just trying to really gauge the degree of confidence that you have. My second question would be relating to China competition. I think we all understand that there's been good local supply, but within the pandemic, we did hear of people able to get a hold of Chinese product and integrate it into their processes. I just wonder if you feel that that Chinese competition is going to be leaking out into other areas, or whether you feel that any short-term use of those products will go away, and once again, people will look for the higher quality products that come from you. Just, to clarify on the element of destocking, on the Lonza call just before this one, Lonza talked about having seven months of inventory at the half year, the same as the inventory level that they had at the end of 2022, and they were talking to doing destocking in the H2 of the year. That's one customer where we would get a slightly more pessimistic outlook. Thank you. Yeah, for the confidence regarding order intake development in Q3 and Q4, in how far the quality of, or the details that we have got from customers have changed. I think we tried to express that before. We would say that the level of detail that we get from customers is indeed a little bit higher, therefore, we feel that the outlook is maybe a little bit more robust now. We also would say that a stock level around the six months is rather something that we have seen at many customers before the pandemic, while during the pandemic, stock levels have been very often around the 12-month level. I don't want to comment on any single individual customer here, but our view is that indeed stock levels at customers have been going down quite substantially. One can read this very clearly from the order intake that we are reporting. You know, let me clearly say, we try to be very, very transparent here. I think, as you know, following us for longer, that we have been flagging what we called back then, a changed ordering behaviors of customers, I think around, yeah, almost three years ago. Back then, we said, it's hard to quantify. At that time, it was actually impossible to quantify, but we nevertheless flagged that. And we continued doing so, even at times where no one, customers as well as competition, was addressing this topic, and we are reporting order intake. A nd this is an information that you cannot see from anyone else. So, I, I would like to claim, that we are very, very transparent here and, and try to share, information in that transparent way as, as we have it available. But of course, we cannot guarantee for, for any of, of this information. I think that's clear. But we think t hat the numbers that we have now, the insight that we have now, is a little bit more detailed and robust than before, indeed. Then on China, I think what we said, and again, this is something I believe we are talking about in these kind of calls for a long time, and for sure, also quite a while before the pandemic. We always said that we would expect a number of mechanisms in the market that we are addressing to be the same as in other industries as well. We always said we would expect Chinese competition to become established and to also then gain share for sure, particularly in the Chinese market. We always said that we would expect this to happen, when we talk about consumer, particularly first and mostly in the fluid management domain and in the more simple applications here, because we don't have any IP protection, and nobody has any IP protection there. As said before, what we see now is that for the Chinese market and in the Chinese market, this trend has been a bit amplified and accelerated during the pandemic. I think something that one can see also in some other industries, probably. Now, you are asking, if I got you right, what we think, how this would develop going forward, and that is quite difficult to project. We still, of course, have this one specific feature of the applications that we are serving in, and that is that for more, let's say, sophisticated applications, further downstream, for instance, the validation of and the specification of products that are being used in the manufacturing of a drug, plays a larger role. Therefore, the stability of existing business is quite high. That's one factor that for sure plays a role. In how far the Chinese competitors will make inroads to the global markets, and how that exactly will play out, I think is really difficult to predict. One thing, what we deeply believe in, and we always have been therefore pushing forward, is that innovation plays a major role in this market. The products that our customers are producing are extremely valuable. That is for sure the case for monoclonal antibodies, but even more the case for cell and gene therapies. Therefore, the key question for, of our, by our customers always is in how far we can help them to accelerate their processes and to how to improve the productivity of their processes. That is more important than the price point of the respective product. Differentiation, innovation, productivity gains is really the key factor. Clearly, to expect that, or we would not expect and build our strategy on, whatever, that, you know, Chinese competitors would be excluded from global markets or so, I don't think that this would be a viable strategy. Thank you for your very full reply. Our next question comes from Hugo Solvet with BNP Paribas Exane. Please go ahead. Hi, hello. Thanks for taking my questions. I have three. First one on biotech customers. Can you give some more thoughts around the weak funding environment and the impact it has had on your business, and say if those type of customers were to go to zero, how much would that represent of sales? Second, you have a lot of new capacity coming online in the coming months, time, demand is a bit weaker. Is there a risk that we could see longer term pressure on the margin from low utilization rates? Third, on Polyplus, now that the transaction has closed, could you just clarify your earlier comment on the bond issue? Does that imply that you won't do a right issue? Thank you. Thank you. This is René speaking. I take the questions one and two. I think Rainer will comment on the third question. Regarding the biotech customers, for us, of course, it's a very important market segment, customer segment. However, today, our exposure, revenue exposure to these customers is below 10%. Of course, we also see a slowdown there. You can see that in a way that, for example, in the lab division, they would, you know, instead of buying five instruments at a time, you know, do it sequentially. You see a slowdown there. You know, cash protection, you see that also in a way that they prioritize, reshuffle, reprioritize their assets, pipeline, drugs. We rather see a slowdown in early phase drugs in early phase or preclinical development, so it's less, you know, less business simply due to the volumes. Overall, yeah, there is an impact, but not that strong for definitely not for the bioprocessing business. Capacities, yeah, we have we are building and expanding manufacturing capacities. Joachim mentioned one driver is regionalization. Yeah, here, we want to make sure that we fulfill expectations of customers in Asia, and being, you know, having local footprint in Asia. Is there a risk, you know, that we would see a pressure on margins? We will see that so far, so far, not necessarily. We believe that the capacity expansions we are doing, looking at our projections and expectations for the future growth, that will get filled then rather quickly again. We want to be prepared for these volatilities, which we talked about also, and having capacities ready for the next phase. Rainer? Yeah. Hugo, on the bond, basically, we're looking at a plain vanilla bond, anticipating buckets between three to twelve years. We really need to see how it plays out at the end of the day, but it was a fixed coupon, so really a straightforward bond. I hope that answered your question. Our next question comes from Richard Vosser with JP Morgan. Please go ahead. Hi, thanks for taking my questions. A couple, please. Just thinking about the customer reordering in late Q3, have the customers indicated any sort of increase or level of reordering that they expect to you? Just some thoughts there, how they think that to develop. Second question, it looks as though you still have an order backlog at this point. I know around maybe about EUR 500 million ahead of sales over the last sort of three or four years. Is that the case? When do you expect that to return to balance? How much of this is expected to benefit the H2? Just thinking about that H2 and the, that order backlog and the orders you've taken in the H1, you know, the H2 has still got an element of recovery to get to your guidance. Just thinking about the pushes and pulls on that H1 versus H2, is that all backlog? Because the low orders that you've taken in the H1 seem to mean that that's relatively challenging. Just or somewhat challenging. Just some thoughts there. Thanks very much. Maybe before René may comment on in how far we see any, you know, level and size of orders of customers that have come to an end with their destocking. We wouldn't we don't call that backlog, I guess, what you are addressing, and I therefore I hope I got your question right and am able to answer it in the right way. Ballpark, EUR 100 million, maybe EUR 150 million is the number of maybe what we would say, destocking left to happen. So, but, you know, backlog for us would always be a kind of whatever carryover of orders, which always happens, but which is not necessarily subject to any destocking activities by customers also. but I guess, you know, if we are talking about the same thing here with maybe slightly different words, then we would say ballpark, it's that number. what we indeed factored into our H2, as you call, recovery of sales revenue, is the pickup of ordering activity again by customers. That's basically the most significant aspect that we are expecting here. René? Richard, on the size of orders, I would say that very much overall, it's of course driven by consumption and then by each customer's preference and strategy on inventory levels. What we, however, see and would expect is that other than in the past, where customers, some customers would place standing orders for the year consumption, that we will not see that or see that less, and rather more of smaller orders. That's something we are seeing coming. Excellent. Thank you very much. Our next question comes from James Quigley with Morgan Stanley. Please go ahead. Hello, thank you for taking my questions. I've got about two left. Just picking up on the question on margins and the impact of capacity coming online. Thinking about your capacity utilization today, sort of broadly across your network, how does that compare now versus pre-COVID levels? Also, is there a mix element as well that maybe might also support higher margins for a similar level of utilization today versus where you were in the sort of 2019 period or so? Just thinking on a quarterly basis, the Q2 margin looks a little bit lower than the Q1. Similarly, on the same topic, in terms of the margin, you mentioned the cost-cutting initiatives. How much of the sort of margin hit has been offset by cost-cutting initiatives? Secondly, on the lower investment by customers, can you talk through some of the drivers here? Is this projects that where customers have ordered equipment in advance than received, see that equipment before this year? Or is this more referring to customers being cautious about investing in future projects and deliveries there? Thank you. Yeah, maybe I start. Capacity utilization, during the high times of the pandemic, in the sense of where we had this very high level of order intake, customers were trying to build up inventories or were de facto building up their inventories, inventory levels. The capacity utilization was really at 100% in many, for many product segments, so that included a very significant expansion of our of our shift models. There were quite some sites where we were running 24/7 shifts. Now this is back to a more normal level. If we would now say 24/7 is 100%, then we are now down to, you know, 80%, 75%, depending a little bit also on the product segments. In some product segments, a little bit lower, in some, a little bit higher. That's also why the significant capacity expansions that we are still investing into are very relevant in our view because of the midterm growth expectations that we are having. It's also important that we are not running at 80%+ capacity utilization too quickly again, because there's always quite some lead time that it takes to expand capacity. I think, during other times, during different times, we also spoke about this in one of those calls, that there is nothing more expensive than not having capacities available. That is why we believe, this makes sense to continue investing here. You were asking for several other effects on profitability besides capacity utilization or the volume effect. Rainer was a little elaborating on the volume effect earlier today. You were mentioning mix costs, et cetera. I would like to add to this price and supply costs, so to say, and that, of course, had quite some impact. We have pretty much been able to offset the higher costs on the supply side by price increases. I think that has been a topic since 15 months, roughly. So far, I think we are on a good track to continue being able to offset that. The cost adjustments that we were undertaking were compensating only for a smaller part of the volume effect. It's pretty much. I mean, of course, it's always possible to achieve more compensation here, but what we are trying to balance here at the moment is what we addressed earlier in our call here today, and that is being prepared for a pickup of order intake again because we then think that we have to adjust outputs again quickly. Therefore, it was only a smaller part that we were offsetting. Rainer, you want to add? Yeah, I can also add some color there, James. Basically, if you look at that we are with our functional expenses, also, this, the first 6 months, 2023, are pretty much in line with the first six months of 2022. When you look in 2022, actually, the H2 was 10% higher than the H1. You see that actually we made quite some progress also in managing really also our functional expenses overall. It gives you the communication there, and there is a mid-double-digit EUR million figure we're talking about there. Maybe the last question, if I took that down rightly, that is in how far customers have been investing into equipment in advance? I don't know, René, whether you want to comment on that. I think one can say in general that we have seen that before, that there have been times where people were expanding capacities very significantly, one was triggering the other, there was a little bit more capacity available. I don't know. Yeah, absolutely. You can see it rather at the smaller clients, smaller customers, smaller CDMOs, mostly in Asia Pacific, including China, that those companies, you know, kind of driving the wave of high demand during the COVID invested in capacities which are not yet utilized. That, you know, it's one of the reasons why we see less investments going on now, in, yeah, particularly in that customer segment. Great. Thank you. Just one quick follow-up, if I can. Just in terms of the capacity utilization, at what levels were you sort of pre-COVID? I mean, that might be a bit more of a direct comparison to where you are now, the sort of 80%-75%. Yeah. Where were you pre-COVID? We typically want to stay below 80%, or in other words, as soon as we reach 80%, we want to be able to activate additional capacities relatively quickly. Typically, we try to maneuver between 60% and 80%. It sounds relatively low, but please keep in mind that we are typically growing 10% or more year on year, and that there are quite some lead times to activate additional capacity. Ballpark, 80% is a good number, but again, new capacities have to be available relatively quickly. Lovely. Thank you very much. Our next question comes from Odysseas Manesiotis with Berenberg. Please go ahead. hi, thanks for taking my questions. First, want to follow up on René answer around inventory levels earlier. I mean, if 60% of your customers are expected to reach their target inventory levels at the end of the Q3, what was that percentage around June or the end of the Q2? Secondly, could you please give us a bit of a feeling of your cost of debt from 2024 onwards, assuming the Polyplus acquisition is fully debt financed, would around 4%-4.5% be sensible? Thirdly, could you also please talk to us about any progress made around the CFO search and what the expected timelines are? Thank you. Maybe on the first question, we believe that the vast majority of our customers have not reached their targeted inventory level before the end of Q2. Maybe something below 25% that have reached that level by the end of Q2, but not more than that. Rainer? Yeah, on the debt assess, basically, going forward, the total debt, because we are still enjoying, to be honest, some lower financing from the past, that the combined debt going forward is probably more around on the 4% range. We expect, of course, the bond to be more on the between 4%, 4.5%, and since we have currently a bit lower rate, the combined one, I would see around 4%. Yeah, I hope, I thought it's clear that this is something that we cannot comment on. I think it's clear that this is very much on top of the agenda of the supervisory board and my understanding is that the supervisory board is quite, yeah, driving this process, yeah, very diligently and well in time. All clear. Thank you very much. Our next question comes from Falko Friedrichs with Deutsche Bank. Please go ahead. Thank you. Good afternoon. My first question is, thanks for sharing this EUR 100 million-EUR 150 million that is still left to be destocked. Can you help us put that into perspective and share, the amount that you've experienced in the H1 of this year, that was destocked? My second question is related to that: How much of the EUR 100 million-EUR 150 million still left to be destocked do you expect to be destocked in 2024? Do you expect all of that to be completed by the end of this year? Thank you. Sorry, we were on mute here. Once again, ballpark, we believe that this will be close to half a billion overall of destocking that we will have seen. We think left will be the EUR 100, maybe a little bit more than the EUR 100, and then there will be something EUR 300 plus that we think has happened so far in H1. That's ballpark, we don't expect a significant number to be carried out into 2024. Okay, thank you. Our next question comes from Delphine Le Louët with SG. Please go ahead. Yes, hello. Good afternoon, Delphine Le Louët speaking. If I move a bit on Polyplus, could you let us know the evolution of the mix in between the reagent and the transfection that you see in the future now that you've been completed the acquisition? Secondly, I was wondering, because you already mentioned 1 percentage point additional growth coming out from Polyplus, and we know that the margin are fairly exceptional in the field, and you have no contribution to margin. Does your vision and midterm vision, or can you give us a bit more idea about what would be the fluctuation of the margin just linked with the incorporation of Polyplus into the business? Yeah. Le again, can you please repeat the first question? I was wondering if you can share your vision about the evolution of the mix in term of revenue for Polyplus, regarding the breakup in between the reagent and so in between the transfection factors and the plasmid. Would that change over time, according to you and to your client base, how you see the future? Second question was more about the margin and the accretion to the to the overall. Okay, yeah, thank you for clarifying. Product mix evolution for Polyplus, we would expect is that, you know, in transfection reagents, Polyplus having already very strong market position versus. And they will continue to grow that moving forward. Plasmid, Polyplus is rather a newcomer in the plasmid manufacturing and plasmid design, so here we would expect higher growth rates, of course, starting on a bit lower level than transfection reagents. Margins, margins, I think. I can say something. Rainer can comment on that. The margin we'll see basically on a full year basis, half a percentage point increase on every day. Of course, we'll really see that, partially of that this year, but since it's still within the range of our guidance, we didn't flag that specifically. It is obviously has a, substantially higher by, margin than the Bioprocess Solutions Division so far. Mm-hmm. Okay, thanks. Our next question comes from Oliver Metzger, with ODDO BHF. Please go ahead. Good afternoon. Thanks a lot for taking my questions. Two I have. The first is on the inventory levels at customers. We hear that some customers approach low inventory levels, but the degree of concern is not so high as basically the whole bioprocess industry signals openly that they are able to deliver short term. Do you regard lower inventory level and the tendency potentially to order just in time, as a risk or a new normal that also given the higher cost of capital and therefore efforts to reduce working capital? That potentially your assumption that six months inventory level we saw before the pandemic is not the old reality but the new reality might be somewhere below the six months. My second question is just very quick on Polyplus. Can you comment on the underlying performance of Polyplus since the beginning of the year? As basically, since, over the last months, you were not allowed to talk in details, but now we are after the closing, and do you see also some higher volatility at Polyplus? Thanks a lot. Yeah, maybe I take the first question. Regarding the target inventory levels of our customers, we don't have an indication that they are aiming for a substantially lower level at this point. I fully understand the considerations that you have just explained. On the other hand, many customers still are rather cautious and want to be prepared for future disruptions of supply chains. At the moment, we don't have any indications that they are aiming for a substantially lower inventory levels. On Polyplus, René? The performance is as expected. The few similar effects as we see in the other portfolios by processing, but by far not that pronounced. There are a couple of customers also who build inventories, but again, it's much less pronounced than in other businesses. Okay. Thank you very much. Our next question comes from Sezgi Ozener with HSBC. Please go ahead. Hi, thanks for taking my question, and thanks for your clarification on the financing. Now that net debt to debt is reaching four levels, I know it's going to come down gradually, but what will your be your strategy if another opportunity came up? That's question number one. Question number two is on, in terms, you mentioned the Russia comps, 4% by Sartorius and 5% by Stedim. When does the base get easier for that? Do you ever expect this business to come back, and are there strategies that you're taking against that? The last one is on the substantial reduction that we've saw in the receivables. We know that it's partially a working capital correction, but did that have, like, further, like, impact, such as, like, the acquisition of the distributor in Turkey or any other, any other change that you saw during the period? Thank you. The line was indeed a little bit, limited here, so don't know whether we got your questions right from an acquisition standpoint. Can I repeat them? Happy to repeat them. Yeah, that would be great. Sure. First of all, on the Polyplus acquisition and the financing with two bonds you mentioned, equity financing for Stedim seems to be out for the moment. What would your strategy be in the case of another attractive acquisition opportunity coming up, given net debt to debt is coming close to four? Second question was on the Russia comps. You mentioned a significant impact on revenues. When do you expect Russia comps to reach a base? Is there structural change there? Do you ever expect this business to come back, or did it get transferred to a different region or, yeah, to local competition? The last one is the substantial reduction in receivables that we've seen. Is this just like the working capital correction we have seen, or does it have more to do with the one-time payment to suppliers that you mentioned, or the acquisition of a distributor in Turkey, such as that? Yeah, thank you very much for repeating the three questions. This is now very clear. As we always have said that we would consider using equity for financing acquisitions in general. That, of course, always depends on the specific case, so therefore, we would not, you know, like to speculate now about any theoretical case. In general, we do have the opportunity to use both or either SSB shares in case of an acquisition that would be made by the Sartorius Stedim Biotech subgroup, or Sartorius AG's treasury shares, in case it would be an acquisition that would be made by the LPS division. Definitely wouldn't exclude this year, but currently no plans for doing that. Again, depends on a couple of factors, I believe. Russia, first of all, it's important to point out that our business in Russia is extremely reduced and extremely limited. It always has been very focused on the healthcare and biopharma sector anyway. No business outside this sector. I think it goes without saying that no business outside any restricted areas or allowed areas, very much down to the level that might stay, but maybe it goes even further down. It's very much reduced now already. As you are asking for structural changes, I guess you know that they sound maybe easier than they are. Even pulling out here is restricted legally and comes with certain risks. We are trying to manage that very diligently, but clearly we are almost completely out of any activities there. To your third question, though, it's the normal course of business that has influenced our network and capital position and the different elements here. As we always have said, we were working on reducing our inventory levels by ourselves. This is a function of the robustness of supply chains, expected orders, that's clear. On receivables, nothing specific to mention here. Thanks very much. Just as a follow-up, in terms of the Russia business base, when do you expect the comps to become easier? Beginning of the war or in the later quarters? I wouldn't expect any change here anytime soon. Okay, thanks. Our next question comes from Naresh Chouhan with Intron Health. Please go ahead. Hi there. Many thanks for taking my question. Just a couple on supply, please. Can you help us understand when each of the kind of different elements of your new supply come on stream and how long they'll take to get to full capacity? Then, if I heard you correctly, since COVID, you added about 10% of capacity a year, if I heard correctly, I may have misheard that. Can you confirm that? If, can you also help us understand what kind of amount of capacity we're getting over the next few years? Thank you. Sorry, Naresh, could you repeat, especially on the questions? Apologies. The second one we didn't get. Okay. On the, if I heard you correctly, I think you said that you've been adding about 10% of incremental capacity each year over the last few years. I may have misheard that. Can you confirm? Secondly, on that, can you help us understand kind of what percentage of increase in capacity we should be assuming in the coming years out to 2025? Thank you. Yeah, thanks. Thanks again for repeating, but maybe we have a problem here with the quality of the audio line. Capacities, now what I actually tried to bring across is that if you, if you take approx 10% organic growth, then it means that capacity utilization gets increased by approx 10 percentage points year on year. Just ballpark number, right? And that means that we don't feel comfortable to run any manufacturing site above 80% capacity levels, because then we hit very soon the ceiling. That is what we wanted to bring across. The capacity additions. Therefore, of course, you are right. One could translate that into, okay, every year we have to add around 10% capacities. That's right. When you look into a specific project, to extend capacities, then very often they are larger than just 10%. Yeah, so therefore, you typically, the chunks that we are adding, and that now depends very much on the type of technology, product segments, and so on and so forth. Very often, I would rather think of sizes of 30%, sometimes 50%, sometimes even larger, sizes of additional capacities. I think we sometimes spoke about that. Sometimes we also do that in a staggered approach, that we add quite substantial additional clean room capacities, for instance, that would allow us for even doubling the capacities. Then we fit in machines only for, let's say, additional 25% of capacities and then add the machinery sequentially over the time. So you cannot translate that that easily, but that's roughly what we are seeing. The second question, how much additional capacities we will make available over the next couple of years, then ballpark for sure will be rather around 50%. Again, it depends now on the different segments. In some areas, for instance, when we talk about cell culture media, and then reagents, et cetera, it's even more than that, whereas in other segments, it's maybe rather around that number. Again, keep in mind, cell culture media, reagents, critical materials, et cetera. This is the segment that we have entered. René was elaborating on that earlier today, where we also expect substantially higher growth rates than the 10% I was talking about. That's why also the additional capacities that we are building at the moment are larger. Thank you. If I can just ask, when would you expect those to come on stream? Is that at 2024 or 2025 or beyond? Yeah. you know, it depends. For example, additional capacities in Aubagne for fluid management technologies, we basically will have available partially already end of this year, beginning of next year. There are additional capacities in Yauco for our single-use technologies as well as for cell culture media, where we are also talking about later this and earlier next year, capacities in South Korea, we are rather talking about end 2025, beginning of 2026. It's really staggered. There is not this one big bang moment. It's really rather over time. Thank you very much, appreciate it. There are no further questions at this time. I hand back to Dr. Joachim Kreuzburg for closing comments. Please go ahead. Yeah, thank you very much, everyone, for your interest in in our results, and also in all those strategic and operational topics, beyond the short-term results only. Appreciate very much the dialogue with you. I hope we were able to answer your questions sufficiently. Looking forward to continue our dialogue latest in three months when we will publish our nine months results. Wish you a relaxing summer wherever you are. Enjoy your vacation. Talk to you soon. All the best. Bye-bye. Ladies and gentlemen, the conference is now concluded, and you may now disconnect your line. Thanks for joining, and have a pleasant day. Goodbye.