Merck KGaA Reports Solid Organic Performance in Q2 2018

Merck KGaA, Darmstadt, Germany, reported solid organic sales growth for the second quarter of 2018 and a slight increase in sales despite considerably negative foreign exchange effects. EBITDA pre-declined in comparison with the year-earlier quarter and was also impacted by foreign exchange effects. Merck KGaA confirmed its full-year forecast for 2018 with respect to organic business performance but now expects a slight weakening of negative foreign exchange effects.
 
“In the second quarter, our company generated solid organic sales growth, which was mainly attributable to our Life Science and Healthcare business sectors. This also reflects the positive contributions of our new medicines Bavencio and Mavenclad. Performance Materials also generated slight organic sales growth owing to the strong development of Semiconductor Solutions,” said Stefan Oschmann, chairman of the Executive Board and CEO of Merck KGaA, Darmstadt, Germany. “Overall, we confirm our forecast for organic performance in 2018, a year of transition with many challenges, as already stated at the beginning of the year.”
 
Group sales grew in the second quarter by 0.5% to €3.7 billion, thus maintaining the year-earlier level (Q2 2017: €3.7 billion). Organically, Group sales grew by 5.2% thanks to the Life Science and Healthcare business sectors. However, this was offset by negative foreign exchange effects amounting to 4.7%, which stemmed mainly from the weaker US dollar against the euro.
 
EBITDA pre, the key financial indicator used to steer operating business, declined by 13.7% to €920 million (Q2 2017: €1,066 million). The impact of negative foreign exchange effects on Group EBITDA pre was 11.0%. Group EBIT dropped by –35.4% to €392 million (Q2 2017: €608 million).
 
Net income of the Group thus fell in the second quarter by 42.0% to €247 million (Q2 2017: €426 million). Earnings per share pre declined by 18.5% to €1.23 (Q2 2017: €1.51).
 
The net financial debt of the group increased to €10.7 billion as of June 30, 2018 (Dec. 31, 2017: €10.1 billion). Among other things, this development was attributable to the dividend payments made in the course of the quarter.
 
In the first six months of 2018, net sales of the group declined by 2.1% to €7.2 billion (January-June 2017: €7.4 billion). This decrease was attributable to negative foreign exchange effects amounting to 6.3%, which exceeded organic sales growth of 4.2%. In the first half of 2018, EBITDA pre declined by 16.6% to €1.9 billion (January-June 2017: €2.3 billion), with 10.4% stemming from negative foreign exchange effects. Earnings per share pre fell by 21.0% to €2.56 (January-June 2017: €3.24).
 
In the second quarter of 2018, net sales of the Performance Materials business sector declined by 4.2% to €587 million (Q2 2017: €612 million). This was attributable to negative foreign exchange effects of –4.6%, which could not be offset by slight organic growth of 0.4%.
 
The Display Solutions business unit saw an organic decrease in sales but maintained its market leadership position. The lower sales of the business unit were attributable in particular to headwinds in the Liquid Crystals business owing to continued declining prices and now stagnating volume growth. An exception here were the energy-saving UB-FFS technology as well as OLED materials, which generated double-digit organic growth. The Semiconductor Solutions business unit, which comprises the business with materials used in integrated circuit production, delivered very strong organic growth in the second quarter.
 
EBITDA pre of Performance Materials declined by 18.2% to €196 million (Q2 2017: €239 million). This included negative foreign exchange effects of 8.8%. Consequently, the business sector’s EBITDA pre margin decreased to 33.4%.