GROUPMANAGEMENTREPORT - B. Braun

18 G E S C H Ä F T S B E R I C H T 2 0 1 7 19

01 FIVE-YEAR OVERVIEW

02 ABOUT THE B.BRAUN GROUP

03 ECONOMIC REPORT

04 RISK AND OPPORTUNITIES REPORT

05 OUTLOOK

GROUP MANAGEMENT REPORT

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FIVE-YEAR OVERVIEW

2016€ million

2017€ million

2018€ million

2019€ million

2020€ million

Sales 6,471.0 6,788.9 6,908.1 7,471.3 7,426.3Cost of goods sold 3,608.1 3,833.7 3,971.9 4,444.9 4,503.2

Functional expenses 2,250.6 2,366.6 2,403.0 2,551.1 2,428.1

Selling, general and administrative expenses 1,959.2 2,050.7 2,079.5 2,186.6 2,058.2

Research and development expenses 291.4 315.9 323.5 364.5 369.8

Interim profit 612.3 588.5 533.2 475.4 495.0

Operating profit 582.2 546.4 495.8 434.8 461.2

Profit before taxes 527.8 513.7 451.6 309.0 416.1

Consolidated net income 396.0 411.5 328.4 197.3 301.5

EBIT 597.4 574.9 520.6 388.8 481.8

EBITDA 975.0 985.1 952.5 1,079.1 1,103.2

Assets 7,981.8 8,525.9 9,224.4 10,088.4 9,720.1

Intangible assets (incl. goodwill) 623.3 757.0 818.3 854.5 831.8

Property, plant, and equipment 3,987.3 4,196.4 4,589.3 5,244.1 5,150.0

Other financial investments 50.3 62.0 63.3 68.0 65.1

Inventories 1,135.4 1,178.5 1,344.4 1,370.2 1,450.2

Trade receivables 1,089.1 1,148.0 1,141.8 1,233.5 1,178.9

Equity 3,172.0 3,436.4 3,649.0 3,720.6 3,641.0

Liabilities 4,809.9 5,089.6 5,575.4 6,367.8 6,079.1

Pension obligations 1,300.8 1,269.0 1,332.1 1,580.0 1,728.2

Financial liabilities 1,992.1 2,224.5 2,502.1 3,034.2 2,687.0

Trade accounts payable 442.9 483.9 532.1 506.8 438.2

Investments in property, plant, and equipment,intangible assets and financial investmentsincl. business acquisitions 806.7 969.2 921.6 894.6 782.8

Depreciation and amortization of property,plant, and equipment and intangible assets 377.7 410.2 431,9 599.2 621.4

Personnel expenditures 2,388.1 2,552.8 2,651.8 2,828.9 2,855.4

Employees (annual average) 56,849 59,851 62,675 64,210 64,217

Employees (as of December 31) 58,037 61,583 63,571 64,585 64,317

GROUP MANAGEMENT REPORTFive-Year Overview

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ABOUT THE B. BRAUN GROUP

BUSINESS MODEL

B.Braun is one of the world’s leading manufacturersof medical technology and pharmaceutical productsas well as a provider of medical services. As of De-cember 31, 2020, 64,317 employees in 64 countrieswere working for the company. Our customers areproviders of essential inpatient and outpatient healthcare services, in particular hospitals, medical prac-tices, pharmacies, long-term care, and emergencymedical services—but also patients and their familymembers directly. With high-quality system solu-tions, we continually set new, pioneering standardsfor the health care industry, and seek to protect andimprove the health of people around the world.

The B. Braun product range comprises a total of5,000 products, 95% of which are manufactured bythe company. Our range of products includes pro-ducts for infusion, nutrition and pain therapy, infu-sion pumps and systems, surgical instruments, suturematerials, hip and knee implants, dialysis equipment

and accessories, as well as ostomy, disinfection andwound care products. With our services and consul-ting, we improve processes in hospitals, renal carecenters and medical practices as well as make pro-cedures safer and treatments more efficient. B.Braunalso helps patients and their families prepare forhome care. At the Aesculap Academy, we hold aca-demic courses every year on the safe use of productsas well as classic product training for hospitals andoutpatient care. In the reporting year, we reachedover 350,000 medical practitioners in around 2,600courses.

2020, the year of the pandemic, particularly showedjust how essential the B.Braun company is: our cus-tomers could depend on us to supply urgently nee-ded medical devices. Social distancing requirementsin many countries due to the pandemic greatly limi-ted face-to-face customer interactions. However, inclose collaboration with our customers, we swiftlyfound digital solutions to continue to supply and ad-vise them during the crisis.

B. BRAUN THERAPEUTIC AREAS AND APPLICATIONS

Abdominal Surgery Neurosurgery

Cardio-Thoracic Surgery Nutrition Therapy

Continence Care and Urology Orthopaedic Surgery

Diabetes Care Ostomy Care

Extracorporeal Blood Treatment Pain Therapy

Infection Prevention Spine Surgery

Infusion Therapy Sterile Goods Management

Interventional Vascular Therapy Wound Management

GROUP MANAGEMENT REPORTAbout the B.Braun Group

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We have divided our products and services into 16therapeutic areas and applications managed acrossfour divisions: B. Braun Hospital Care, B. Braun Aes-culap, B. Braun Out Patient Market and B. BraunAvitum

B. Braun Hospital CareThe Hospital Care division considers itself a leadingsupplier for infusion, nutrition and pain therapy.We offer a complete portfolio of infusion therapyproducts, from single use products to complexmedical device systems. Our products set standardsfor quality, efficiency and safety; with the Ecoflac®plus IV container, the Intrafix® Safety IV adminis-tration set and the Introcan Safety® IV cathetermaking us a market leader. Our products are sup-plemented by the ProSet portfolio of services,which uses customized sets to optimize the imple-mentation of complex infusion systems. The Spaceand Compactplus product lines provide hospitalswith infusion pump systems for various applicationscenarios, especially in ICUs, which means theywere in high demand during the pandemic in 2020.The B. Braun Online Suite software solution allowsthe infusion pumps to be connected to hospital ITsystems, setting the foundation for data-driven in-fusion management. In the area of pain therapy, thefocus is on the practice and applications of region-al anesthesia, where we are a world leader. Our in-novative Onvision® Needle Tip Tracking makes theprocess easier for users and safer for patients. Ouranesthesia and pain therapy portfolio is made com-plete with a range of intravenous drugs. With thesuccessful fast-track registration of the sedativedexmedetodmidine in Europe, we have been able tooffer an alternative treatment for patients on me-chanical ventilation. Good nutritional status in apatient is a prerequisite of any successful therapy.The B. Braun portfolio contains parenteral and en-teral nutrition products as well as drink solutions,which are used for preclinical, inpatient and hometreatment. In the reporting year, we launched a re-design of the Nutriflex® three-chamber bag to im-prove administration. The Remune™ oral nutritionalsupplement helps especially in the treatment ofundernourished cancer patients. In the therapeuticareas of the Hospital Care division, our products areused in inpatient and outpatient settings around

the world. We are experiencing growing interest inour system partnership concept, where we workwith our customers to improve processes in hospi-tals and along the entire clinical treatment path-way, creating long-term added value.

B. Braun AesculapThe Aesculap division is a partner for surgical andinterventional treatment concepts in inpatient andoutpatient care. Aesculap focuses on the followingtherapeutic areas: abdominal surgery, cardiothora-cic surgery, orthopedic surgery, spine surgery, neu-rosurgery, interventional vascular therapy and ster-ile goods management. We are a system partner insterile goods management, combining consultationservices to optimize processes with an extensiveportfolio of surgical instruments and sterile con-tainer systems. Solutions for value retention andmanagement, along with IT platforms for managingOR supply with sterile products, round out our ser-vice offering. In the abdominal and cardiothoracicsurgery therapeutic areas, we are developing mini-mally invasive treatment concepts that—with theEinsteinVision® 3D camera system and specializedsuture materials and consumables, for example—can lead to better treatment results. In interven-tional vascular therapy, innovative products such asthe SeQuent® Please NEO drug-eluting ballooncatheter or the Coroflex® ISAR NEO polymer-freestent make better treatment options possible forpatients with vascular diseases. With customizedsets, we aid hospital teams in making processes inthe catheterization lab more efficient. In the ortho-pedic surgery and spine surgery therapeutic areas,treatment can be improved using intraoperativenavigation, minimally invasive surgical techniquesand material coatings that help prevent infection orallergic reactions. Product platforms such as Enno-vate®, CoreHip® and Plasmafit® offer hospitals abroad spectrum in the treatment of orthopedic in-dications. For neurosurgery, our Yasargil aneurysmclips, Miethke shunts and a digital platform for theAesculap Aeos® surgical microscope comprise awide portfolio that helps neurosurgeons with theirday-to-day challenges. Motor systems used in thesetherapeutic areas round out our complete packagefor performing surgical interventions. Process solu-tions for surgery planning, sterile goods processing


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and digital data integration can improve processefficiency. We are also establishing quality-basedconcepts, such as for orthopedic and colorectaltreatment pathways. This means process reliabilityand quality can be combined with better treatmentresults and economical solutions.

B. Braun Out Patient MarketThe Out Patient Market division is focused on meet-ing the needs of patients with chronic diseases.Aside from hospitals, our customers include physi-cians in private practice, outpatient and inpatientcare services, pharmacies, and patients and theirfamilies. The division offers products and servicesin the therapeutic areas of hygiene management,continence care and urology, wound management,ostomy care and diabetes management. During thepandemic in 2020, the demand for hygiene man-agement products was especially high, and we wereable to consistently supply our customers withproducts for hand and surface disinfection as wellas with surgical and examination gloves. In thetherapeutic area of continence care and urology, wedevelop urostomy products and innovative cathe-ters, such as the easy-to-use disposable cathetersin the Actreen® series. The products in our woundmanagement range are designed to take care ofsurgical, acute and chronic wounds. B. Braun’s so-phisticated range of products for slow-healingwounds aids in the natural wound healing processin an individualized and stage-specific way. Our ho-listic approach to consultation and support com-bines high quality with cost-effectiveness.

B. Braun AvitumB. Braun’s Avitum division is one of the world‘sleading providers of products and services for peo-ple with chronic and acute kidney failure. As a sys-tem partner in extracorporeal blood treatment,B. Braun Avitum focuses on three areas: hemodia-lysis, acute dialysis and apheresis. With productsand services along the entire value chain that com-bine with the complete B. Braun portfolio, we makeit possible to provide comprehensive care to pa-tients with kidney failure. Locally adapted treat-ment concepts help us optimally balance first-classcare and affordability, enabling us to make neces-sary dialysis treatments accessible to an increasing

number of people around the world. We operate anetwork of more than 360 renal care centers inEurope, Asia-Pacific, Latin America and Africa, pro-viding care for over 30,000 patients. At our clinics,medical practitioners are available to advise dialysispatients. We are striving to consolidate our marketposition with the goal of high product quality andavailability as well as an extensive program of usertraining, technical support and IT solutions.

CORPORATE GOVERNANCE

The higher-level family-owned holding company forstrategic management includes the Group‘s ac-counting, controlling, treasury, tax, legal, internalaudit, corporate human resources and corporatecommunications departments. This family-ownedholding company constitutes the link between thefamily and the company. Under the family-ownedholding company, B. Braun SE is the operationalparent company that directly or indirectly holds theshares in B. Braun Melsungen AG, Aesculap AG andB. Braun Avitum AG. The corporate bodies ofB. Braun SE are the Management Board, the Super-visory Board and the Annual Shareholders’ Meeting.

The members of the Management Board have clear-ly assigned spheres of responsibility and are jointlyresponsible for the company‘s success. As of April1, 2020, Dr. Stefan Ruppert, as a deputy member ofthe Management Board, assumed responsibility forthe human resources and legal departments, alsotaking the role of Director of Labor Relations fromAnna Maria Braun. After 32 years at B. Braun,Caroll H. Neubauer retired on August 31, 2020. Hewas first appointed to the Management Board as Di-rector of Legal Affairs in 1991. From 1996 to 2020,he was in charge of B. Braun’s business affairs inNorth America. The new CEO of B. Braun NorthAmerica is Dr. Jean-Claude Dubacher. On the Man-agement Board, this region is overseen by Anna Ma-ria Braun.

The Supervisory Board consists of 16 members, halfof whom are selected by the company‘s sharehold-ers and the other half of whom are elected by theemployees. Committees have been established to


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efficiently support the work of the SupervisoryBoard. The Human Resources Committee is respon-sible for matters such as the Management Boardmembers‘ employment contracts and compensa-tion. The Audit Committee monitors the company’ssystems of internal controls, the integrated compli-ance management system, accounting processesand financial statement audits. Prof. Dr. h. c. LudwigGeorg Braun, who managed the company for 34years, has served as Chairman of the SupervisoryBoard since 2011.

Through its subsidiaries and holdings, B. Braun op-erates in 64 countries. The B. Braun SE Group in-cludes 290 (previous year: 292) fully consolidatedcompanies. Of the holdings, 26 (previous year: 29)are consolidated using the equity method of ac-counting. Major manufacturing locations are locat-ed in Melsungen, Berlin, Dresden, Glandorf, Roth,Tuttlingen (Germany), São Gonçalo (Brazil), Suzhou(China), Santo Domingo (Dominican Republic), No-gent (France), New Delhi (India), Mirandola (Italy),Tochigi (Japan), Penang (Malaysia), Nowy Tomyśl(Poland), Timişoara (Romania), Crissier, Escholzmatt,Sempach (Switzerland), Rubí (Spain), Gyöngyös(Hungary), Allentown, PA, Daytona Beach, FL, Irvine,CA (US), and Hanoi (Vietnam).

Key performance indicators for strategic manage-ment purposes include sales, EBITDA and definedbalance sheet ratios. The key performance indica-tors interim profit and EBIT are primarily used tomanage operations. In addition, we evaluate thedevelopment of working capital based on days salesoutstanding (DSO), days payables outstanding(DPO) and coverage in weeks (CIW).

Our Code of Conduct has defined how we conductourselves when doing business since 1996. For us,corporate governance and compliance are notmerely obligations but a self-evident prerequisitefor sustainable management. The legal and ethicalconduct of our employees is central to our valuesystem. Compliance with national and internation-al regulations regarding product registration, pro-duction validation and product safety is animportant obligation. B. Braun has a global compli-

ance management system that, in addition to com-pliance with the law, includes ethical values such asfairness, integrity and sustainability. A supervisoryGroup Compliance Office and local compliance of-ficers ensure that all employees conduct themselvesin accordance with uniform standards.

GROUP STRATEGY

The strategic period that started in 2015 ended inthe reporting year. During this period, we resolvedto increase sales by 5 to 7 percent every year andto improve our EBITDAmargin (2015: 14.3 percent).In addition, we sought to further increase profita-bility through process optimizations and active costmanagement. Our extensive investment program isintended to be financed predominantly from ourown earning power.

With annual sales having increased by an averageof 5.2 percent through 2019, we are within ourstrategic expectations. Due to exchange rate trendsand the pandemic, we were unable to increase salesin the reporting currency in the fiscal year. This re-duces average annual sales growth for the mostrecent strategic period to 4.1 percent. We were ableto consistently maintain our EBITDA margin above14 percent, with the exception of 2018 (13.8 per-cent), and achieved 14.9 percent by the end of thestrategic period. Process and cost optimizationshave had a positive effect, whereas increases inproduction costs of individual plants put strain onour earnings. About 80 percent of our extensive in-vestment program has been financed with our ownfunds. Despite an increase in absolute debt ofapproximately € 1 billion compared to 2015, wehave been able to decrease our leverage ratio from2.1 in 2015 to 1.8 in 2020. Overall, this means wehave been able to achieve the key goals from our2020 strategy. We continue to see the potential forearnings optimization, for example, by downsizingcorporate structures, getting new products to mar-ket sooner and reducing startup costs for new pro-duction facilities. Nevertheless, what has beenaccomplished is a solid foundation for the nextstrategic period.


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In the reporting year, we developed our strategicframework, called B. Braun — the next decade, forthe period up to 2030. New technology and thedigital transformation will be crucial when it comesto shaping the world of medical technology and thehealth care industry of tomorrow. This is why wewill continue to drive digitalization forward andmake key technologies, such as robotics and bio-technology, useful both for us and for our custom-ers. Digital systems help us optimize our structuresand accelerate processes. Using a smart system ofintensive care therapies, digital solutions for theoperating room and an optimized orientation forour Provider and Home Care business, we seek tosupport our customers even better—medical prac-titioners most of all. We leverage our strength andexpertise to develop treatment systems that offerthem added value, and protect and improve thehealth of people around the world. All the while, ourvalues—innovation, efficiency and sustainability—continue to shape the way we do business. At thesame time, we promote a culture characterized bytrust, accountability and diversity.

As a family-owned company, our focus is on the longterm and we are also looking to grow sustainably inthe next decade. This is based on a financial frame-work that we have defined for an initial period up to2025: Our sales should grow 5 to 7 percent everyyear and our EBITDAmargin should be above 15 per-cent. We will also continue to invest heavily in re-search and development. To achieve the goals in ourstrategic framework, an additional step will see divi-sions, central services and national organizationsdrawing up detailed development plans with clearmilestones.

In conjunction with the new strategy, we already be-gan adapting our corporate structure on January 1,2021. By consolidating the divisions B.Braun Avitumand Out Patient Market into the division Avitum, wewill bundle our strengths in outpatient nephrologyand cardiology as well as in patient care for peoplewith chronic conditions. We also plan to further op-timize our global sales organization to support ourcustomers even faster and more purposefully.

SECURING THE FUTURE

In 2020, we again invested over € 1 billion in newproduction as well as in research and developmentprojects, to grow and secure our business activities.Our German locations received around 25 percentof this investment.

We invested € 369.8 million (previous year: € 364.5million) in research and development. Additions tofinancial assets and property, plant, and equipment(including capitalized development expenditures)for the reporting year amounted to € 782.8 million(previous year: € 894.6 million).

Research and developmentResearch and development activities in the B. BraunGroup are concentrated in the centers of excellence(CoEs), where research, development, productionand registration departments for specific therapeu-tic areas are combined and closely coordinated. OurCoEs are located in Melsungen, Berlin, Tuttlingen(all in Germany), Boulogne (France), Penang (Malay-sia), Sempach (Switzerland), Rubí (Spain) and Allen-town, PA (US).

The Hospital Care division focuses its research anddevelopment on improving safety for patients andusers. We develop ready-to-use versions of drugs ininfusion containers and prefilled syringes that re-duce user error, protecting both nurses and patients.We also continue to improve our products for vas-cular complete access to make their use even safer.With our new product developments, we are pursu-ing the goal of optimizing hospital processes andensuring economical health care, which is why weare working on networked solutions for integratingand connecting our new generation of infusionpumps, SpacePLUS, into hospital ecosystems. Stan-dard WiFi functionality allows for seamless treat-ment documentation in electronic patient files. Thepumps on the hospital network allow continuousaccess to central drug libraries. Dose recommenda-tions tailored to the patient are precisely adminis-tered to efficiently minimize potential medicationerrors.


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The Aesculap division combines internal and exter-nal innovations to create added value for core sur-gical and interventional processes. We haveestablished research structures that ensure contin-uous exchange with customers from the early de-velopment stage on, which can lead to fastersolutions. Our customers benefit from products thatfacilitate high-quality, safe, ergonomic use and helpto optimize hospital processes. In the 2020 report-ing year, we were able to bring key developmentprojects to completion. These include additivelymanufactured implants such as 3D-printed cages orhip socket replacements, whose coated dual mobil-ity inlays redefine the concept of corrosion preven-tion. Our Ennovate spinal system is a platform thatcovers the entire spectrum of treatment options.We are utilizing the potential of digitalization withthe Aesculap Aeos® surgical microscope for ro-bot-assisted 3D visualization, which is also thestarting point for other future areas of application.By networking our systems, we are setting thegroundwork for data-driven therapeutic approach-es and customized, cross-sector treatment con-cepts.

The Out Patient Market division continues to stead-ily develop product ranges in the therapeutic areasof wound care, continence care and urology, andostomy care, with a focus on greater tolerabilityand environmental friendliness. One example is our

catheters: Patients with a urinary tract conditionuse a total of about 2,000 catheters per year, gen-erating a substantial amount of plastic waste. Theimproved Actreen® urinary catheter reduces theimpact on the environment: It is lighter than com-parable products, is PVC-free, has minimal packag-ing and is 100 percent recyclable. This reduceswaste by a factor of 2.4. With our services, we alsolook out for innovative solutions that make life eas-ier for both nurses and their patients: Even beforethe pandemic, we were working with comprehen-sive approaches to improving hygiene in hospitalprocesses and actively preventing post-surgical in-fections. In the reporting year, we improved onthese approaches and now offer detailed hygieneanalyses of surgery processes to complement ourcustomized product range.

The goal of the research and development activitiesat the B. Braun Avitum division is to improve treat-ment quality and efficiency in extracorporeal bloodtreatment. In 2020, we quickly developed innova-tive therapeutic approaches for treating COVID-19patients, since the kidneys are the second mostcommonly affected organ in severe cases. For acutedialysis, an enhanced treatment method combinesrenal replacement therapy with the elimination ofcarbon dioxide from the patient’s blood (OMNIset®ECCO2R). This reduces stress on the patient causedby mechanical ventilation, while also allowing the

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INVESTMENTS IN FINANCIAL ASSETS, PROPERTY, PLANT, AND EQUIPMENT, AND RESEARCH ANDDEVELOPMENTIn € million

2016 2017 2018 2019 2020

DEPRECIATION AND AMORTIZATION INVESTMENTS (INCL. RESEARCH AND DEVELOPMENT ACTIVITIES)

Investments in financial assets

Research anddevelopment activities

Investments in fixed assets


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lungs to be in a partial resting state. Since May 2020,we have been able to offer citrate anticoagulation foran acute treatment method (CVVHDF). In 2020, wealso continued our research into sustainability anddigitalization. New control technology enhances thenetworking of reverse osmosis systems for dialysiswater treatment.

The “Internet of medical things” (IoMT) will bringabout more and more online medical technology inthe future. Across divisions, we continued to work onour digital health cloud platform, where medical de-vices like the SpacePLUS pump system or theAesculap Aeos® digital surgical microscope are con-nected to online applications, to not only store andanalyze data, but also optimize logistics and treat-ment processes. Data protection and secured accessconcepts play an important role here. We will active-ly participate in this development using new, digitalprocesses in the areas of customer relationship man-agement (CRM) and product lifecycle management(PLM). At the same time, we are working on stand-ardizing and further digitalizing our processes inconjunction with the continued development of ourERP system (S4 Hana).

Our B.Braun Innovation Hub bundles, structures andmanages our innovation approaches across theGroup. It is a network of employees across all areasof the company who coordinate innovation projectswith university research groups, hospitals and start-ups. The Innovation Hub provides ongoing informa-tion on the latest ideas and technologies, and assiststhe evaluation of these ideas. Through part-ners such as the German investment firm High-TechGründerfonds, Trendlines out of Israel andGerman Accelerator Lifescience in the United States,B. Braun receives a continuous influx of ideas andstartups frommedical technology innovation centersworldwide. Our partners focus on various develop-mental levels of ideas development, from the seedphase to exit. The Accelerator program offers cus-tomized support to selected startups in the form ofexpertise, market access and financing. B.Braun andthe startup founders test the ideas for customer de-mand, technical feasibility andmarket prospects. Thegoal is to translate innovative ideas into successfulbusiness models more quickly and present them asmarket-ready solutions.

InvestmentsIn the 2020 reporting year, total additions to prop-erty, plant, and equipment, intangible assets and fi-nancial assets, as well as additions to investments inassociated companies and acquisitions of fullyconsolidated companies amounted to € 782.8 million(previous year: € 894.6 million). Of that total, € 113million (previous year: € 70 million) was in additionsof rights of use under IFRS 16 for the extension ofexisting as well as signing new contracts. Invest-ments were offset by depreciation and amortizationtotaling € 621.4 million (previous year: € 599.2million).

The Hospital Care division continued expanding pro-duction capacity in Gyöngyös (Hungary). InBerlin (Germany), expansion of infrastructure andproduction capacity was completed. In the UnitedStates, extensive investments were made in theAllentown, PA and Daytona Beach, FL locations,expanding production capacity. Our investments inthe Irvine, CA plant also allowed us to complete thechanges mandated by the FDA in 2017, restoring fullproduction capacity at this location. Expansion ofcapacity in pharmaceuticals as well as for intrave-nous sets, intravenous access products and otheraccessories continued worldwide. In Spain, theAesculap division completed the automation of itsclosure technologies manufacturing. The expansionof the cleanroom in Tuttlingen (Germany) continuesas planned. In Midrand (South Africa), constructionof a new plant for products in the Out PatientMarket, Hospital Care and B.Braun Avitum divisionswere very near to completion. At the location inSempach (Switzerland), construction of a new plantfor producing disinfection products started in May.We continued to optimize our global network ofrenal care centers in the reporting year, divesting ourcenters in Poland and expanding existing centers. Inselected countries, we have constructed or acquirednew centers. At the production location in Spangen-berg (Germany), we are investing in an optimizedfactory concept.

Investment commitments in the amount of € 357.8million had already made as of the reporting date.These investments are largely attributable to ongo-ing replacement and expansion investments inthe above-mentioned locations.


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MACROECONOMIC AND INDUSTRY-SPECIFICENVIRONMENT

Performance of the global economy1The global economy is in a recession due to theCOVID-19 pandemic. The gross domestic product(GDP) in many countries shrank considerably in thefirst half of 2020 while unemployment rose. Go-vernment intervention, however, prevented unem-ployment from rising even more. Temporary tradeand investment restrictions were put in place andsome border closures occurred, which hamperedglobal trade. Commodities prices also sagged. Glo-bal GDP in Q1 2020 fell by an estimated 3 percent.In China, where the pandemic originated, economicactivity in Q1 slowed by 10 percent compared tothe same period in 2019. Among the top nationaleconomies, those in Europe experienced a greaterdrop in economic activity than the United States orJapan due to stricter measures that were enactedearlier. The crisis has laid bare the vulnerability ofdomestic output from the sourcing of inputs fromgeographically distant providers, above all for com-plex global value chains.

In Germany, measures taken to contain the pan-demic in the spring of 2020 resulted in a significantdownturn in economic activity, though reducedworking hours and fiscal stimuli produced a stabi-lizing effect. The supplemental budget for 2020passed by the federal government in March of thatyear totals € 156 billion and provides for an addi-tional expenditure of € 123 billion. The governingcoalition also decided on the basic points of an eco-nomic stimulus and crisis management package inearly June 2020 that provides for additional ex-penditures and fiscal measures. Although Q3showed some recovery, GDP for the entire year of2020 fell by 5.0 percent.

The transition phase for the United Kingdom’s exitfrom the European Union (EU) was complete at theend of the reporting year. The parties signed a co-operation agreement, which provisionally enteredinto force on January 1, 2021, including a free tradeand security agreement that generally maintainstheir economic relationship. However, the start of2021 saw new customs regulations that resulted in

1OECD Economic Outlook, June 2020 and German Council of EconomicExperts Economic Outlook for 2020 and 2021

ECONOMIC REPORT

CHANGE IN GROSS DOMESTIC PRODUCTin %

2019 2020

Europe 1.6 -7.0France 1.5 -9.8

Germany 0.6 -5.0

Great Britain 1.5 -9.8

Italy 0.3 -10.6

Poland 4.1 -3.6

Russia 1.3 -4.1

Spain 2.0 -12.8

North America 1.9 -4.9

Canada 1.7 -7.1

USA 2.2 -4.3

Asia-Pacific 4.6 -2.2

China 6.1 1.9

India 4.2 -10.3

Indonesia 5.0 -1.5

Japan 0.7 -5.3

Malaysia 4.3 -6.0

Latin America -0.2 -8.1

Argentina -2.1 -11.8

Brazil 1.1 -5.8

Chile 3.3 -8.2

Mexico -0.3 -9.0

Africa and the Middle East 2.3 -3.6

Kenya 5.4 1.0

South Africa 0.2 -8.0

GROUP MANAGEMENT REPORTEconomic Report

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significant delays in the cross-border exchange ofgoods. The pandemic struck the countries of Europeto different degrees at different times and substan-tial measures were taken at the national and Euro-pean levels to contain the virus. This led directly toproduction losses of 25 to 30 percent compared totimes of normal economic activity, with the serviceindustry being hit the hardest. At the start of thelockdown, GDP in Q1 2020 fell 3.6 percent com-pared to the previous quarter. The European CentralBank (ECB) responded with measures to shore uplending by banks and maintain liquidity. While sev-eral European nations did show recovery trends inQ3 2020 compared to the previous quarter, GDP inEurope over the entire reporting year still decreased7.0 percent.

In Russia, businesses suffered from the prolongedcoronavirus lockdown and the treasury has hit bylow oil prices. In April 2020, GDP shrank 28 percentcompared to the same month of the previous year.The shutdown of businesses and the decline in oilprice resulted in a decline in economic output ofaround $ 33 billion. Although real wages rose about6 percent in January and February, many peoplelost their jobs when the economy went into lock-down. Foreign capital is currently only trickling intoRussia, and the country’s foreign trade also droppedoff significantly.

The pandemic has put tremendous pressure on theUS economy. Demand for goods and services wasswiftly reduced to the essentials. A state of emer-gency was declared in March 2020, with businessesbeing supplied with liquidity to prevent closure.Unemployment rose and was on target for the20-percent mark at the end of April 2020. Sincemid-March, 26.5 million people had lost their jobs,bringing the total number of registered unemployedto over 30 million. GDP fell 9 percent in Q1 com-pared to the previous year. Investments were put onhold in most sectors, with the exception of onlineretailers and medical product manufacturers. Gov-ernment-ordered closures of retail stores, restau-rants and recreational facilities led to a plunge in

fixed trade volume, intensified by the population’sdeclining purchasing power. Politically, 2020 wascharacterized by the presidential election. The pre-vious administration’s refusal to accept the resultsof the election led to great uncertainty, though thedomestic situation calmed when the new govern-ment formally took office in January 2021.

The Asia-Pacific region has gained economic clouton the world stage in recent decades and is themost dynamic region on the planet. In the face of adifficult global outlook due to the coronavirus, Chi-na utilized extensive fiscal and monetary instru-ments to support businesses with extra liquidityand preserve jobs as well as encourage consumerspending from its population. After a difficult startin 2020, China’s industrial production rebounded by3.9 percent in April compared to the same monthof the previous year, exceeding expectations. How-ever, the first four months of 2020 saw a total of10.4 percent less investment in assets compared tothe same period the previous year. Imports in April2020 also fell 14.2 percent compared to the samemonth of the previous year. Despite this, China’seconomy was able to recover over the course of2020, achieving an overall increase in GDP. Japan’seconomy was greatly impacted by the pandemic,most notably with a double-digit drop in GDP fromMarch to June. Multiple lockdowns and entry re-strictions caused domestic and foreign demand tofall considerably. Production, deliveries, investmentpropensity and consumer spending all decreased in2020. Industrial companies recorded their biggestdrop in orders in seven years. India’s foreign tradealso felt the effects of the pandemic. As early asMarch, imports tumbled by 29 percent and exportsby 35 percent compared to the same month of theprevious year. Due to the low demand for consumerand manufactured goods, inventories in many in-dustries accumulated and capacity utilization in themanufacturing industry decreased. In mid-May2020, the government proposed a stimulus and fi-nancial package totaling € 250 billion, primarily tosupport microenterprises as well as small to medi-um-sized enterprises with programs such as soft


30

loans. The package also focused on cash and in-kind transfer benefits for low-income social groups.

In Latin America, a study by the UN Secretary-Gen-eral’s Department of Economic and Social Affairspredicted declining incomes on average, continuinginequality and a rise in poverty, coupled with re-newed financial instability, growing political uncer-tainty and a reduction in global trade. In Brazil,unemployment rose significantly despite govern-ment aid measures. A high level of uncertainty puta lasting strain on the investment climate. Restric-tions due to coronavirus predominantly affectedbusinesses in the service industry, which make upover 70 percent of Brazil’s economic output. In theindustrial sector, over 80 percent of businesses re-corded sales losses due to a lack of demand. Anunfavorable exchange rate also raised the prices ofthe most commonly imported capital goods. Thepandemic hit Mexico’s economy with a productionhalt in critical industries, lower demand fromabroad, a lack of consumers for its vital tourismindustry and low oil prices. The decline in industri-al production of 4.9 percent in March 2020 wouldherald the country’s deep recession. With supportfor the economy nowhere in sight, businesses wereforced to lay off vast numbers of workers. The re-cession that had been dominating Argentina sincemid-2018 continued in 2020, and it was exacerbat-ed by the pandemic. How the economy will trendcritically depends on whether the new governmentis able to renegotiate the national debt.

The economic impact of the pandemic has beenenormous for many African countries and the finan-cial leeway for economic countermeasures is mar-ginal. South Africa responded early to thepandemic but nevertheless recorded a deep declinein GDP in the first half of 2020. Bailout packagesand slashes in interest rates corresponding toaround 10 percent of GDP are aimed at supportingthe economy. Compared to South Africa, Kenya’slockdown was mild, with parts of the economy ableto remain active, though heavy national debt meantthe government lacked the funds for extensivestimulus programs. Previous government measurescomprised tax breaks and loan guarantees for busi-nesses. The national economies in the Middle East

and southwestern Asia are becoming increasinglyunsteady and the pandemic could exacerbate thealready serious crisis in some countries. Even beforethis global state of emergency, the region wasstruggling with numerous problems: Corruption,high unemployment with a rapidly growing popula-tion, war and political tension have compoundedpoverty and underdevelopment in most countries.Economic power fell by more than 10 percent in2020.

Performance of the health care industryIn the reporting year, the health care industry wasone of the hardest hit by the pandemic. Acutetreatment of COVID-19 patients pushed hospitalsaround the world to the breaking point. At the sametime, elective surgeries had to be postponed or evencanceled, further straining the already difficult fi-nancial situation of many hospitals, since a largepart of these surgeries are a critical component ofcovering costs. Several countries enacted differentsupport programs to prevent hospitals from becom-ing insolvent. The pandemic also highlighted theregional differences in the availability of medicalcare. Above all, the intensive care of COVID-19patients challenged health care systems around theworld. Manufacturers of medical supplies, medicaldevices and drugs were also heavily impacted bythe pandemic, with increased demand for productsused to treat COVID-19 forcing a ramp-up in pro-duction capacity. Supplying the resources neces-sary for this effort was challenging, as numerousglobal supply and value chains were interrupted bytemporary export restrictions (including for perso-nal protective equipment [PPE]). After the initialweeks of the pandemic, many governments tookswift action to strengthen local production capa-city and build up emergency supplies. The effects ofthe pandemic on the future structure of global va-lue chains in the health care industry cannot beassessed in full at this time. At the same time, manu-facturers of products for elective surgeries (such aship and knee implants) experienced considerabledecreases in sales, resulting in production stoppa-ges, reduced working hours and layoffs. A sustainedrecovery is only expected once the pandemic isover. For pharmaceutical manufacturers and bio-tech companies worldwide, the development of


31

vaccines against COVID-19 was one of the biggestchallenges. At the end of 2020, the first vaccineswere administered following conditional approval incompliance with regulatory agencies. The largestglobal vaccination campaign in history is expectedto continue through to 2022 due to vaccine availa-bility and impending logistical challenges.

Aside from managing the pandemic, the digitaliza-tion and outpatientization of treatment pathwaysare the major factors facing the health care indus-try. Medical advancements and persistent costpressure are pushing more and more treatmentsfrom the inpatient to the outpatient setting, andhospital stays continue to get shorter. Digitalizationwill promote this trend and open up opportunities,in rural areas using telemedicine, for example, toensure good medical care. For several years now,the world has seen different initiatives and invest-ment programs put into motion that, in some coun-tries (such as in Scandinavia), have already beenimplemented. Further implementation was slowedsomewhat in 2020 due to a shift in priorities fromthe pandemic. At the same time, the pandemicmade it clear how important efficient and digitalprocesses are in health care. This can lead to accel-erated implementation in the medium term.

Germany’s health care industry proved itself resil-ient even in the crisis of 2020. Care for COVID-19patients was ensured while government supportmeasures were able to stabilize hospitals financial-ly. The Future of Hospitals Act, passed by the Bun-destag in September 2020, provides for a total of €4.3 billion to expand digital infrastructures in hos-pitals. In addition to digitalization, the shortage ofskilled labor poses a serious challenge in this indus-try. Making medical professions more attractiveseems to have been met with broad political andsocial approval due to the coronavirus, though spe-cific and lasting measures have proven elusive thusfar. The continued rising demand for medical devi-ces from Germany kept growth steady for manufac-turers. Especially in crisis mode, German manufac-turers found success thanks to supply capabilityand consistently high quality. The debate that hasstarted about the local manufacturing of medicalcare products can strengthen Germany as a loca-

tion for the pharmaceutical and medical technologyindustries.

Europe‘s health care industry was also able to takeadvantage of the opportunities digitalization re-vealed in the reporting year. France pursued numer-ous projects to increase the use of digital servicesin the health care industry. Prior to the pandemic,the government had estimated a total of € 500 mil-lion to digitalize the country’s health care industryby 2022. In mid-July 2020, it presented a packageof measures totaling over € 6 billion in investmentfunds for hospitals. In the United Kingdom, billionsin government spending on new hospitals expandedthe country’s health care industry. Currently, how-ever, the pandemic has highlighted a gap in inten-sive care facilities. The market for eHealth solutionsis growing, since the government is increasinglyestablishing the necessary parameters for innova-tive enterprises and is forcing digital solutions forhealth care. Construction of a total of 31 plannedmunicipal hospitals around the country is progress-ing well. With the outbreak of the virus, the com-pletion of ongoing projects was given increasedpriority. These projects are being implemented aspublic–private partnerships. The United Kingdom’sexit from the EU poses challenges to the healthcare industry as well. At the moment, the effects ofBrexit on the country’s health care industry aremanageable due to numerous transitional arrange-ments. While a new national system for approvingmedical devices and drugs may be geared towardthe EU, manufacturers still need to be prepared forincreased regulatory burden. Poland’s health caresystem continues to be underfunded, with Europe-an funding being a critical driver of growth in theindustry, aiding in the purchase of new equipmentas well as in the construction of new hospitals. Thebulk of medical technology used in Poland is im-ported; the percentage of imports is estimated tobe over 95 percent. Poland’s government is firmlypushing the digitalization of the country’s healthcare forward. It considers this a major opportunityfor a system suffering from not just a lack of fund-ing but, more than anything, a lack of doctors. Sickleave forms and prescriptions are already issuedelectronically Russia’s basic medical care reformand its national project “Health” are proceeding de


32

spite the pandemic, with money being spent on theconstruction of hospitals and the manufacture ofmedical technology. Between January and April2020, the manufacture of X-ray, rehabilitation anddiagnostic equipment rose 50.7 percent comparedto the previous year’s period, to around € 111 mil-lion. The manufacture of medical instruments anddevices grew between January and April 2020 by11.8 percent compared to the previous year’s peri-od. To manufacture medical technology and drugsto fight COVID-19, the government temporarily re-appropriated funds intended for upgrading basicservices to speed up the manufacture of ventilators,PPE and vaccines. This has resulted in a delay in theplanned renovation of hospitals. In general, Spainhas a well-equipped health care system. The publicsector represents € 74 billion in health spending peryear, the private sector another € 31 billion. Thetwo combined represent 9 percent of the country’sGDP. The government that took office in January2020 seeks to upgrade Spain’s health care system,with a focus on more modern medical technologyand digitalization. Special attention is being paid toefficient, safe technology with proven benefits.

The topic of telemedicine and eHealth was alsodriven forward in North America‘s health care in-dustry. The health care industry in the United Statesexperienced increased appreciation after COVID-19laid bare the system’s deficiencies. The country’sregulatory authority, the FDA, has issued a series ofemergency approvals since the start of the crisis,resulting in novel concepts for ventilators, test kitsand test vaccines coming to market quickly. Dutyreliefs were enacted for certain medical products.The field of telemedicine saw dynamic development:Under the latest amendments, patients are not re-quired to pay out of pocket for virtual consultationsor coronavirus tests during the crisis. Polls are sug-gesting a permanent shift, with a clear majority ofUS users of telemedicine services expressing highsatisfaction. With executive orders such as “BuyAmerican”, the US administration also seeks to re-duce the nation’s dependence on imported consum-ables, medical technology and pharmaceuticals.

In the Asia-Pacific region, the health care industrygrew substantially in the reporting year due to anaging population, growing prosperity and the asso-ciated increase in health awareness. China is themost populous country in the world, with a rapidly

increasing percentage of elderly people. After thecountry had spent several years relying on cooper-ation with the private sector to upgrade its healthcare industry, China is currently about to change itsstrategy. Legal regulations, like those on vol-ume-dependent public procurement, are attemptingto significantly drive down medical technologyprices, which primarily impacts foreign manufac-turers. Chronic diseases account for 87 percent ofall deaths in the country. To better utilize resourcesand improve national health care, the governmentis now relying on the expansion of IT infrastructurein the health care industry, on digital aids, onlineplatforms for eHealth, and increasingly on the useof big data and artificial intelligence (AI). The pan-demic has only sped up the trend toward digitalhealth. Statista Research Development estimatedChina’s online health care industry to be over € 3billion in 2020, even before the outbreak ofCOVID-19. This can reach patients in rural areas andthe capacities of specialized hospitals can be betterutilized. The government has also announced moreinvestments in digital hospital infrastructure. Thefirst legal foundations for reimbursing or partiallyreimbursing health care services provided online aspart of China’s basic health insurance have alreadybeen laid. In the future, even more digital serviceswill be reimbursed. The possibilities arising out ofdigital health are enormous, especially for large in-surance companies, which have access to largequantities of patient data and dominate the tradi-tional insurance business of risk analysis. By usingbig data and AI as well as bundling various offeringsfor specific services, they can continue to streng-then their relationships with patients. Cooperationwith large insurance companies should also becomemore and more important to medical technologyproviders in addition to adapting to the ecosystemestablished by the major Internet companies. ForIndia’s health care industry, the pandemic is awake-up call. The public health sector is currentlyplanning 90 hospital projects with an investmentvolume of $ 900 million. The pandemic has furtherincreased Japan’s demand for medical technologyand drugs. Domestic production should be streng-thened overall, since the country, with a rapidly ag-ing population, relies on a high percentage of im-ports in some segments. The island nation is alsoattempting to compensate for a lack of nurses byusing robot nurses and assistants. The expansion ofpublic health insurance in the ASEAN countries,


33

such as Indonesia and Malaysia, resulted in growingdemand for health care services and products. Atthe same time, private households themselves in-vested, if only at a low level, a greater share of theirincome in their health. This led to growing imports,since the region itself predominantly produces con-sumer goods, less-sophisticated medical electricaldevices and hospital furniture. Telemedicine alsogained importance in Southeast Asia in the repor-ting year in order to improve care in remote partsof the region. Basic care is provided by publiclyfunded facilities, which were also the source of thegreatest demand for medical technology products.The biggest growth, however, was in private healthcare facilities.

Latin America‘s health care systems struggled withincreased cost pressure and higher demand. Brazil’spopulation development argues for sustainedmarket growth, however, low market prices aremaking the market unattractive despite growth op-portunities. In addition, the pandemic has heavilyshaken an otherwise crisis-proof industry. Themarket research institute IQVIA expects an increasein sales in national currency of just 4 percent for2020 and 10 percent for 2021. Converted to euros,the market volume for 2020 is set to decline, sincethe Brazilian real depreciated dramatically. Accord-ing to IQVIA, Brazil was the world’s seventh-largestmarket in 2018, behind the United States, China,Japan, Germany, France and Italy. With annualgrowth rates of 5 to 8 percent, IQVIA expects thatthe country will rise to fifth by 2023, surpassingItaly and France. The critical situation with thenation’s finances has limited the Ministry of Health’sbudget, with expenditures for vaccines and drugstaking up an increasingly larger portion. In Brazil,online retail and delivery apps are showing highlydynamic development. The purchase of pharmaceu-tical products online more than doubled in the firsthalf of 2020. However, it still accounts for less than5 percent of sales by the major retail chains. Weakpurchasing power is reinforcing the trend towardgenerics and more affordable medical technology,usually of lower quality. Mexico’s governmentattempted to urgently adapt its neglected healthcare system to the pandemic, fast-tracking thecompletion of hospitals under construction, hiringnew personnel and awarding no-bid contracts topurchase needed medical technology. To financethese endeavors, the Ministry of Health initially

spent around $ 1.7 billion from an emergency fundstarting in March 2020. Unfortunately, in manycases there was no longer a budget for equipmentnot directly needed for COVID-19 treatment,including diagnostic and orthopedic technology.Argentina‘s recession was also felt in the healthcare industry in the reporting year, since the socialsecurity funds had fewer contributions due todeclines in real income and employment. Neverthe-less, to be able to efficiently utilize the existing in-frastructure, the government relied more onmeasures to digitalize health care. Colombia‘shealth care system faced enormous challenges in2020 from both an aging population and immigra-tion from Venezuela. The country continued to relyon imports to meet the increased need. Demandwill continue to rise in the coming years with theconstruction of new hospitals. The insolvency ofhealth insurance companies and the steep dis-counts necessary on outstanding invoices from ser-vice providers such as dialysis clinics are negativelyaffecting confidence in the stability of the healthcare system.

In the last two decades, Africa has made significantprogress in terms of life expectancy and reducinginfant mortality. Nevertheless, health care on thecontinent continues to exhibit substantial deficien-cies compared to other regions of the world. Thenext 30 years will pose additional challenges to thelocal health care systems, as a growing child popu-lation coincides with a higher percentage of elderlypeople. Due to limited funding, public health carebarely has the capacity to adequately respond tothe additional need. Additionally, the percentage ofpublic expenditures on the health sector lags be-hind both when compared to developed countriesand in comparison to the African Union’s 2001 Abu-ja Declaration. The health sector in South Africa isrelatively well positioned to manage the pandemicbut must increase its capacities; hospitals couldonly slowly expand their treatment options forCOVID-19 patients. In Kenya, the pandemic shone alight on the limited capacities of the health sector.Additional capital from abroad should mainly im-prove basic medical care. The Kenyan governmentlacks the funds for extensive investments due to ahigh level of debt, though some market observersare expecting investments in laboratory facilities.Health care in the Middle East is characterized byseveral international cooperative efforts. Numerous


34

foreign health care providers operate independenthospitals and assist local hospitals with their exper-tise. The industry also relies on foreign supportwhen it comes to eHealth. The health budget of theUnited Arab Emirates (UAE) in 2020 was $ 1.3 bil-lion (+6.9 percent compared to 2019). As part of itsAI strategy, the UAE intends to invest the equiva-lent of $ 2 billion, including digital health. The prin-cipal investor in digital health is the public sector,whose financial leeway is greatly limited due to theimpact of the pandemic. Greater involvement of theprivate sector will be decisive for successful imple-mentation.

PERFORMANCE AND FINANCIAL POSITION

Business performanceIn the 2020 reporting year, B. Braun sales grew 2.2percent at constant exchange rates. This is outsideof our strategic growth range of 5 to 7 percent,however, given the pandemic, the sales trend for2020 is satisfactory. Depreciations of the US dollarand the Russian ruble as well as South Americancurrencies such as the Brazilian real and Argentin-ian peso particularly affected the development ofthe reporting currency. The same applies to theprice decline of the Chinese renminbi during theyear. Sales in the reporting currency fell 0.6 percentto € 7.4 billion (previous year: € 7.5 billion). TheHospital Care, Out Patient Market and B. BraunAvitum divisions showed good increases in sales,which were largely within the targeted growthrange when adjusted for currency effects. The Aes-culap division was unable to offset the negative ef-fects of the pandemic due to elective surgeriesbeing postponed in many countries. Despite ordershaving since stabilized, sales in this division for thereporting year were significantly less than in theprevious year. In contrast, products from the areasof infusion systems, compounding, infection pre-vention and injectable drugs sold very well, andproducts for disinfection and hygiene as well ascorresponding PPE were in high demand.

Our domestic market of Germany performed well inthe reporting year, with the increase in sales rea-ching our targeted growth range. The developmentin Europe was largely positive. Italy, Russia, theUnited Kingdom, Scandinavia and Switzerland inparticular saw local sales increases. Sales in France,Poland, Belgium and the Netherlands, on the otherhand, were weaker than in the previous year. Salesin US dollars in North America were good, howeverthey remained at the previous year’s level in thereporting currency. The Asia-Pacific region was un-able to reach the previous year’s level. Nearly everyAsian country recorded a decline in sales due to thepandemic, with China in particular seeing a consid-erable loss. Only South Korea and Australia showedincreases compared to the previous year. In LatinAmerica, development in local currencies wassatisfactory. Mexico and Chile achieved goodgrowth rates. Brazil and Colombia were also able toachieve slight increases. Business performance inArgentina was again seriously strained in 2020 dueto inflation. Due to the devaluation of Latin Ameri-can currencies compared to the euro, those nationsperformed poorly in the reporting currency. In theAfrica and Middle East region, we continued to in-crease sales, however, the increase was hamperedin the reporting currency by negative exchange rateeffects.

We were able to increase our operating profit in thereporting year, reaching the goal of improved ear-nings we set for ourselves. While cost increases inour production and growing regulatory require-ments continued to put a strain on earnings, it waspossible to reduce our cost level for sales and ad-ministration with a declining gross margin from alack of business in Aesculap. In addition to activelycontrolled measures to improve process efficiency,this reduction was facilitated primarily by the re-strictions on travel and sales activities put in placeto contain the pandemic. The changes to our plantin Irvine, CA (US) mandated by the FDA in 2017were completed in the reporting year through closecooperation with the agency and the corresponding


35

warning letter was lifted. Currently, we are workingon overhauling/expanding production at the loca-tion in Daytona Beach, FL (US) and we expect FDAapproval in 2021. Also in the United States, the val-ue of the capitalized development costs for Novo-cart 3D was adjusted in the amount of € 20.1million. Our pharmaceutical plant in Berlin experi-enced an incident resulting in property damage anda production stoppage. Final valuation of the dam-age is still pending. EBITDA at constant exchangerates for 2020 is 4.4 percent above the previousyear, totaling € 1,126.3 million (previous year:

€ 1,079.1 million). Despite this clear improvement,we were unable to reach our goal of € 1.2 billion.

Of the key performance indicators used to manageoperations, interim profit and EBIT, only interimprofit reached the projected target range of € 500million to € 550 million. This corridor could not bereached for EBIT despite a significant increase com-pared to the previous year. Given the pandemic,however, we are nevertheless satisfied with thisearnings trend. In absolute figures, these manage-ment indicators at constant exchange rates totaled

KEY PERFORMANCE INDICATORS

2019 2020 Changein %

Sales (in € million) 7,471.3 7,426.3 -0.6

Gross margin (in %) 40.5 39.4

Net profit margin after taxes (in %) 2.6 4.1

Interim profit (in € million) 475.4 495.0 4.1

Profit before taxes (in € million) 309.0 416.1 34.7

Profit before taxes (adjusted in € million) 400.2 416.1 4.0

Consolidated net income (in € million) 197.3 301.5 52.8

Consolidated net income (adjusted in € million) 288.5 301.5 4.5

EBIT (in € million) 388.8 481.8 23.9

EBIT (adjusted in € million) 480.0 481.8 0.4

EBITDA (in € million) 1,079.1 1,103.2 2.2

EBITDA margin (in %) 14.4 14.9

Equity ratio (in %) 36.9 37.5

Equity ratio including loans from shareholders (in %) 37.6 38.3

Equity ratio net of effects of IAS 19 (in %) 42.4 43.9

Net financial debt (in € million) 2,951.9 2,537.9 -14.0

Debt-equity ratio (Net financial debt/EBITDA) 2.7 2.3

Research and development expenses (in € million) 364.5 369.8 1.5

Investments in property, plant, and equipment, intangible assets andfinancial investments (in € million) 894.6 782.8 -12.5

Depreciation and amortization of property, plant, and equipment and intangible assets 599.2 621.4 3.7

Net working capital (in € million) 2,051.2 2,165.7 5.6

Personnel expenditures (in € million) 2,828.9 2,855.4 0.9

Employees (as of December 31) 64,585 64,317 -0.4


36

7.47 7.436.47

2016 2017 2018 2019 2020

6.916.79

SALES DEVELOPMENTin € billion

€ 509.0 million (interim profit) and € 491.3 million(EBIT), respectively, or 7.1 percent and 26.4 percentabove the previous year, respectively. Even whenallowing for the adjustment in value of the sharesin Rhön-Klinikum AG in the previous year (€ 91.2million), the previous year’s result was still exceed-ed. Consolidated net income at constant exchangerates rose to €307.3 million (previous year: € 197.3million). The pandemic had a considerable impacton demand in the reporting year. Increasing demandfor disinfection and hygiene products as well as PPEwas observed for single use products. Infusion ther-apy products also saw high demand, particularlypump systems for COVID-19 patients in intensivecare. In contrast, we took losses in the areas ofbasic care (Hospital Care) and implants (Aesculap).

The B. Braun Group remains in good, stable financialcondition, even during the pandemic. At present, weare not aware of any other factors that could ma-terially have a negative impact on the Group’s po-sition.

EarningsB. Braun Group’s sales growthIn FY 2020, B. Braun Group sales totaled € 7,426.3million (previous year: € 7,471.3 million), for a 0.6percent decrease (2.2 percent at constant exchangerates) over the previous year.

At the operational division level, Hospital Care, OutPatient Market and B. Braun Avitum made a positivecontribution to our sales. The Hospital Care and OutPatient Market divisions posted strong growth rates

of 3.5 percent and 5.8 percent, respectively.B. Braun Avitum’s sales rose by 1.0 percent, whilethe Aesculap division took a loss of 11.4 percent dueto the lack of elective surgeries.

Germany experienced good growth at 6.1 percent.In Europe (excluding Germany), sales growth atconstant exchange rates remained stable at +3.8percent, with Italy, Russia, the United Kingdom,Scandinavia and Switzerland in particular seeinggood growth locally. However, due to currency ex-change rate trends, some countries with foreigncurrencies performed considerably poorer whenconverted to euros. France, Belgium, the Nether-lands and Poland were unable to achieve the pre-vious year’s sales level. North America was able toexceed the previous year’s sales in US dollars by 2.1percent, with sales just exceeding the previous yearby 0.2 percent in the reporting currency. In theAsia-Pacific region, B. Braun was unable to reachthe previous year’s sales at constant exchange rates(-4.4 percent). China (including Hong Kong), Indiaand Indonesia in particular fell below the previousyear in local currency, with negative currency ex-change rate effects due to a strong euro puttingadditional strain on sales in the reporting currency.In Malaysia, we just barely reached the previousyear’s sales level in local currency. Australia andSouth Korea had positive growth despite the nega-tive exchange rate effects also prevalent in thosecountries. In the Latin America region, we increasedsales in local currencies by 3.5 percent. Argentina,Mexico and Chile saw good sales increases in theircurrencies. Every country in Latin America (espe-cially Argentina) were impacted by strong, negativefluctuations in exchange rates compared to the eu-ro, which is why sales in the reporting currency fell14.8 percent compared to the previous year. In theAfrica and Middle East region, we experienced 2.0percent in growth in local currencies, however, salesin the region ended up 2.3 percent below the pre-vious year in the reporting currency.

Business performance ofthe B. Braun Hospital Care divisionThe Hospital Care division increased sales 3.5 per-cent to € 3,459.8 million (previous year: € 3,343.0million), though the division was burdened by neg-


37

ative currency exchange rate effects. When adjust-ed for currency effects, the division’s growth ratewas 6.8 percent. Our infusion pumps were a criticaldriver of this growth, as demand rose sharply dueto the pandemic. The addition of extra capacity inthe United States for patient-specific nutrition

solutions further increased sales. However, demandfor basic care products, IV catheters, infusion setsand regional anesthesia products declined. Growthwas also negatively impacted by currency exchangerate effects in Latin America, Eastern Europe andAsia-Pacific, with government interventions in Ec-

243 238217

1,810 1,814

1,596

429 366417

1,2081,282

1,163

2,410 2,4422,274

1,3711,2851,241

3,3433,460

3,131

1,968

1,7431,824

917 971841

1,210 1,2221,082

SALES BY DIVISIONIn € million

B.Braun Hospital Care B.Braun Aesculap B.Braun Out Patient Market B.Braun Avitum

2018 2019 2020

SALES BY REGIONIn € million

Germany Europe(without Germany)

North America Asia-Pacific Latin America Africa and theMiddle East


38

uador, Colombia and Peru restricting necessaryprice increases that would have offset these effects.Growing regulatory requirements and higher pro-duction costs also prevented better development.

Business performance of theB. Braun Aesculap divisionIn the last fiscal year, the Aesculap division report-ed sales of € 1,742.9 million (previous year:€ 1,968.2 million), falling 11.4 percent (9.5 percentat constant exchange rates) below the previousyear. This decline in sales was the result of post-ponements or cancellations of elective surgeriesdue to the pandemic. The core markets of Germany,the United States and China all recorded losses.Sales of implants (knee, hip and spine) and surgicalsupplies (suture materials and laparoscopy pro-ducts) declined, however, products for access portssaw increases. The digital microscope Aeos® wassuccessfully launched in the market. The steps ta-ken worldwide to reduce costs were unable to off-set the poor sales caused by the pandemic and im-plementation of the European Medical DeviceRegulation (MDR) further dampened earnings.

Business performance of theB. Braun Out Patient Market divisionThe Out Patient Market division reported sales of€ 970.9 million (previous year: € 917.3 million), rising

5.8 percent (7.9 percent at constant exchangerates) above the previous year. This growth was pri-marily achieved with our infection prevention prod-ucts. By contrast, sales in the areas of wound careand ostomy care fell below the previous year. Salesdevelopment was also burdened by currency ex-change rate trends, predominantly in South Americaand Eastern Europe. In Ireland, B. Braun surgicalmasks launched successfully, and possible expan-sion to other countries is currently being examined.

Business performance of theB. Braun Avitum divisionSales in the B. Braun Avitum division increased by1.0 percent in the reporting year (4.5 percent atconstant exchange rates) to € 1,221.9 million (pre-vious year: € 1,210.1 million). The primary growthmarkets were China, the United Kingdom and Mex-ico. Due to the pandemic, sales of acute dialysisproducts rose considerably, with increases in thesales of dialyzer cartridges and HD concentrates.Sales of dialysis machines increasingly improvedover the course of the year. In contrast, several pro-jects relating to water treatment systems could notbe started due to the pandemic. Our network ofrenal care centers saw growth of 1.5 percent atconstant exchange rates. Adjusted for sales andacquisitions, organic sales growth came in at 4.8percent. The decline in sales due to the sale of our

FUNCTIONAL EXPENSESIn € million

2016 2017 2018 2019 2020

Research anddevelopmentexpenses

Selling and generaladministrationexpenses

2,079 2,187 2,0582,051

323364

370316

2,4022,551

2,4282,367

1,959

291

2,251


39

centers in Poland was offset. Our overall good de-velopment was negatively affected by the weaknessof the currencies in Latin America and Russia aswell as additional material costs for PPE and in-creased personnel expenditures.

Development of gross profitGross profit in the 2020 reporting year fell 3.4 per-cent to € 2,923.1 million (previous year: € 3,026.5million). Gross margin shrank 1.1 percentage pointsto 39.4 percent (previous year: 40.5 percent) due tostartup costs for our new plants and increased pro-duction costs in Germany along with the locationsin Irvine, CA (US), Nogent (France) and Midrand(South Africa). Furthermore, production also expe-rienced growing regulatory requirements and in-creased costs for audits associated with them.

Development of functional expensesSelling expenses decreased 7.0 percent to € 1,695.0million (previous year: € 1,823.1 million). Highercargo rates due to the pandemic also increasedcosts. At the same time, we managed to save con-siderably on costs through optimized sales andlogistics structures, though mostly through reducedtravel, and fewer trade fairs and events due to the

pandemic. The ratio of selling expenses to salestherefore decreased significantly by 1.6 percentagepoints. Administrative expenses in the fiscal yearcame to € 363.2 million (previous year: € 363.4 mil-lion), remaining at the previous year’s level. At con-stant exchange rates, administrative expenses were2.7 percent higher than the previous year. We aimto maintain this low cost level by consistently im-plementing further process and cost optimizationmeasures, with a major component being the con-tinued expansion of our shared service organizationin conjunction with additional process automation.The first projects using modern technology, such asrobotic process automation, are already underway.

Research and development expenditures roseslightly in the reporting year. Non-capitalized re-search and development expenses were up by 1.5percent to € 369.8 million (previous year: € 364.5million), with € 26.1 million (previous year: € 14.2million) in adjustments of the value of developmentprojects. In addition, development expenditures to-taling € 22.8 million (previous year: € 21.4 million)were capitalized as intangible assets.

Development of other operating income andexpensesOther operating income and expenses for the re-porting year totaled € -33.8 million (previous year:€ -40.7 million), a difference of € 6.8 million. Coststo hedge exposure in foreign currencies dropped€ 7.8 million to € -25.7 million (previous year: € -33.5million), in contrast to an increase in value adjust-ments to receivables compared to the previous year.In return, the sale of our provider business in Polandmade a positive contribution to discontinued con-solidation. Income was realized in connection withearnout payments from past acquisitions.

Development of net financial incomeNet financial income, including investment income,improved in FY 2020 by € 80.7 million to € -45.1million (previous year: € -125.8 million). Interestexpenses totaled € 51.7 million, falling € 6.6 millionfrom the previous year (€ 58.3 million). At € 9.6million, interest income was higher compared to the

975 953

1,079 1,103

985

EBITDAIn € million

2016 2017 2018 2019 2020

2The difference between additions to fixed assets and cash outflow from in-vesting activities as attributable to cash relevant investments and currencytranslation effects.


40

previous year (€ 7.7 million). Additionally, invest-ment profits (including profits from equity methodinvestments) were significantly higher (€ +66.7 mil-lion), totaling € 20.9 million (previous year: € -45.9million). This was essentially the result of the ad-justment made in FY 2019 on the carrying value ofthe investment in Rhön-Klinikum AG. We sold offour shares in Rhön-Klinikum AG in the reportingyear.

Development of earnings figuresInterim profit increased to € 495.0 million (previousyear: € 475.4 million). EBIT in the reporting yearreached € 481.8 million, just barely exceeding theprevious year’s level (previous year adjusted:€ 480.0 million). Depreciation increased to € 621.4million (previous year: € 599.2 million), for an EBIT-DA of € 1,103.2 million. EBITDA increased 2.2 per-cent over the previous year. The EBITDA marginincreased by 0.5 percentage points to 14.9 percentof sales (previous year: 14.4 percent of sales).Profit before taxes improved 34.7 percent, reaching€ 416.1 million (previous year: € 390.0 million). In-come taxes for the fiscal year amounted to € 114.6million, up € 2.9 million from the previous year(€ 111.7 million). The effective tax rate in the re-porting year was 27.5 percent (previous year: 36.1percent). Consolidated net income totaled € 301.5million, up 52.8 percent from the previous year(€ 197.3 million).

Financial positionLiquidityOperating cash flow totaled € 797.8 million (previ-ous year: € 815.0 million), down € 17.2 million fromthe previous year. Cash flow from investment activ-ities2 fell € 452.6 million in the fiscal year to€ 346.6 million (previous year: € 799.2 million), re-sulting in a clearly positive free cash flow of€ 451.3 million (previous year: positive free cashflow of € 15.8 million). Accordingly, cash flow forinvestments in plant, property and equipment aswell as intangible assets totaled € 677.1 million(previous year: € 768.9 million) and € 24.1 million(previous year: € 59.5 million) for investments infinancial assets and business acquisitions. At thesame time, B. Braun received dividends and dividendequivalents in the amount of € 14.1 million (previ-ous year: € 15.3 million). The sale of our interest inRhön-Klinikum AG brought in another € 304 mil-lion. Net loan repayments for the reporting year

was € 408.5 million (previous year: net € 41.7 mil-lion in borrowing). Overall, cash and cash equiva-lents rose by € 66.8 million as of the reporting date,to € 149.1 million (previous year: € 82.4 million).Stable cash flow from operations in conjunctionwith open, firmly committed credit lines givesB. Braun adequate liquidity at all times.

Asset structureAs of December 31, 2020, the total assets of theB. Braun Group decreased to € 9,720.1 million (pre-vious year: € 10,088.4 million), a decrease of 3.7percent. At constant exchange rates, total assetsincreased 1.1 percent, reflecting investments inproperty, plant, and equipment that exceeded de-preciation and more working capital.

Non-current assets decreased 6.2 percent to€ 6,605.9 million (previous year: € 7,040.0 million).Due to a consistently high level of investment, totalproperty, plant, and equipment increased in the re-porting year by 3.0 percent at constant exchangerates, though a strong euro resulted in a 1.8 percentdecrease in the reporting currency to € 5,150.0 mil-lion (previous year: € 5,244.1 million). Financial as-sets decreased 65.2 percent to € 175.0 million dueto the sale of our shares in Rhön-Klinikum AG. In-ventories as of the reporting date amounted to€ 1,450.2 million, up 5.8 percent (11.6 percent atconstant exchange rates) over the previous year(€ 1,370.2 million). Inventory coverage as of the re-porting date was 16.7 weeks (previous year: 16.0weeks). Trade receivables dropped by 4.6 percent(+2.7 percent at constant exchange rates) to€ 1,182.9 million (previous year: € 1,240.0 million).Trade receivables DSO were reduced by 4 days to 61days compared to the previous year (65 days).

Financing structureEquity decreased by 2.1 percent (+5.0 percent atconstant exchange rates) to € 3,641.0 million (pre-vious year: € 3,720.6 million). The equity ratio was37.5 percent (38.3 percent at constant exchangerates), 0.6 percentage points over the previousyear’s level (36.9 percent). Taking into accountshareholder loans, this corresponds to an equity ra-tio of 38.3 percent, meeting our goal from the pre-vious year of over 38 percent. In the reporting year,the actuarial interest rate for pension provisions fellto 1.25 percent (previous year: 1.5 percent), for arise in actuarial losses of € 97.6 million. According-


41

9.224

1,325

1,344

1,148

4,589

818

7,982

1,148

1,135

1,089

3,987

623

10,0889,720

8,526

1,3801,1051,247

1,3701,450

1,178

1,2401,1831,148

5,2445,150

4,196

854832

757

STRUCTURE OF STATEMENT OF FINANCIAL POSITION: ASSETSIn € million

2016 2017 2018 2019 2020

Intangible assets(incl. goodwill)

Property, plantand equipment

Inventories

Trade accounts receivable

Other assets

10,0889,720

9.224

8,526

7,982

1,226 1,2141,1961,1121,074

1,580 1,7281,3321,2691,301

527 450545484443

3,034 2,687

2,5022,225

1,992

3,721 3,641

3,649

3,436

3,172

STRUCTURE OF STATEMENT OF FINANCIAL POSITION: EQUITY AND LIABILITIESIn € million

2016 2017 2018 2019 2020

Equity

Financial liabilities

Pension obligations

Trade accounts payable

Other liabilities


42

ly, total provisions for pensions and similar commit-ments increased by 9.4 percent to € 1,728.2 million(previous year: € 1,580.0 million). The low interestrate necessitated an increase in pension provisions.Adjusted for the effects in the period from 2011 to2020 from the revaluation of pension commit-ments, equity totals € 4,263.9 million. This resultsin an equity ratio of 43.9 percent, which is close toour strategic target of 45 percent. Financial liabili-ties decreased 11.4 percent to € 2,687.0 million(previous year: € 3,034.2 million). Non-current fi-nancial liabilities fell 15.8 percent to € 1,935.8 mil-lion (previous year: € 2,298.2 million). Currentfinancial liabilities, in contrast, rose 2.1 percent to€ 751.2 million (previous year: € 736.0 million). Fi-nancial liabilities from leasing sank in the fiscal yearby € 28.3 million to € 404.2 million (previous year:€ 432.5 million). Most Group financing is conductedin euros, however, there are also small loans in var-ious foreign currencies. As of the reporting date,57.6 percent (previous year: 61.9 percent) of finan-cial liabilities to banks and insurance providers car-ry a fixed interest rate. Less financial debt andincreased cash and cash equivalents mean that netfinancial debt (including IFRS 16) fell € 414.0 millionto € 2,537.9 million (previous year: € 2,951.9 mil-lion). Trade accounts payables fell 13.5 percent to €448.7 million (previous year: € 524.9 million). At thesame time, trade payables DPO dropped 7 days to37 days (previous year: 43 days).

Outside financing is obtained exclusively frombanks we deem reliable and the range of measuresincludes syndicated and bilateral credit lines, prom-issory notes and an asset-backed securities pro-gram. As of the reporting date, B. Braun hasavailable lines of credit in the amount of € 1,592.0million (previous year: € 1,251.1 million). We havemet all of the required financial performancebenchmarks agreed upon with our banks. In 2020,we were able to place our planned refinancing in-struments. Financing measures in the reportingyear included B. Braun SE taking out a new syndi-cated line of revolving credit in the amount of€ 700 million that has replaced an existing syndi-cated line of credit taken out by B. Braun Melsun-gen AG for € 520 million. B. Braun SE also assumed

promissory notes from B. Braun Melsungen AG to-taling € 883.0 million under the established termsas part of an assumption of obligations. The as-set-backed securities program was largely financedby the backup line of credit during the reportingyear.

Non-financial performance indicatorsNumber of employeesAs of December 31, 2020, the B. Braun Group em-ployed 64,317 personnel, 0.4 percent less than inthe previous year (64,585). The slight decrease wasdue to targeted adjustments and optimized pro-cesses in production and in the sales organizationsof individual national subsidiaries, along with thesale of our renal care centers in Poland, withoutwhich our number of employees would have risenslightly.

At the end of the year, a total of 15,893 peoplewere working for B. Braun in Germany (+0.4 per-cent). This increase was due to the acquisition ofadditional renal care centers and an increase in hir-ings for the production of dialyzer cartridges. Thenumber of employees in Europe (excluding Germa-ny) also rose slightly, by 0.8 percent to 20,085 (pre-vious year: 19,924). This was due to an expansion ofbusiness activities, particularly in Russia, where weacquired existing renal care centers and establishednew ones, as in previous years. There was a need fortemporary employees in our logistics centers inSpain, and in technical and administrative areas. Tomeet the increased demand due to the pandemic,temporary employees were hired for production inItaly. In France, rising sales resulted in an expansionof production and, with it, an increased need forpersonnel.

In North America, we increased production capac-ity and expanded our research and developmentactivities, resulting in an increase in employees by2.5 percent to 7,777 (previous year: 7,587). In theAsia-Pacific region, B. Braun had 16,108 employees,3.6 percent fewer than the previous year (16.713).In Malaysia, we adapted pharmaceutical productionto a decrease in demand and exploited synergies inother areas. In India and China, lower demand re-


43

sulted in a decrease in employees. In Latin America,the number of employees sank 4.0 percent to 3,431people (previous year: 3,575). Improved productionefficiency through restructuring and retirementschemes reduced the number of employees in Bra-zil. The number of employees in Colombia increaseddue to expanded production and dialysis business.

In Africa and the Middle East, a total of 1,023 peo-ple were working at B. Braun at the end of the re-porting year, 6.8 percent more than the previousyear (958). The construction of a production facili-ty in Kenya that began operations in April 2020 anda new pharmaceutical factory in South Africa in-creased the number of employees in these coun-tries.

Vocational trainingB. Braun trains young people in Brazil, Germany,France, Malaysia, Poland, Switzerland and Vietnam.In these countries, a total of 1,110 (previous year:1,105) people were undergoing vocational trainingin the reporting year. A total of 360 young people(previous year: 384) completed their training and289 (previous year: 291) accepted offers to joinB. Braun.

At B. Braun’s locations in Germany, we train youngpeople in a variety of commercial, technical andscientific occupations. Overall, B. Braun offers 27various positions requiring certified apprentice-ships, which is provided in a dual education system.To learn the theoretical knowledge they need, ap-prentices attend vocational school every week or inblocks. At B. Braun, they work in a variety of de-partments to connect their theoretical knowledgewith practice. Across Germany, there are currently783 (previous year: 802) people in apprenticeships.In the reporting year, a total of 105 apprentices(previous year: 91) took the option of undertakinga course of study in one of 14 different majorsalongside their training. Of the 236 apprenticeshipgraduates overall (previous year: 232), a total of209 (previous year: 201) accepted offers to joinB. Braun.

Thanks to the employeesIn the spirit of Sharing Expertise, the employees ofB. Braun work together with our customers to pro-tect and improve the lives of people around theworld. Especially in 2020, the year of the pandemic,B. Braun was able to rely on the flexibility, personalcommitment and high motivation of its employees:

958 1,023841

7,587 7,7777,314

3,575 3,4313,558

19,924 20,08519,317

16,71316,108

16,86115,828 15,89315,680

EMPLOYEES BY REGION

Germany Europe(without Germany)

North America Asia-Pacific Latin America Africa and theMiddle East

2018 2019 2020


44

We had employees volunteer to work at other plantsand locations to help handle spikes in production.Our employees in warehousing and logistics en-sured smooth operations, making it possible tomaintain high supply capability. Employees in salesfound pragmatic solutions to let us deliver productsto our customers, despite the pandemic. Adminis-tration employees arranged for urgently neededPPE in the face of strained supply chains. And em-ployees working in offices switched to working athome and video-conferencing from one day to thenext. We extend our sincere thanks to all our em-ployees for their work and for their willingness totake on new tasks. This willingness will also be thebasis for positive business performance in the fu-ture. We thank the employee representative com-mittees and trade unions for their always fair andconstructive collaboration.

Quality and environmental managementB. Braun operates an extensive and connected qua-lity management system certified by accredited no-tified bodies. It consists of a multi-step processthat covers international requirements, regulations,and laws, and integrates applicable standards formaterial, product, and risk management. Other re-quirements regarding environmental protection andoccupational safety have also been combined intoan integrated management system. This allows usto meet the ISO 13485 criteria in all reportingcountries that manufacture medical devices. ISO13485 verifies that a high-quality managementsystem is in place that evaluates, analyzes and con-tinuously improves on quality in developing, manu-facturing, storing and selling medical devices. Inmany countries, we are also certified under ISO9001, a basic standard in quality management thatincludes all industrial sectors. We implement newor modified global standards in cross-divisionalprojects and integrate them into this system. Wealso integrate regulatory requirements from nation-al markets into the system, such as the MedicalDevice Single Audit Program (MDSAP), which moni-tors the quality of medical devices in Australia, Bra-zil, Japan, Canada and the United States. We cur-rently include our German and Swiss locations in

the MDSAP and are successively expanding the cer-tification of other international locations. With ourglobal quality management system, we ensure thatall locations in the production network operate ac-cording to the same principles. The result is prod-ucts and services that not only meet nationalquality requirements, but often go far beyond them.The latest legal standards include the EU’s regula-tion on medical devices (MDR), which was meant totake effect as of May 2020. It supersedes the pre-vious Medical Device Directive (MDD) and has animpact on numerous processes regarding the devel-opment, manufacture, and sale of medical technol-ogy. With its higher requirements, the MDReffectively improves product quality; for example,with stricter requirements on conducting clinicaltrials, an expanded scope for qualifying and vali-dating manufacturing processes, restructuring re-sponsibilities for technical documentation, andenhanced measures for market surveillance. In2019, B. Braun in Germany passed its audit underthe new regulation and was given an MDR certifi-cate for our quality management system as well asfor the first products audited under the MDR imple-mentation guidelines. This makes us one of the firstcompanies in Germany to receive an MDR certifi-cate and we consider ourselves well equipped toimplement the regulation by May 2021. In additionto medical devices, there is a new European regu-lation for drugs: the Falsified Medicines Directive(FMD). The European Union enacted this regulation(the Track & Trace Directive) to establish traceabil-ity to prevent the production of counterfeit pre-scription drugs. We invested around € 20 million toretrofit 30 production lines, 30 warehouses and 700packages in Europe and North America to meettrack and trace requirements, allowing us to regis-ter the serial numbers of every drug we have pro-duced since the inception of the directive onFebruary 9, 2019 on a central EU database. Withthis, B. Braun fulfilled all track and trace regulationswhen the directive took effect.

The B. Braun Management Board and the EuropeanWorks Council have agreed to joint rules for envi-ronmental protection. All European subsidiaries in


45

the B. Braun Group are committed to adhering tounified standards that exceed the statutory regula-tions in the respective countries. In this way, wecan achieve comparable systems for operationalenvironmental protection across Europe. The bind-ing certifications for all European B. Braun produc-tion subsidiaries include ISO 14001 for environ-mental management and ISO 50001 for energymanagement. Also outside of Europe, numerousB. Braun companies have already certified locationsin accordance with these ISO standards. Some lo-cations have even been awarded the Eco Manage-ment and Audit Scheme (EMAS) certificate, such asin Spain and Austria. To complement the manage-ment approaches in the ISO 14001 certification,EMAS focuses on publicly available environmentalreporting with tangible action plans and data. InSwitzerland, we are a member of the Energy Agen-cy of the Swiss Private Sector (EnAW). As part ofthe “Effizienz+” program, we have optimized ourprocesses in this country to use the energy neededfor production even more efficiently. All employees,in accordance with their position, receive regulartraining on occupational safety and health, first aid,and what to do in case of a fire. We design work-places to be ergonomic and, if possible, low-noise,and develop occupational safety and health plansto strengthen our culture of safety. All technicaldepartments of the company must meet strict legaland regulatory requirements, supplemented byB. Braun’s own standards for occupational safetyand health, and monitored by regular audits. SomeB. Braun locations have already been certified underISO Standard 45001, which will supersede the long-time standard OHSAS 18001 in 2021. Both certifi-cations are considered the highest standard formanaging occupational safety and health. WhereasOHSAS 18001 focuses exclusively on procedureswithin a company, ISO 45001 looks at companyprocesses and how they interact with the businessenvironment. In the United Kingdom, we are imple-menting the comparable plan-do-check-act systemset forth in the HSG65 national standard. TheMelsungen location has also obtained the seal ofapproval for systematic safety from Germany’sstatutory accident insurance provider for the raw

materials and chemicals industry (BG RCI). SelectEuropean B. Braun renal care centers are certifiedunder EN ISO 9001 and IEC/TR 62653 “Guideline forsafe operation of medical devices used for hemodi-alysis treatments”. Renal care centers qualified un-der these standards are authorized to use the GoodDialysis Practice certificate. B. Braun is also a mem-ber of the German Chemical Industry Association(VCI) and follows its guidelines for responsible con-duct, with the goal of independently improvinghealth, safety and the environment.

Despite high quality standards and preventivemeasures, a product can, on a rare occasion, bedefective or be used incorrectly. Complaints are re-ceived by our local sales organizations, then ana-lyzed and evaluated in Melsungen and Tuttlingen.From there, investigations are ordered at the pro-duction locations in question, then our experts de-velop solutions on site as required.

Customer accountability andproduct responsibilityB. Braun protects and improves the health of peoplearound the world—with safe, high-quality productsand services. Our customer groups—hospital ma-nagement, doctors, nurses, pharmacists and, notleast, patients—expect us to provide medical solu-tions with maximum value. This is why we see it asour responsibility to develop therapy systems thatoptimize processes, bring about progress, increasesafety and strengthen partnerships for better pa-tient care.

With the “B. Braun for Safety” project, which waslaunched in 2013, we have strengthened our part-nerships with a variety of organizations and asso-ciations, including cooperation with the EuropeanAssociation of Hospital Managers, the umbrellaorganization for hospital management in Europe.Through joint projects, we increase awareness ofthe risks of use and contribute to safe andhigh-quality patient care over the long term.

B. Braun is actively working in the German MedicalTechnology Association (BVmed), the European


46

Medical Technology Association (MedTech Europe)and the Asia Pacific Medical Technology Asso-ciation (APACMed) on new medical standards andrules, including on the topic of safety. B. BraunManagement Board member Dr. Meinrad Lugan ischairman of the board of BVMed and sits onMedTech Europe‘s Operations ManagementCommittee. Dr. Gabriela Soskuty, Senior VicePresident Global Government Affairs & MarketAccess, represents us as on the board of the Ger-man Pharmaceutical Industry Association (BPI). Dr.Jean-Claude Dubacher, chairman and CEO ofB. Braun in North America, sits on the boards of theGerman American Chamber of Commerce and themedical technology association AdvaMed. LamChee Hong, President of the Asia-Pacific region,represents B. Braun on the Management Board ofthe Asia Pacific Medical Technology Association(APACMed).

Part of our safety concept is to continuouslyimprove the design of our products and packaging:Easily visible, harmonized color codes indicate thesize of the product or what material is used tomanufacture it. Special labels with clear, differen-tiating colors and shapes make it easier to selectthe proper dose of medications and make the pack-aging more noticeable, which is particularly impor-tant when it comes to critical substances. Our workin this area has been recognized by multiple prod-uct design awards.

Our Data Protection department establishes theB. Braun data protection strategy, defines goals andestablishes standard processes. B. Braun’s data

protection experts ensure compliance with legalrequirements and internal standards, supported byother data protection officers and data protectioncoordinators. This department organizes routineemployee training sessions, consults on the draftingof contracts or marketing activities, and offers acomprehensive data protection information center.At regular events, the Data Protection department,data protection officers and data protectioncoordinators meet to discuss current developmentsin data protection. The requirements in the EU’sGeneral Data Protection Regulation (GDPR) unifythe rules for processing personal data. We imple-ment legal requirements and internal standards atall European B. Braun locations, and country-spe-cific regulations are also applied locally.

More networking brings with it potential risks tocritical infrastructure (KRITIS), such as at hospitalsand the production facilities of manufacturingcompanies, which are important to the community.

Lawmakers are responding to this development withnew regulations, such as the IT Security Act inGermany. At B. Braun, a chief information securityofficer (CISO) coordinates all information securityactivities and measures. We have set a goal ofestablishing an information security managementsystem (ISMS) in accordance with internationalstandard ISO/IEC 27001. We also work withGermany’s Federal Office for Information Security(BSI) to conduct voluntary tests of connectedmedical technology products in order to use theknowledge obtained to further increase the safetyof product software.


47

RISK MANAGEMENT AND CONTROLLING

All strategic and operational decisions at B. Braunare made with consideration of the risks and oppor-tunities involved. We fundamentally pursue a cau-tious corporate strategy and avoid any un-controllable potential risks, with risk managementand controlling being key management tasks and anessential part of Group management. The B. BraunGroup’s comprehensive risk management ensuresthat risks can be identified, documented, assessed,monitored and managed. Risks resulting directlyfrom business operations are quickly identified andassessed using our systematic controlling process-es, which are implemented throughout the Group inall business areas, companies and regions. We alsoidentify and manage risks that do not result direct-ly from business operations. The divisional andGroup risk committees assess these risks and doc-ument appropriate countermeasures. Our risk man-agement is rounded out by an internal auditdepartment and ultimately by the annual audit offinancial statements.

RISKS

The risks described below, which could have an im-pact on B. Braun, do not constitute every single riskto which B. Braun is or may be exposed. Risks thatare not known or are considered to be insignificantat the time this annual report was prepared mayalso impact the earnings and financial position ofthe B. Braun Group.

Macroeconomic riskOne substantial risk is the future developments inthe coronavirus pandemic. If the number of newinfections cannot be kept low, a more prolongedstate of vulnerability can be expected. Fresh out-breaks of the virus can impede or even temporarilyhalt individual production facilities and supplychains. If the crisis were to continue to persist, itwould be more difficult for governments to mitigate

its impact with public borrowing and publicly fund-ed support programs. In the eurozone, MemberStates that were already heavily in debt before thepandemic are faced with a significant challenge. Ifthe economic consequences of the pandemic can-not be contained, there is a risk of renewed doubtin the solvency of individual Member States. Thismeans the risk of a financial crisis has risen. Shouldgovernment assistance measures expire before theeconomy has achieved sustainable recovery, thereis a risk of business insolvencies that could weakenthe financial position of banks and institutional in-vestors, which could narrow the options for outsideand equity financing.

The trade conflict between the United States andChina holds a risk of permanently straining interna-tional economic relations. The first punitive tariffson goods from China in June 2018 were the preludeto an escalating trade dispute between the world’stwo largest economies, resulting in global uncer-tainty. There is a risk that businesses will refrainfrom investing and consumers will put off purchas-es. This would put considerable strain on ex-port-oriented companies. Price increases or lowproduct availability can also prove detrimental toprivate households. With the new administration inthe United States, Europe can assume a more openand reliable dialog. Even if some of the protection-ism that grew in recent years remains, the risk ofextra duties on imports from Europe is likely to belower.

The probability of individual macroeconomic risksbecoming reality appears high and can impede thegrowth of B. Braun.

Industry riskThe health care industry is of major importance tonational economies while also being largely unaf-fected by economic trends. This means the healthcare industry can have a stabilizing effect on ag-gregate demand and on the labor market. Thehealth care industry is also on a course of expan-

RISK AND OPPORTUNITIES REPORT

GROUP MANAGEMENT REPORTRisk and Opportunities Report

48

sion overall. With B. Braun’s portfolio of single useproducts, stable sales can generally be earned,whereas the capital goods it produces are more vul-nerable to macroeconomic development. We arecurrently observing a somewhat divergent develop-ment as the pandemic progresses. Despite massivestrains on government budgets, especially fromsupport payments related to business closures,products such as infusion pumps, which are neededin ICUs, are in high demand while the sale of singleuse products necessary for procedures such aselective surgeries are in decline. Economic develop-ment is usually also reflected in areas in which thepatients must pay for health services out of pocket.The significant increases in costs within the indus-try have resulted in virtually every national healthcare system taking steps to save money. China, forexample, introduced volume-dependent public pro-curement, which has had a negative effect on pric-es. Individual countries also continue extendingpayment targets. This will only increase due to sec-ondary effects resulting from the pandemic. Oncethe pandemic phase has been overcome, it is ex-pected that government budgets will limit spendingin order to reduce the debt generated by the pan-demic. This can impact health care budgets, curtail-ing the solvency of our customers. It is possible thatour DSO will worsen, so we are preparing with anappropriate receivables and liquidity managementscheme. Some markets are seeing a trend of foreignmanufacturers receiving no or only limited accessto public procurement opportunities, especiallywhen domestic manufacturers can offer compara-ble products. To secure access to global sales mar-kets, B. Braun is continuing to expand its regionalpresence.

According to the “Hospital Rating Report 2020” bythe RWI-Leibniz Institute for Economic Research,German hospitals have continued the poor econom-ic performance of the previous year, with 13 in the“red zone” with an elevated risk of insolvency. It islikely that the renewed decline in the number ofinpatient cases has been a crucial factor in poorerfinancial positions. This is exacerbated by a short-age of skilled labor and the growing outpatientiza-tion of medicine. Funding under Germany’s HospitalFinancing Act has decreased over time. In terms ofcase numbers, an appreciable one-off decrease ofat least 6 percent is expected this year due to the

postponement of elective procedures. It is expectedthat just 50 percent of the postponed elective in-patient procedures will be performed in 2021 and2022. Additionally, by the year 2030, hospital staysare likely to have shortened further, which woulddecrease the need for hospital beds. Should thistrend continue and wages continue to increase, thepercentage of hospitals in the green rating zonewould fall from 64 percent to 54 percent by 2025.

The potential of digitalization can be utilized evenbetter, especially in health care administration.Many health care facilities are still predominantlyanalog in organization or use isolated digital appli-cations or in-house developments, leaving synergis-tic effects and process simplifications between thevarious health care players unutilized. Introducinga nationwide digital infrastructure brings with itthe challenges and opportunities of getting every-one to cooperate and network with one another. Atthe same time, solutions for the specific needs ofindividual interest groups must be integrated, whileultimately meeting all data protection require-ments.

Thus, the structural risks for businesses operatingin the health care industry remain elevated overall.Should these risks become reality, it may impactthe earnings of B. Braun.

Procurement riskRisks generally result from commodity price chang-es and supply shortages in the procurement mar-kets. The materialization of these risks may impactproduction supply, thereby impacting B. Braun’ssupply capabilities. In some instances, potentialsupply shortages were recorded in the reportingyear that were essentially related to the pandemic.In addition to PPE and hygiene/cleaning products,there were challenges due to closed plants and re-duced component production from suppliers. Risingdemand for portions of the product range neededto be met by increasing procurement volumes in adifficult market situation. Steps taken early on, suchas the build-up of safety stocks and the Group-wide bundling of activities and a Group-wide mar-ket approach, served to avert these risks, so that atno time did any appreciable production delays orinterruptions occur. Our long, trusting and fair co-operation with our suppliers was also a key factor.


49

To minimize the risk of supplier defaults, we rou-tinely conduct risk assessments of our suppliers. Ifa supplier is identified as a high default risk, wehave a range of processes and instruments in placeto ensure continuous supply. These include disasterrecovery plans, building up inventory either atB. Braun or at the supplier’s location, second anddual sourcing, and the notarized storage of docu-ments about production processes and formula-tions.

We expect no significant change in procurementrisk in 2021. Given the ongoing pandemic, our sup-plier risk management will continue to be expandedto minimize the risks of supplier defaults.

Product riskWe counter the risk of adverse interactions and sideeffects with quality management systems at ourproduction facilities. These are based on interna-tional standards to assure that all regulatory re-quirements are observed. Regular reviews of ourquality management systems using internal andexternal audits, together with continuous employeetraining, round out our quality management.

To minimize risks from product liability, B. Braun hasplaced an international liability insurance programwith a consortium of four primary insurers. To en-sure that the particular country-specific or legalrequirements are met, a local policy was taken outin each country where B. Braun has its own compa-ny (majority interest). In conjunction with this, anexcess liability policy offers more extensive, glo-bally uniform insurance coverage.

There are no risks from ongoing processes thatcould jeopardize the company’s continued exist-ence.

Human resources riskIn the reporting year, the pandemic sped up thedigital transformation of professional life. Within ashort period of time, the majority of B. Braun em-ployees in administration were working from home.New digital formats have shaped our working cul-ture, both within the company and in our contactwith customers. We are guiding our employeesthrough these changes with appropriate IT solutionsand training. The extensive offering at the B. Braun

Business School, as well as regional and local em-ployee development programs, offer prospects forprofessional development. A digital portfolio makesit possible to shape individual learning pathways ina needs-based, self-regulated and flexible manner.To face the demographic trend of an aging work-force, succession planning ahead of time is an im-portant component of our strategic humanresources planning, alongside continuous in-housetraining and development, and the hiring of newemployees.

We expect the pandemic will influence and likelyalter our working culture. This crisis has alreadyshown that the fast pace of digital transformationcan also be an opportunity to break new groundwhen it comes to working together. In the comingyears, expanding our employees’ digital skills will beemphasized considerably, as well.

Due to existing HR processes and development ini-tiatives, we expect no material impact from poten-tial human resources risks, even in the future.

IT riskA failure of critical IT systems or the loss, unauthor-ized alteration or disclosure of data can have graveconsequences, including interruptions in businessoperations, loss of reputation or even fines and le-gal claims. To reduce these risks, various organiza-tional and technical security measures have beenimplemented, such as routine data backups andemployee training as well as authorization con-cepts, redundant systems and malware protection.These measures are continually reviewed and ex-panded as part of a comprehensive IT security pro-gram. Enhanced protections for our productionnetworks and continuous monitoring for attacksare some of the steps being taken. In addition, aninformation security management system (ISMS)according to international standard ISO/IEC 27001is being implemented. This kind of ISMS systemati-cally identifies the risks to which our IT systems andthe information they process are exposed and de-fines adequate protections. In the face of increasingdigitalization and networking as well as ever-chang-ing threats (such as novel cyberattacks), it will soonbe necessary to constantly review and implementnew security measures at all times. Reducing secu-rity risks will remain one of the fundamental tasks


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for guaranteeing the smooth running of processeswithin the Group in the future.

With the protections that are already deployed andthose that are being implemented, we see no ex-traordinary dangers to B. Braun from IT risks at thistime.

Financial riskB. Braun operates internationally and is, therefore,exposed to currency risk, which it hedges using de-rivative financial instruments. The Group regularlyhedges its net position from recognized receivablesand payables against currency risks with foreigncurrency derivatives. In individual instances, weemploy layered hedging for expected payables thathave not yet been recognized. Trading and manage-ment of derivative financial instruments are regu-lated by internal guidelines and are subject tocontinuous risk monitoring.

To manage liquidity risk, we maintain sufficient re-serves of short- and long-term committed creditlines, including, in particular, a syndicated loan for€ 700 million. There is also the risk of a possibledeterioration in the payment behavior of our cus-tomers or public payers. Limited financing optionscan have a negative impact on liquidity and an in-dividual customers’ ability to pay. We currently seeno elevated risk of default. However, the persis-tence of the pandemic, accompanied by the risingdebt of individual countries, may lead to an increasein the default risk of individual customers, especial-ly public ones. There is also a risk that our suppliers’liquidity situation could become strained and could,in the worst-case scenario, threaten their viability.

As part of development projects, costs were capi-talized to some extent, which can lead to write-offsin the event of negative developments. This couldimpact the earnings situation of B. Braun. Develop-ment projects are, by nature, subject to higher risk,but substantial opportunities come with it.

OPPORTUNITIES

In addition to risk, B. Braun regularly identifies andassesses opportunities for the company. Oppor-tunities can generally arise from the advancement of

medical standards or the launch of new products andservices. Close dialog with our customers allowsus to continue swiftly seizing opportunities andopening up new business prospects through innova-tion.

Opportunities from positive economic develop-mentEconomic conditions affect the development ofB. Braun’s business. Our statements on the futuredevelopment of the Group are based on the expectedmacroeconomic environment as described in theforecast report. Should the global economy performbetter than currently expected, our sales, earningsand financial position may exceed our forecasts.

Opportunities from growthIncreased capacity enables us to share in the grow-ing demand for health care and medical technologyproducts. New, ultra-modern production processesfurther improve our competitiveness. In addition, ourcomprehensive product range and our years of expe-rience enable us to offer efficient solutions for ourcustomers. Should the international health care in-dustries develop at a faster rate than currently ex-pected, this could have a positive impact on oursales, earnings and cash flow.

Opportunities from research and developmentOur growth strategy is based on the development ofnew products and services as well as innovations fortreatment concepts and processes. In close partner-ship with our customers and users, we work to bringnew and improved treatments to market. If we areable to achieve a quicker time to market for our re-search and development projects than is currentlyexpected, this too could positively affect our sales,earnings and cash flow.

Opportunities from digitalizationNew possibilities for mass (bulk) data processing andanalysis can affect our production and sales process-es. The digitalization of production can open thedoor to further optimization and improve earnings.Opportunities also present themselves when modify-ing the way we interact with our customers: a morecomprehensive and faster exchange of informationabout customer requirements and the solutions weoffer, along with digital sales structures, can posi-tively affect our sales, earnings and cash flow.


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Opportunities from our international presenceThe opening of additional health care markets tointernational medical technology companies, to-gether with the trend toward privatization in thefield of health care services, could present addi-tional opportunities for B. Braun. Our internationalpresence allows us to take part in these develop-ments. This would lead to a sustained improvementin the B. Braun Group’s future sales and earnings.

Opportunities from employeesThe ideas of our employees today can be the inno-vations of tomorrow. Our employees are constantlycollaborating with each other as well as with endusers and patients. They bring our philosophy ofSharing Expertise to life, creating value for custom-ers and businesses. During the pandemic in particu-lar, our employees have shown how quickly andreadily they can adapt to new situations. Our newcorporate strategy, B. Braun — the next decade,builds on this high level of motivation, readinessand individual accountability as well as promotingdigital skills and new programs for managers andemployees. The successful implementation of thisnew strategy with the help of every employee canfurther improve B.Braun’s competitiveness, leadingto a positive impact on B.Braun’s sales, earnings andcash flow.

OVERALL STATEMENT ON THE GROUP’S RISKAND OPPORTUNITY SITUATION

At present, there are no identifiable risks or depen-dencies that could threaten the viability of theB. Braun Group for the foreseeable future.The Group’s net risk position rose slightly fromthe previous year due to the pandemic, however,

once again, no risks were identified that couldjeopardize the company’s continued existence. Eventhough the pandemic affected B.Braun in differentareas, the reporting year has proved the resilience ofB.Braun’s business model. Our global presence, broadportfolio of products and services as well as thequalification and motivation of our employees havemade stable growth possible in 2020. The pandemicwill have a strong influence in 2021 and it must beassumed that our slightly elevated risk position willcontinue. In addition, there is a growing protectionistsentiment in parts of the world that can harm aninternational company like B.Braun. Ongoing geopo-litical hot spots can also have a destabilizing effect.Volatility on foreign exchangemarkets may also con-tinue to increase in 2021. While the risks on the pro-curement markets remain unchanged, IT risks maycontinue to rise and it should be assumed that ad-vances in networking and digitalization, both on theuser side as well as in production, could lead to anincrease in these risks.

To the extent that it is possible and reasonable,we are insured against liability risks, natural disas-ters and other risks. To minimize the financial im-pact of cyber risks, B. Braun has taken out a cyberinsurance policy that essentially covers risks suchas losses from operating disruptions and third-party liability claims resulting from breaches of in-formation security. Despite our extensive insurancecoverage, obtaining full coverage for potentialproduct liability risks is not feasible. In general,however, we are convinced that the ever-presentmarket risks will not have a substantial negativeimpact on the B. Braun Group’s performance.Alongside these market risks are significant oppor-tunities that may help the company continue tosucceed.


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The statements made here on economic and com-pany performance are forward-looking statements.Actual results may, therefore, be materially diffe-rent (positively or negatively) from the expectationsof future developments. Our forecasts contain allmaterial events that were known at the time theGroup Management Report was drafted and thatcould impact the business development of theB. Braun Group. Expectations are based in part onthe macroeconomic and industry-specific develop-ments described.

EXPECTED MACROECONOMIC ANDINDUSTRY-SPECIFIC ENVIRONMENT

Expected development of the global economy3

The coronavirus pandemic led to a global recessionin 2020. The progression of the pandemic has beenhighly dynamic, characterized by significant heter-ogeneity between countries. The development ofthe global economy depends greatly on how thepandemic continues as well as on efficient contain-ment measures, effective treatment methods andvaccines. If the number of new infections cannot bekept low, a considerably more prolonged state ofvulnerability is expected. The impact the mutationsof the coronavirus that have begun spreading sincethe start of the new year will have cannot yet bepredicted at this time. Also likely to be decisive inthe course of events is how uniform future growthwill be around the world, so that the recovery ofindividual economies is not thwarted by a lack ofdemand for exports. With regard to production cut-backs, a scarcity of inputs could also prevent pro-duction. Monetary and fiscal policy are likely toprovide stimulus. Many countries and central banks,especially the United States Federal Reserve andthe European Central Bank, have enacted extensivemeasures.

In Germany, economic development over the courseof 2021 will occur in two parts: Stabilization at alow level is expected at the start, followed by re-

covery. Overall, Germany’s economy should resumegrowth, with 4.2 percent expected in 2021. Thisshould bring GDP back to pre-pandemic levels in2022 at the earliest. Unemployment will continueto rise in the coming months and will only beginslowly receding over the course of 2021. The world’spoor foreign trade environment will continue toharm German exports in 2021.

Of the major economies in the eurozone, France,Italy and Spain were hit hardest by the pandemicand its economic effects. Recovery in 2021 appearspossible but also depends on how the pandemicprogresses and the restrictions on economic activ-

OUTLOOK

3German Council of Economic Experts Economic Outlook for 2020and 2021 and IMF World Economic Outlook, October 2020

FORECASTED CHANGE INGROSS DOMESTIC PRODUCTin %

2020 2021

Europe -7.0 4.7France -9.8 6.0

Germany -5.0 4.2

Great Britain -9.8 5.9

Italy -10.6 5.2

Poland -3.6 4.6

Russia -4.1 2.8

Spain -12.8 7.2

North America -4.9 3.3

Canada -7.1 5.2

USA -4.3 3.1

Asia-Pacific -2.2 6.9

China 1.9 8.2

India -10.3 8.8

Indonesia -1.5 6.1

Japan -5.3 2.3

Malaysia -6.0 7.8

Latin America -8.1 3.6

Argentina -11.8 4.9

Brazil -5.8 2.8

Chile -8.2 4.0

Mexico -9.0 3.5

Africa and the Middle East -3.6 3.1

Kenya 1.0 4.7

South Africa -8.0 3.1

GROUP MANAGEMENT REPORTOutlook

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ity that come with it. How much cross-border tour-ism will be possible and actually occurs is likely tobe critical to development, since tourism is a majorindustry in some Member States. Europe is expect-ed to resume growth in 2021 with 4.7 percent, ne-vertheless GDP at the end of the year is likely to bebelow pre-pandemic levels. An appreciable rise inunemployment is expected in the eurozone in thewake of the crisis, with the upward job markettrend of recent years coming to an end for the timebeing. Development in the individual Member Statesshould vary due to different levels of economic im-pact and existing institutional differences. For theeurozone overall, an annual unemployment rate of9.3 percent is expected for 2021 compared to the7.5 percent of 2019.

Russia is able to turn to extensive financial reservesin order to stabilize its economy, as its NationalWealth Fund has accumulated around $ 168 billion(as of May 1, 2020). For 2021, the Ministry of Eco-nomic Development is predicting an increase in GDPof 2.8 percent. Unemployment will remain high (5.7percent on average in 2020). The Central Bank isexpecting a decline in exports if oil prices and de-mand for fuels and raw materials continues to below.

Despite the pandemic, the United States enjoyedconsiderable economic growth in the second half of2020 that is highly likely to extend far into 2021.An increase in GDP of 2.3 percent is predicted forQ1 2021, with GDP likely returning to the pre-pan-demic level at the end of the year. Money is beinginvested in the expansion of broadband Internet,especially 5G, as well as in business networks, serv-er farms, and computer hardware and software.Industry 4.0 solutions in particular are in high de-mand. Government spending is expected to rise,first to directly contain the crisis and then to boosteconomic activity in the market, with targetedspending on expanded health protection and on in-frastructure. The CARES Act has already disbursed$ 25 billion for the construction of hospitals, socialservices, nursing homes, mass accommodations,housing, airports, railways, bridges and roads. Thenew administration will begin moving the countryout of the age of fossil fuels and laying the founda-tion for decarbonizing transportation, energy andindustry. This means extensive investing in greenstructural transformation is inevitable. With regard

to trade policy, the United States is expected toresume making a stronger contribution to the inter-national trade system.

After economic performance in the Asia-Pacific re-gion shrank in 2020 for the first time in 60 yearsdue to the pandemic, growth of 6.9 percent is ex-pected in 2021. China emerged invigorated fromthe pandemic and was able to further expand itsglobal position. This can be traced back to an inten-sive pandemic response and stimulus measures suchas a reduction in social security taxes for business-es as well as investments in infrastructure. China’seconomy is expected to grow 8.2 percent in 2021.The nation continues to be attractive to foreign in-vestors. Chinese exports increased substantially inthe final months of 2020 and will continue to risein 2021, especially medical products (masks, disin-fectants) and electronics, including computers andhome office equipment. India’s economy shrank forthe first time in decades due to the pandemic. Thegovernment attempted to counter with stimulusmeasures and reforms. The IMF predicts the coun-try’s economy will grow 8.8 percent in 2021. How-ever, the fiscal impact of the pandemic has beenenormous, with India’s debt-to-GDP ratio rising tojust above 90 percent as a result. The vast majorityof India’s workers are in the informal sector, mean-ing they are not covered by social programs. Nei-ther government aid nor savings can compensatefor a lack of income. Japan’s economy should recov-er slightly in 2021, growing by 2.3 percent, thougha return to the pre-pandemic level is only expectedin two to three years due to new waves of corona-virus that have also struck here. While Japan’s vitalconsumer market and investing will rise in 2021,nevertheless, growth stimuli are still rather weak.The government and the Bank of Japan will supporteconomic growth through fiscal and monetary pol-icy measures, which will further increase publicdebt.

The United Nations Economic Commission for LatinAmerica and the Caribbean (ECLAC) has projectedan economic setback for the region from which thecountries will only gradually recover. As a result ofthis development, many households are facing thethreat of poverty. Brazil’s government was able tocushion the blow of the pandemic to a degree witha comprehensive aid package, which will somewhatslow its recovery in 2021 compared to the rest of


54

the region. The extra government spending in-creased gross public debt, which will severely limitthe government’s room to maneuver in 2021 and2022. Unemployment will remain high. Mexico’sgovernment, when compared to other countries,has been extremely cautious in its support of theeconomy. Medium-sized and large enterprises mustget by without tax relief, emergency loans or com-pensation for reduced working hours. Accordingly,unemployment has risen. The depreciation of theMexican peso has also made foreign goods moreexpensive. Argentina’s economy will recover slight-ly from its low level in 2021. Extensive investmentsare likely to continue to be withheld given the con-tinued weak business sentiment and high interestrates, while inflation will impact consumer spend-ing.

Africa is a promising continent, with some countriesexperiencing above-average growth rates. The pan-demic, however, thrust Africa into a recession in2020 and only a marginal recovery is predicted in2021. A deep plunge in consumer spending and alack of liquidity for businesses are straining eco-nomic growth. Lower oil prices will lower importcosts while a general drop in prices for raw materi-als and precious metals will have a negative impact.The countries of the Middle East are expected tosee a recovery in their economic situation in 2021.Expansion is expected in the larger national econ-omies in particular. These predictions are based onreforms, increasing investments, a stable tourismindustry and reduced political risks in the countriesin question. However, the growth outlook of small-er countries in the region is uncertain, since busi-ness and consumer confidence depends on reformefforts in these locations. The weakness of thebanking industry and high public debt also have anegative effect on the economy of these countries.Bilateral trade agreements and political initiativesto resolve current conflicts could provide stimulus.

Expected development of thehealth care industryThe global health care industry will continue to ex-pand in the coming years due to a growing andaging population, the rise in chronic diseases, theexpansion of the necessary infrastructure, improve-ment in preventive care models, higher incomesfrom the growth of the middle class in developingcountries, and the expansion of health care systems

and the markets arising from them. Health carespending is expected to increase 5 percent eachyear through to 2023. The Middle East, Africa andAsia in particular are expected to see increases ex-ceeding 7 percent. Global health care spending as apercentage of GDP through to 2023 is likely to bearound 10.2 percent, reflecting both economic im-provements and cost containment efforts fromhealth care systems. Spending per capita is likely tocontinue to be unevenly distributed, ranging from$ 12,300 in the United States to just $ 45 in Paki-stan in 2023. Efforts to close this gap will be madedifficult by higher population growth in many de-veloping countries, but future innovations—espe-cially in the digital arena—should provide relief:cloud computing solutions, for example, offer highflexibility as well as mobility, and help doctors withpatient care. AI can improve the accuracy of diag-noses and the effectiveness of treatments. Robotshelp doctors perform complex surgical procedureswith greater precision and flexibility. Sensors onwearable devices can monitor the status of patientsand develop algorithms for determining treatmentrecommendations. Blockchain systems use digitalrecords of transactions to monitor and track medi-cal products along the supply chain. At the centerof the latest technologies for the health sector isthe Internet of medical things (IoMT), a networkedinfrastructure of medical devices, applications andhealth care systems. The IoMT contributes to bettertreatment outcomes by connecting people (pa-tients, nurses and hospital staff), data (patient orservice data), processes (service provision and pa-tient support) and enablers (sensors and networkedmedical devices) together.

Business expectations in the German health careindustry have greatly improved since the negativeoutlook from early summer 2020. Businesses in thisindustry are looking to the future with greater con-fidence overall than those in the general economy,but they continue to see themselves dependent onhow the pandemic progresses. The medical technol-ogy industry’s expectations for 2021 in particulardepend on the situation in ICUs and the resumptionof elective surgeries in hospitals. The pharmaceuti-cal industry’s expectations also remain low com-pared to previous years. Aside from generaleconomic conditions caused by the pandemic, thelack of skilled labor is considered the greatest risk.Concern about qualified personnel is still more pro-


55

nounced among businesses in the health care in-dustry than in the overall economy. Despiteimproved expectations on exports by medical tech-nology and pharmaceutical companies for 2021,many companies are planning on reduced invest-ment budgets.

Europe’s health care industry will be dominated bydigital transformation in the coming years, with theelectronic health record being a central theme. Thishas already been introduced by most MemberStates of the European Union or is currently in theintroduction stage. The next step will be to facili-tate the exchange of data across national borders.With this integration, EU citizens will be able tohave doctors in other European countries view theirrecords and get electronic prescriptions from theirhome country filled. Uniform data structures alsofacilitate collaboration in research and develop-ment as well as in fighting disease. France seeks toreduce its dependence on the import of strategicproducts. Its government also passed legislation onhealth care reform to provide higher pay in thehealth services and spending to upgrade hospitals.In the coming years, it will seek to digitalize itshealth care industry. The state is providing not on-ly the framework for interoperability, security andethics of digital services but also basic platformsand instruments. Accordingly, the market potentialfor digital health is high. New and upgraded hospi-tals will also provide business opportunities in theUnited Kingdom’s medical technology area in thecoming years. Sales in Poland’s medical technologymarket should continue to rise. Polish manufactur-ers cover only a small portion of domestic demand;the need for imports is high. Hospitals could bene-fit from EU funding: While some of them are receiv-ing money to purchase new medical technology,others are getting financing for extensive expan-sions and upgrades, including new equipment.Spain’s health care industry should also becomemore modern and more digital. Thousands of COV-ID-19 cases among medical personnel led to discus-sions on the increased use of telemedicine,however, how to finance the necessary governmentspending could be a problem.

The health care industry in Russia will benefit fromthe pandemic, since digital technologies will be im-plemented faster. This applies to remote diagnostics

as well as the online OTC drug trade, which has nowcleared the legal hurdles and was launched in July2020. It is conceivable that the government will in-vest more money in medical care in order to im-prove basic medical services by 2024. This shouldinvolve the upgrading of central hospitals, healthclinics and urgent care centers. Back in December2019, an additional € 7 billion was earmarked forthe procurement of medical equipment and ambu-lances through to 2024. Work on the nationalHealth Care Project is continuing despite the pan-demic, with special focus on oncology: By 2024,around € 12.5 billion should be available for theconstruction of oncology centers, among other pro-jects. With its strategy for developing the manufac-turing industry through 2035 that it enacted inApril 2020, the government seeks to quadruple theproduction volume of medical technology to around€ 4.1 billion. The fields of telemedicine, biomechan-ics (including exoskeletons), robots and 3D printingshould also see development. This strategy is in-tended to increase production value by a factor of3.5. Exports should increase more than tenfold, to$ 1 billion. The market share of Russia’s approxi-mately 400 medical technology manufacturersshould grow from today’s 23 percent to 40 percentby 2030.

Industry experts predict constant, modest marketgrowth in the United States in the coming years,driven by the gradual aging of the population andthe high costs of health care in the country. In itsindustry outlook from Q3 2020, Fitch Solutions as-sumes that the US medical device market will growan average of 3.6 percent each year from 2019 to2024, to $ 208 billion. In addition to COVID-19 di-agnostics, key drivers of sales for device manufac-turers will be treatments that were put on hold dueto the pandemic, including treatments for obesity,cardiovascular and neurological diseases, and acuteand chronic diseases that are becoming more fre-quent due to the gradual aging of the population.Devices for medical imaging, particularly for com-puter tomography and X-ray applications, as well asfor measuring blood glucose and treating acuteconditions such as cancer, heart attack and strokeare likely to be back in high demand soon. In con-trast, manufacturers of orthopedic products willneed to hold out longer. Devices for medical care inthe home, such as mobile dialysis machines and


56

heart rate monitors, are also becoming increasing-ly important. Spending is rising the most in thehome care sector in terms of percentage. At aroundone third, hospitals account for the largest share ofcosts in the US health care sector. The potential foreHealth solutions is considerable, with demand fo-cused on innovative technologies that increasetreatment efficiency and lead to reduced costs inthe long term. This is why surgical robot systemsare seeing increased use. Shortly after the pandemicarrived in the United States, market research com-pany Arizton predicted that the USmarket for tele-medicine would grow about 78 percent in 2020 to$ 9.5 billion, then by just under 30 percent on ave-rage every year until 2025, to $ 25.6 billion. Heavyinvestment in cutting-edge AI research is likely tohave good opportunities for growth in the comingyears.

The population in the Asia-Pacific region can andwants to spend more on their health, meaning de-mand for health services and products will growdramatically in the next few years. Following thestress test from the outbreak of the pandemic, Chi-na’s health care industry is expected to see greaterdigitalization. As an integral part of its long-term“Healthy China 2030” strategy, China is looking tocontinue to advance the use of big data and AI inits health care industry. Experts believe that eventhe implementation of the electronic health record,which has thus far encountered difficulty, and na-tional databases, are likely to make considerableprogress in the next three to five years. India’s go-vernment has committed to creating a favorablebusiness environment in the coming years in orderto position health care as one of its strongest in-dustries in terms of sales and employment. By 2025,it wants to invest a total of € 200 billion in publichospital infrastructure to open 150,000 primarycare centers and 200 specialized hospitals. Themarket for digital health could grow from $ 1.5 bil-lion today to up to $ 11 billion by 2025. Local in-dustry manufacturers in Japan are investing in thedevelopment of cutting-edge technology, such asdigital health solutions, AI-based medicine and ro-botics technology. Development of pharmaceuticalproducts is vigorously driven, especially the re-search and use of regenerative medicine and bio-technology. In the countries of the ASEANEconomic Community, such as Indonesia and Ma-

laysia, Business Monitor International predicts themarket for medical technology will grow by justunder 10 percent each year, reaching $ 8.5 billionby 2021. The highest demand here comes from pub-lic institutions, which ensure basic care in most ofthe member states.

In Latin America, various factors are contributing tothe growth of the health care industry. For one, theregion has the fastest-aging population in theworld, with 80 percent of the population over 60suffering from at least one chronic illness. The peo-ple in Latin America are also the most obese in theworld. This excessive weight, in turn, promotes va-rious diseases, such as high blood pressure, diabetesand gout. Some countries are already attempting tocombat obesity with laws promoting health, how-ever, experts believe the health care systems of theregion will have to battle the consequences of anobese population for at least 30 years. Lastly, LatinAmerica’s health care is also in need of investment.

Health care in Africa will still have an enormousamount of catching up to do in the coming years.In particular, the investment gap in the publichealth care sector needs to be closed in order tocompete with private but expensive facilities withexcellent, state-of-the-art equipment. The AfricaBusiness Coalition for Health (ABCHealth), formedin February 2019, has set the goal of assisting pri-vate health care companies with their commitmentin Africa. Private investments should promote theareas of drug production, medical training and digi-tal technologies for the health sector, above all.Even though it can be assumed that Kenya’s healthcare industry will grow, capital for investments inprivate and public stakeholders is becoming morescarce in the wake of the pandemic. As before, howmuch capital the major donor organizations givewill play a decisive role. The countries of the MiddleEast have set the goal of establishing first-classmedical care through the digitalization of theirhealth care industries. The UAE seeks to set up oneof the most distinguished health care centers in theworld. To increase the efficiency of the health caresystem for the long term, spending should bereigned in and existing funds should be used moreefficiently. Digital solutions and AI are seeing in-creased use. The key goals of the Innovation HealthCare Strategy are to provide advanced, technolo-


57

gy-based health and treatment services such asrobotic surgery and telemedicine, to develop thepharmaceutical and biotechnology industries, andto develop medical research on treating diseasessuch as diabetes and obesity.

BUSINESS AND EARNINGS OUTLOOK

For FY 2021, we continue to expect negative effectsfrom the pandemic on the sales and earnings of theB. Braun Group early in the year. We expect a grad-ual recovery as the year progresses, though thisdepends on the pandemic being successfully con-tained worldwide. In terms of this recovery over thecourse of the year, we believe a growth rate at con-stant exchange rates of 4 to 6 percent is possible.The expected continued strength of the euro, how-ever, will again have a negative impact on growthin the reporting currency, so we expect a growthrate in euros of 2 to 4 percent.

The new divisional structure established as part ofour strategy B. Braun — the next decade is applica-ble as of January 1, 2020. Essentially, the divisionsB. Braun Avitum and Out Patient Market are beingconsolidated into the new division Avitum, whichwill focus on chronic patient care and the outpa-tient market. Responsibility for the basic care pro-duct portfolio will be assigned to the Hospital Caredivision.

We expect to see moderate growth in the reportingcurrency for the Hospital Care division in 2021; inRussia, the United States and Latin America espe-cially, we predict negative currency effects. Sales inEurope will increase slightly in the 2021 reportingyear due to demand brought about by the pande-mic. Sales increases of single use products for hos-pital use and nutrition solutions should be possiblein Germany. The main driver of growth for HospitalCare is North America, where we expect a rapidrecovery in demand for product groups heavily im-pacted by the pandemic, such as for regional anes-thesia. We also continue to see good opportunitiesfor automated infusion systems and patient-speci-fic nutrition solutions. In the Asia-Pacific region, weexpect business activity to recover in the latter halfof the year. The forecast for Latin America is diffi-

cult to determine due to the uncertain economicsituation. Moderate sales increases in local curren-cies are possible. We see better market opportuni-ties in the Africa and Middle East region.

Following a weak 2020 due to the pandemic, wepredict growth for the Aesculap division, though wewill not reach our pre-pandemic level in 2021, as wedo not expect recovery until the second half of theyear. A lower number of elective surgeries will harmvirtually the entire Aesculap portfolio. Neverthe-less, we expect an increase in sales in Germany andEurope. In North America, sales will also recovergradually and help contribute to the division’sgrowth. Recovery in the Asia-Pacific region may behampered by China’s new public procurement pro-cedure. Due to a decline in project business in Afri-ca and the Middle East, we expect little stimulus forgrowth from this region.

For the Avitum division, we predict good salesgrowth at constant exchange rates. The expectedcontinued weakening of the Russian ruble and theLatin American currencies will substantially reducegrowth in the reporting currency. Our provider busi-ness will be able to grow well following the portfo-lio optimization in 2020. However, the pandemic isnegatively affecting patient figures, since mortalityis increasing. The extensive hygiene and protectivemeasures are also putting a strain on our coststructure. For our chronic dialysis product portfolio,we forecast significant stimulus for growth; we areexpecting recovery effects for water treatment sys-tems in particular. We also expect a recovery in thegrowth markets of China and Russia, which are im-portant for the division. The increased demand foracute dialysis products and PPE caused by the pan-demic will also continue at least in the first half of2021. In the areas of infection prevention andwound care, we are expecting dynamic growth thatwill have a positive impact on the development ofthe Avitum division.

We expect our performance indicators of interimprofit and EBIT to each end up somewhere between€ 500 million and € 550 million (2020: interim prof-it of € 495.0 million and EBIT of € 481.8 million) atconstant exchange rates. We forecast EBITDA togrow to € 1,110 million to € 1,140 million at con-


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stant exchange rates (2020: € 1,103.2 million). AnEBITDA margin of 15 percent of sales is the goal.Achieving our earnings goals will depend on howthe pandemic progresses. In addition to a betterproduct mix due to the growth of the Aesculapportfolio, our more optimized production, sustain-able cost management and the digitalization ofsome of our sales processes will add to our profi-tability. The strategic goal in connection with ourproactive working capital management, at constantexchange rates, is for CIW to be 16 weeks (2020:16.7 weeks) and for DSO to largely remain in 2021at the low level of this reporting year (61 days).

EXPECTED FINANCIAL POSITION

B. Braun will continue its solid financial policy ofrecent years in the future, as well. We are strivingfor an equity ratio above 38 percent for 2021 whilemaintaining our current dividend policy.

The financing volume for long-term maturities willbe € 310 million for 2021 and a total of € 580 mil-lion in the following year. Due to our longstandingbanking relationships and the sustained earningpower of B. Braun, we do not expect any significantrisks in connection with the upcoming financingmeasures. Should there be a departure from theexpansive monetary policy currently prevailing, ahigher interest rate may make refinancing more ex-pensive for B. Braun. An intensification of geopo-litical conflicts or a prolongation of the pandemicwith continually changing mutations can elevateuncertainty in the capital markets, which may in-crease risk premiums. However, we do not considerthis a substantial risk to B. Braun at this time. Thegoal is to finance the investments in tangible assets

planned for the coming years with the current cashflow.

With the Group-wide cash pooling system, we willensure optimal financing within the Group in thefuture, as well. Furthermore, Group-wide inventoryand receivable management projects continue topositively support the need for financing.

OVERALL STATEMENT ON THE OUTLOOK FORTHE GROUP

Given the assumptions presented with regard to theperformance of the global economy and the healthcare market, we expect positive sales and earningsfor the B.Braun Group in 2021. Should the pandemicpersist with restrictions throughout the entire year,this may negatively affect our expected increases insales and earnings. As soon as the pandemic hasbeen essentially overcome, we expect continuedgrowth even beyond FY 2021. The reporting year hasshown that B.Braun is highly resistant to crisis, con-sistently achieving stable sales and earnings. Basedon this, we will secure the desired growth throughextensive research and development activities aswell as through investments in existing and newplants. The use of new technology and the con-tinuous improvement of internal processes will in-crease our competitiveness and, ultimately, our pro-fitability. With our current portfolio as well as new,digital product and service solutions, we will be ableto continue to protect and improve the health ofpeople around the world.

Melsungen, March 3, 2021

The Management Board


GROUPMANAGEMENTREPORT - B. Braun

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