We are pleased with our performance and the solid underlying sales growth in the first half of the year. In a very dynamic market environment with longer purchase decisions and cautious investment behavior among many customers, our teams did an outstanding job of materializing the opportunities that arose. It also stands out that we are now much more broadly positioned across multiple growth market segments. In addition to life science research and diagnostics Tecan also serves the medical devices market through strong OEM partnerships which continue to show solid growth. In addition, we were able to launch numerous new, highly innovative products directly or with partners in the first half of the year. With the continued dedication of our remarkable global teams and the support of our valued partners, we remain cautiously optimistic for the remainder of the year, as our sales funnel and new products in the Life Sciences Business and the combined offering in Partnering Business have shown promising potential.
Dr. Achim von Leoprechting
Chief Executive Officer
Dr. Lukas Braunschweiler
Chairman of the Board
Order entry for the first six months of the year was CHF 536.6 million (H1 2022: CHF 600.5 million), down 10.6% year-on-year, or 7.1% in local currencies compared to the substantial order entry achieved in the first half of 2022. In the prior-year period, COVID-related orders still contributed to the high order intake. In addition, higher inventories, for example of OEM components, were created by customers due to disrupted supply chains. As supply chains largely normalized in the first half of 2023, customers no longer needed to place orders as far in advance as they did in the prior-year period. As a result, the book-to-bill ratio also returned to normal at a level of around 1.
Reported sales in the first half of 2023 decreased by 7.3% in Swiss francs and 3.6% in local currencies to CHF 541.5 million (H1 2022: CHF 584.0 million or CHF 561.8 million when compared in local currencies). Underlying sales, on the other hand, increased by 6.8% in local currencies, excluding the effects of lower COVID-related sales and a lower pass-through of material costs compared to the prior-year period (estimated net effect of CHF -48 million in local currencies and CHF -7 million, respectively).
Adjusted operating profit before depreciation and amortization (earnings before interest, taxes, depreciation and amortization; EBITDA) decreased by 15.0 % to CHF 101.2 million, mainly related to the lower sales volumes (H1 2022: CHF 119.1 million). The adjusted EBITDA margin amounted to 18.7% of sales (H1 2022: 20.4%).
Adjusted net profit1 amounted to CHF 65.8 million (H1 2022: CHF 80.6 million), while adjusted earnings per share1 reached CHF 5.16 (H1 2022: CHF 6.34). Reported net profit for the first half of 2023 was CHF 53.2 million (H1 2022: CHF 65.7 million). This figure includes integration-related costs in connection with the Paramit acquisition (CHF 5.0 million) as well as the accumulated amortization of acquired intangible assets (CHF 9.9 million).
Cash flow from operating activities increased by 17.3% to CHF 82.5 million in the first half of 2023 (H1 2022: CHF 70.3 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, and further reductions are expected by the end of the fiscal year. 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 61.7 million (December 31, 2022: CHF 41.2 million).
- The calculation of adjusted net profit and adjusted earnings per share excludes acquisition and integration costs (+CHF 5.0 million) as well as the accumulated amortization of acquired intangible assets (+CHF 9.9 million) and they were calculated with the reported Group tax rate of 15.1%.
Sales in the Life Sciences Business reached CHF 228.6 million (H1 2022: CHF 259.1 million or CHF 246.6 million in local currencies), a decrease of 11.8% in Swiss francs or 7.3% in local currencies compared to the first half of 2022. In contrast, underlying sales increased by 5.1% in local currencies, excluding the impact of lower COVID-related sales compared to the same period last year (estimated net effect of CHF -29 million in local currencies, based on an allocation of 60% of total COVID-related sales in H1 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 51.5% of segment sales (H1 2022: 50.9%).
Underlying demand for life science research and diagnostics solutions remained solid in many application areas, despite ongoing global economic uncertainties and more cautious spending patterns overall. In addition to good demand for existing products such as DreamPrep® NGS, newly launched products for growth areas have already enjoyed strong interest in the market, for example for liquid biopsies and biobanking, as well as new modules for the Fluent platform that enable high-throughput applications.
With order entry at the same level as sales, the book-to-bill ratio reached 1. Excluding COVID-related orders, the Life Sciences Business segment recorded its highest-ever order entry in a first half-year.
Reported operating profit in this segment (earnings before interest and taxes; EBIT) reached CHF 40.3 million (H1 2022: CHF 53.2 million). The operating profit margin amounted to 17.2% of sales (H1 2022: 19.5%), mainly due to the lower sales volumes in the first half of the year.
The Partnering Business generated sales of CHF 312.9 million in the period under review (H1 2022: CHF 324.9 million or CHF 315.2 million in local currencies), which corresponds to a decrease of 3.7% in Swiss francs. Sales were down 0.7% in local currencies. Underlying sales increased by 8.2% 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 -19 million in local currencies and CHF -7 million, respectively). Paramit reported strong double-digit growth supported by the fulfilment and subsequent revenue recognition of the high order backlog from 2022 and some pent up demand for medical products in the first half of the year. 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 Paramit manufacturing sites.
Underlying demand in Partnering Business remained solid and as order entry was only marginally lower than sales, the book-to-bill ratio was close to 1.
Reported operating profit in this segment (earnings before interest and taxes; EBIT) amounted to CHF 30.8 million (H1 2022: CHF 35.5 million), while the operating profit margin reached 9.8% of sales (H1 2022: 10.9%). The integration costs (CHF 5.0 million; H1 2022: CHF 3.3 million) 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.
In Europe, Tecan's sales in the first six months of 2023 were still affected by a COVID-related high comparison base and developed accordingly with -18.0% in Swiss francs and -15.1% in local currencies. Against this high comparative basis, sales in the Life Sciences Business were 20.1% lower than the previous year in local currencies, and in the Partnering business they declined by 11.0% in local currencies.
In North America, sales grew by 3.5% in Swiss francs and by 6.9% in local currencies. Despite the high COVID-related basis of comparison and more cautious spending behavior, sales in the Life Sciences business segment declined by only 1.8% in local currencies. The Partnering Business segment, on the other hand, reported a 13.2% increase in sales in local currencies, driven by strong sales growth at Paramit, which more than offset COVID-related sales in other product categories from the first half of 2022.
In Asia, sales decreased by 16.4% in Swiss francs and 10.4% in local currencies against a high COVID-affected comparative base, particularly in Japan. Due to the high basis of comparison, sales of the Partnering Business segment decreased by 26.7% in local currencies. The Life Sciences Business segment, on the other hand, recorded a 9.6% increase in sales in local currencies, with sales in China growing at the same rate as the Life Sciences Business in the Asia region as a whole.
Tecan further expanded its core offering in laboratory automation in key growth markets in the first half of this year. With the launch of Phase Separator™, Tecan is advancing automation for high-growth liquid biopsy and biobanking applications to boost efficiency and accuracy in clinical, medical research and pharma lab workflows. Phase Separator is an innovative new pipetting capability available on the Fluent® Automation Workstation and represents a significant advance in liquid-separation technology of whole blood and other complex samples.
The newly launched MCA 96, a pipetting arm with 96 channels for the Fluent liquid handler together with an easy-to-use software offers an extremely wide volume range ideal for high-throughput workflows. The field-upgradeable MCA 96 with optional gripper can be combined with other arms – including another MCA 96 or an MCA 384 – to increase throughput even further.
With the launch of the Resolvex A200 Omics and Resolvex A200 24, Tecan added unique solutions to its broad automation portfolio to address unmet workflow needs for proteomics and bioanalytical processes, nucleic acid purification and food safety workflows.
The company also expanded its automated genomics portfolio and reagents offering. Among the various partnerships entered into in the first half of the year, Tecan and Oxford Nanopore build an alliance to create automated, seamless and fully compatible nanopore sequencing library preparation for any-length fragments of native DNA/RNA. To further expand its reagents offering, Tecan developed the first in a series of specialist reagent kits for its MagicPrep™ NGS library preparation system. The first kits are tailor-made for the Singular Genomics’ G4™ Sequencing Platform.
In the Partnering Business, Tecan concluded several new partnerships and supported various customers with product launches and the start of commercial supplies in all business areas of the Partnering Business. This includes customized OEM systems, OEM components as well as contract development and manufacturing services. The partners are engaged in growth areas in key applications in life science research, diagnostics and the medical market with an initial revenue contribution for several customers as early as 2023. The project pipeline for new development and manufacturing projects remains rich and the broad OEM offering with strong synergies between the individual offerings is well received.
In the first half of 2023, Tecan continued to scale its global production and operational footprint. With Paramit Corporation now a fully integrated subsidiary of Tecan, the transfer of Cavro component production from its US site in San Jose, California, to the Paramit facilities in Morgan Hill, California, and Penang, Malaysia, progressed well and series production has now been successfully established at the new sites. This expansion of production capacity for Tecan's Cavro OEM components will also make it possible to meet the planned increase in demand for these products in the future.
As a step in executing the strategy to serve local customers in China even better and meet their specific needs, Tecan opened a new assembly facility in the Shanghai Free-Trade Zone (SFTZ), where liquid handling and detection products were already manufactured in the first half of the year. The new site also fulfills local manufacturing requirements for goods destined for the Chinese market (“China for China” initiative) and offers new opportunities to advance Tecan’s business in China.
Tecan’s commitment to greenhouse gas emissions reduction took a further step forward in the first half of 2023, with an absolute emissions reduction target set and submitted to the Science Based Targets Initiative for validation. Tecan commits to reach net-zero greenhouse gas emissions across the value chain (scopes 1, 2 and 3) by 2050. The related targets are set out in the 2022 Annual Report, and include a commitment to purchase 100% renewable electricity by 2025.
In addition, the environmental management process has been independently audited, and ISO14001 certification achieved for Tecan’s Männedorf headquarters. The 2022 Sustainability Report provides a comprehensive overview of Tecan’s sustainability program and was published as part of the Annual Report 2022 on the corporate website in March.
Tecan confirms its full-year 2023 outlook and continues to forecast sales to increase in the low to mid single-digit percentage range in local currencies. This expectation includes the negative impact of lower COVID-related sales (approximately -4 percentage points for the full year 2023, with the largest share of the impact already recorded in the first half of the year) and the reduced pass-through of material costs (at least -1 percentage point). Underlying sales, which exclude these negative effects, are expected to grow in the high single-digit percentage range in local currencies.
Tecan also continues to expect an adjusted EBITDA margin, excluding acquisition and integration-related costs, at least at around 20% of sales. This outlook assumes lower integration costs in 2023 compared to 2022. In contrast, Tecan expects the reported EBITDA margin to increase by 20-30 basis points in 2023 despite ongoing inflationary pressures.
The expectations regarding profitability are based on an average exchange rate forecast for full year 2023 of one euro equaling CHF 1.00 and one US dollar equaling CHF 0.92.
Integration and acquisition-related costs are expected to be in the low-teens of millions in Swiss francs in 2023, the accumulated amortization of all acquired intangible assets is expected to amount to around CHF 20 million.
The outlook 2023 does not take account of potential acquisitions during the course of the year.
Tecan also confirms the mid-term outlook published in March 2023.
Männedorf, August 10, 2023
Dr. Lukas Braunschweiler
Chairman of the Board
Dr. Achim von Leoprechting
Chief Executive Officer