Merck KGaA Confirms Outlook for 2017 Despite a Challenging Third Quarter

Merck KGaA, Darmstadt, Germany, reported third-quarter Group sales at the year-earlier level. EBITDA pre exceptionals decreased by 8.3% owing to higher spending on research and development, preparations for the market launches in Healthcare, as well as the business performance of Liquid Crystals.
 
“We generated healthy organic growth in Healthcare and Life Science. In Performance Materials, our diversified portfolio comprising four strong pillars is helping us cope with the challenges in Liquid Crystals,” said Stefan Oschmann, CEO and chairman of the Executive Board of Merck KGaA, Darmstadt, Germany. “We confirm the full-year guidance despite currency headwinds. Since the beginning of the year, we have reduced our net financial debt by €1 billion.”
 
Group sales increased in the third quarter by 0.1% to €3.7 billion, thus maintaining the year-earlier level (Q3 2016: €3.7 billion). Sales grew organically by 4.2% due to the Healthcare and Life Science business sectors. However, this was offset by negative foreign exchange effects amounting to 3.7%, which stemmed mainly from the weaker US dollar against the euro.
 
EBITDA pre exceptionals, Merck KGaA, Darmstadt, Germany’s key earnings indicator, fell in the third quarter by 8.3% to €1.1 billion (Q3 2016: €1.2 billion). This was mainly due to higher research and development costs in the Healthcare business sector and to the normalization of market shares in the Liquid Crystals business.
 
At 28.9%, the EBITDA margin pre exceptionals was lower than in the year-earlier quarter (Q3 2016: 31.5%). Group EBIT grew by 33.3% to €901 million, particularly as a result of the gain on the divestment of the Biosimilars business (Q3 2016: €676 million). Net income soared by 41.1% to €645 million (Q3 2016: €457 million).Earnings per share pre exceptionals decreased in the third quarter of 2017 by -11.2% to €1.51 (Q3 2016: €1.70).
 
As of Sept. 30, 2017, Merck KGaA had lowered its net financial debt resulting predominantly from the acquisition of Sigma-Aldrich to €10.5 billion (December 31, 2016: €11.5 billion).
 
In the period from January to September 2017, net sales of Merck KGaA, Darmstadt, Germany, rose by 2.5% to €11.5 billion (January-September 2016: €11.2 billion). This increase was due to organic sales growth of 3.2%. From January to September 2017, EBITDA pre exceptionals of the Group of €3.4 billion was at the year-earlier level (January-September 2016: €3.4 billion). Earnings per share pre exceptionals climbed slightly by 1.3% to €4.85 in the first nine months of 2017 (January-September 2016: €4.79).
 
In the third quarter, Performance Materials saw a slight organic sales decrease of 1.5%. Overall, sales of the Performance Materials business sector declined by 5.3% to €611 million (Q3 2016: €645 million).
 
The decline in sales in the third quarter reflected the business with established liquid crystal technologies and was caused by the ongoing normalization of the unusually high market shares in the recent past as well as the price declines customary in this industry. The Integrated Circuit Materials business unit generated very strong organic growth, which was driven in particular by the business with dielectrics and deposition materials for chip production.
 
The Pigments & Functional Materials business unit generated healthy organic growth in the third quarter. In the Advanced Technologies business unit, higher demand for OLED materials led to double-digit growth rates in net sales.
 
EBITDA pre exceptionals of Performance Materials fell in the third quarter by 11.7% to €249 million (Q3 2016: € 282 million). With an EBITDA pre exceptionals margin of 40.7%, the profitability of Performance Materials was the highest among the three business sectors (Q3 2016: 43.7%).