Chief Financial Officer’s Report

Sales in the Life Sciences Business reached CHF 451.8 million (2022: CHF 492.3 million or CHF 466.0 million in local currencies), a decrease of 8.2% in Swiss francs or 3.0% in local currencies compared to 2022. In contrast, underlying sales increased by 4.9% in local currencies, excluding the impact of lower COVID-related sales compared to the same period last year (estimated net effect of CHF -35.1 million in local currencies, based on an allocation of 60% of total COVID-related sales in 2022). 

Thanks to good growth in the service business due to the higher installed base of instruments, recurring sales of services, consumables and reagents increased to 52.8% of segment sales (2022: 51.0%).

In the second half of the year, underlying sales increased by 4.4% in local currencies and reported sales rose by 1.6% in local currencies. 

As new orders were only slightly lower than sales, the ratio of new orders to sales (book-to-bill) also normalized to a value close to 1.

The Partnering Business generated sales of CHF 622.6 million during the year under review (2022: CHF 652.0 million), which corresponds to a decrease of 4.5% in Swiss francs and 0.1% in local currencies. Underlying sales increased by 7.4% in local currencies, excluding the impact of lower COVID-related sales and a lower pass-through of material costs compared to the same period last year (estimated net effect of CHF -23.4 million in local currencies and CHF -19.7 million, respectively).

The increase in underlying sales is primarily due to double-digit growth in the Paramit product line, driven primarily by the medical business, which also benefited from pent-up demand for certain medical products after the end of the pandemic.

By contrast, sales of Cavro®OEM components declined substantially, as these products had experienced a significant surge in demand in the prior-year period to mitigate disruptions in the supply chain and in the run-up to the transfer of production to two new manufacturing sites.

Demand for in-vitro diagnostics systems for the Synergence™ product line remained solid and sales in local currencies were nearly unchanged year-on-year.

New orders in the Partnering Business were only slightly lower than sales, the book-to-bill ratio came close to 1. 

In Europe, Tecan's full-year reported sales in 2023 were still affected by a COVID-related high comparative basis and weaker demand and developed accordingly at -22.6% in Swiss francs and -19.9% in local currencies. Against the high comparative basis, sales in the Life Sciences Business were 14.1% lower than the previous year in local currencies, and in the Partnering Business they declined by 24.2% in local currencies.

In the second half of the year, sales in Europe decreased by 24.6% in local currencies for the Group and by 7.7% and 36.2% for the Life Sciences Business and Partnering Business segments respectively.

In North America, reported sales grew by 5.8% in Swiss francs and by 11.8% in local currencies. Despite the high COVID-related basis of comparison and more cautious spending behavior, sales in the Life Sciences Business segment increased by 5.1% in local currencies. The Partnering Business segment reported a 16.4% increase in sales in local currencies, driven by strong sales growth in the medical business, which more than offset COVID-related sales in other product categories from 2022. 

Sales growth in North America accelerated in the second half of 2023, rising by 17.1% in local currencies. Both business segments contributed to this acceleration in the second half of the year, with the Life Sciences Business growing by 13.1% in local currencies and the Partnering Business by 19.6%.

In Asia, full-year reported sales in 2023 decreased by 8.0% in Swiss francs and 1.7% in local currencies. In the second half of the year, by contrast, sales rose by 7.7% in local currencies. However, the development of sales in the two business segments was very different in the two half-year periods. While the Partnering Business was still affected by a high COVID-related basis for comparison and a decline in sales of Cavro components in the first half of the year, segment sales rose by 25.5% in local currencies in the second half of the year. The Partnering Business therefore closed the year as a whole with only a slight loss in sales of 2.9% in local currencies.

In contrast, the Life Sciences Business segment recorded a significant increase in sales in local currencies in the first half of the year but experienced an almost identical decline in sales of 9.8% in local currencies in the second half of the year, mainly due to the market weakness in China. For 2023 as a whole, sales in the Life Sciences Business segment in Asia thus remained almost unchanged at -0.3% in local currencies.

Gross profit reached 390.5 million Swiss Francs (2022: CHF 438.1 million), which was 47.6 million or 10.9% below the prior-year figure. The decline is mainly due to the lower sales volume, which was also the primary factor behind the gross profit margin of 36.3% of sales (2022: 38.3%). Price increases, cost improvements and lower revenue from passing on higher material costs without a margin compensated for the decline in volume, but a less favorable product mix, higher depreciation on production equipment for consumables and acquisition-related integration costs led to the overall lower gross profit margin.

Main effects contributing to the gross profit margin level:

• (-) Lower sales volumes
• (-) Product mix
• (-) Increased depreciation of consumable production lines
• (-) Acquisition-related costs
• (+) Price increases 
• (+) Efficiency and cost improvements 
• (+) Lower revenue from passing on higher material costs without a margin

At CHF 220.6 million, adjusted operating profit before depreciation and amortization¹ (earnings before interest, taxes, depreciation and amortization; EBITDA) was slightly below the previous year's level (2022: CHF 229.9 million), mainly due to lower sales volumes and a negative impact from exchange rate movements in major currencies versus the Swiss franc. The adjusted EBITDA margin nevertheless increased to 20.5% of sales (2022: 20.1%). 

The reported profit before interest and taxes, EBIT, was at CHF 136.0 million (2022: CHF 147.8 million). Reported EBITDA reached CHF 207.3 million in the fiscal year 2023 (2022: CHF 214.9 million). 

Reported operating profit in the Life Sciences Business segment (earnings before interest and taxes; EBIT) reached CHF 84.4 million (2022: CHF 87.1 million). The operating profit margin rose to 18.3% of sales (2022: 17.1%), supported by price increases and cost control and despite the lower sales volumes and an adverse exchange rate effect. 

Reported operating profit in this segment (earnings before interest and taxes; EBIT) amounted to CHF 64.4 million (2022: CHF 74.4 million), while the reported operating profit margin reached 10.3% of sales (2022: 11.4%). The integration costs and amortization of acquired intangible assets in connection with the acquisition of Paramit were recognized for the Group in the Partnering Business segment. Other factors negatively impacting the segment margin were the lower sales volumes with corresponding negative economies of scale and a more negative product mix.

Adjusted net profit² increased to CHF 164.4 million (2022: CHF 154.4 million), supported by a one-time positive effect in connection with transitional measures from the Swiss tax reform. Adjusted earnings per share rose to CHF 12.88 (2022: CHF 12.14). Reported net profit for 2023 increased to CHF 132.1 million (2022: CHF 121.1 million), while basic earnings per share grew to CHF 10.34 (2022: CHF 9.53). 

Cash flow from operating activities increased by 25.2% to CHF 160.6 million in 2023 (2022: CHF 128.3 million). In the prior-year period, inventories and safety stocks increased to ensure delivery capability in times of tight material supplies. These inventories have now been increasingly reduced again. Thanks to the strong cash flow, Tecan’s net liquidity position (cash and cash equivalents plus short-term time deposits less bank liabilities, loans and the outstanding bond) increased to CHF 112.6 million (December 31, 2022: CHF 41.2 million). 

Tania Micki
Chief Financial Officer

1. The adjusted operating profit before depreciation and amortization excludes acquisition- and integration-related costs (+CHF 17.7 million) as well as one-time pension plan effects (-CHF 4.4 million).
2. The calculation of 2023 adjusted net profit and adjusted earnings per share excludes acquisition- and integration-related costs (+CHF 17.7 million), one-time pension plan effects (-CHF 4.4 million) as well as the accumulated amortization of acquired intangible assets (+CHF 19.5 million) and they were calculated with the reported Group tax rate of 1.3%.