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Letter to the Shareholders

Dear Shareholders

In 2023, Siegfried once again delivered a strong year with significant sales growth at attractive profitability. The Siegfried team was able to deliver this very good performance while more than offsetting the phasing out of significant vaccines business compared to 2022. This result validates the resilience of our business model and the dedication and spirit-to-win of our global teams. The company is ready to keep this momentum and to translate the many opportunities available to us into future growth.

In withstanding continued inflation and the ongoing energy crisis in 2023, Siegfried’s underlying business (excluding coronavirus vaccines) with its well-diversified portfolio of products and customers, has once again demonstrated its resilience. The company was able to keep up its dynamic pace and to overcompensate for the phasing out of significant and above-average profitable vaccines business while protecting the profit margin on all levels. This positive result was driven by continued high demand for Siegfried’s products and services in its underlying business, ongoing active portfolio optimization and strict cost discipline at corporate level as well as at all manufacturing sites.

In drug substances, the business continued to strongly expand based on close customer relationships, Siegfried’s scientific and technical excellence and the complementary expertise of its global network. The underlying drug products business grew at mid to high single-digit percentages (in LC). At the same time, Siegfried continued to expand its drug products capabilities and strengthened its footprint in biologics. Paired with its quality track record and extensive manufacturing experience, Siegfried once again was a partner of choice for both new projects and products for drug substances as well as for drug products.

Net sales reached CHF 1.272 billion, an increase of 6.3 percent in local currencies and 3.4 percent in CHF (2022: CHF 1.229 billion). Core EBITDA was CHF 273.3 million, up +0.3 percent (2022: CHF 272.5 million). This resulted in a core EBITDA margin of 21.5 percent (2022: 22.2 percent), despite the phasing out of above-average profitable vaccines business compared to 2022. Core net profit grew by +0.3 percent to CHF 128.1 million (2022: CHF 127.8 million). The Board of Directors will propose at the Annual General Meeting on 18 April 2024 to increase the distribution to shareholders by CHF 0.20 to CHF 3.60 per share. As in prior years, this distribution will be effected by way of a reduction in the par value of each share.

At CHF 208.6 million, the operating cash flow was significantly above the previous year’s level (2022: CHF 142.3 million). Free cash flow amounted to CHF 71.8 million, significantly up from last year (2022: CHF 27.2 million). At year-end, Siegfried had cash and cash equivalents of CHF 56.4 million (2022: CHF 91.5 million). Net debt amounted to CHF 388.6 million, a ratio of 1.42 to core EBITDA, and the equity ratio was 45.0 percent. Compared to the previous year, the Siegfried Group’s debt capacity and its ability to finance further growth steps has further expanded.

Expanding capabilities and capacities to support long-term profitable growth

As part of the EVOLVE strategy, Siegfried continued to make significant investments into its global manufacturing network to further strengthen its innovation and technological capabilities. In March 2023, Siegfried inaugurated the new Development Center for Drug Products in Barcelona. The development center provides a wide range of development services with flexible pilot capacities, strengthening Siegfried’s global Drug Products network and enhancing the ability to acquire new business. At the end of April 2023, Siegfried began constructing a new global development center for Drug Substances in Evionnaz, which will significantly increase Siegfried’s R&D capacities to drive future growth. Construction of the new large-scale multi-purpose production plant for Drug Substances in Minden continued. Beyond these landmark investments, Siegfried invested in additional capacities and capabilities across the entire network.

New growth oppotunities from the acquisition of DINAMIQS

In May 2023, Siegfried acquired a 95% majority stake in DINAMIQS, a Swiss-based biotechnology company focused on the development and manufacturing of viral vectors for cell and gene therapies. Siegfried intends to bring DINAMIQS’ capabilities to commercial scale and to create a best-in-class biotech CDMO in that space. This will include the investment in a GMP manufacturing facility, which is on course to go live in 2025. With first business intake from small and large pharmaceutical companies, the growing DINAMIQS team is well on track to create significant mid to long-term growth opportunities for Siegfried in this dynamic market segment.

Strong commitment to sustainability

Sustainability represents one of Siegfried five corporate values and is at the core of its business. With Siegfried’s expertise in process optimization, the company helps its customers to develop greener production processes for their products and to achieve ambitious sustainability targets. Siegfried introduces second-generation processes, applies green chemistry, and continuously searches for opportunities to apply new sustainable technologies. With these efforts, Siegfried reduces energy consumption, produces less waste, and, at the same time, often saves costs and increases the safety of products. These efforts and initiatives are recognized by external parties and independent institutions: In 2023, Siegfried was again rated positively by ISS ESG, MSCI ESG and Sustainalytics, and were for the third time included in the Dow Jones Sustainability Index Europe. All sites also scored well in the EcoVadis Rating.

Outlook for 2024

In 2024, Siegfried will keep its momentum with the ambition to again overcompensate for the phasing out of significant vaccines business. The company expects a sales growth in the low single-digit percentage range in local currencies and a core EBITDA margin at or above the level of 2023, implying a growth of the underlying business at or above market. Capital expenditures in the year will be elevated due to ongoing projects in Minden, Evionnaz and at DINAMIQS at mid teens percentage of sales.

In the mid-term, Siegfried expects continued profitable growth at or above market (excluding M&A), while stepwise expanding profitability. Over the cycle, the company plans for average annual capital expenditures in low teens percentages of sales.

Continuing to deliver long-term profitable growth

Siegfried’s business model is well-proven and the company has consistently and effectively implemented its strategy in recent years. Based on this, Siegfried expects to deliver continued profitable growth over the years to come through the introduction of attractive new business from existing and new customers, the optimization of its portfolio of projects, products and assets and by execution of organic investments in its network as well as value-adding M&A. Through these activities, Siegfried will continue to expand its capabilities and capacities and play an active role in the further consolidation of the CDMO industry.

In the name of the Board of Directors and the Executive Committee, we would like to thank our 3800 employees at our 12 sites worldwide for their passion and their commitment to our ambitious targets for the future. They have once again demonstrated their ability to perform and withstand in a challenging environment on our way to build the strongest team in the industry.

We would also like to thank you, dear shareholders, for your loyalty towards our company and your support and we look forward to seizing the many opportunities available to us.

Dr. Andreas Casutt
Chairman

Dr. Wolfgang Wienand
Chief Executive Officer

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