Merck KgaA Sets Course for Future Growth in 2Q 2017

Merck KGaA, Darmstadt, Germany, a leading science and technology company, reported an increase in sales in the second quarter of 2017 along with a decline in EBITDA pre exceptionals compared with the year-earlier period. Merck KgaA confirmed its earnings guidance following the first six months of 2017.
 
In the second quarter, Merck KgaA increased its net sales by 2.3% to €3.9 billion (Q2 2016: €3.8 billion). Organic sales growth of the Group was 2.3% and was driven by the Life Science and Healthcare business sectors.
 
EBITDA pre exceptionals fell by -5.6% to €1.1 billion (Q2 2016: €1.2 billion). Among other things, this was due to expenses in the Healthcare business sector as well as to the weaker Liquid Crystals business. The EBITDA margin pre exceptionals fell to 28.1% (Q2 2016: 30.4%).
 
Group EBIT increased by 14.0% to €628 million (Q2 2016: €550 million), reflecting the impact of exceptionals. Net income rose significantly in the second quarter by 35.1% to €421 million (Q2 2016: €312 million), also thanks to an improved financial result. At €1.54, earnings per share pre exceptionals were flat in the second quarter of 2017 (Q2 2016: €1.55).
 
Net financial debt, which had increased sharply owing to the Sigma-Aldrich acquisition, decreased to €11.2 billion as of June 30, 2017 (December 31, 2016: €11.5 billion) despite dividend payments. The Group had 52,233 employees worldwide on June 30, 2017.
 
“We have set the course for future growth. By focusing on innovative medicines, we made very important advances in Healthcare. We also continued to make headway with the integration of Sigma-Aldrich. At the same time, we are seeing a normalization of our unusually high market shares in the Liquid Crystals business. We confirm our earnings targets for the full year,” said Stefan Oschmann, CEO and chairman of the Executive Board of Merck KGaA.
 
In the first half of 2017, net sales of the Group increased by 3.8% to €7.8 billion (January-June 2016: €7.5 billion). This increase was due both to organic sales growth (2.7%) and favorable exchange rate effects (1.5%). In the first six months of 2017, EBITDA pre exceptionals of the Group rose by 4.1% to €2.3 billion (January-June 2016: €2.2 billion). Earnings per share pre exceptionals climbed 8.1% to €3.34 in the first six months of 2017 (January-June 2016: €3.09).
 
Net sales of the Performance Materials business sector fell organically by -3.2% in the second quarter, which was primarily due to declining sales in the Liquid Crystals business. Consequently, net sales by the Performance Materials business sector decreased by -1.3% to €612 million in the second quarter of 2017 (Q2 2016: € 621 million).
 
Particularly in the business with established liquid crystal technologies, Merck KGaA, Darmstadt, Germany, faced the previously announced normalization of its above-average market shares amid ongoing price pressure. The Integrated Circuit Materials business unit, which includes the business with materials used to manufacture integrated circuits as well as the SAFC Hitech business of Sigma-Aldrich, generated almost double-digit organic sales growth. Sales by the Pigments & Functional Materials business unit grew slightly in the second quarter. Net sales of the Advanced Technologies business unit showed double-digit growth, driven by higher demand for OLED materials.
 
EBITDA pre exceptionals of Performance Materials fell in the second quarter by -12.5% to €239 million (Q2 2016: € 273 million). The profitability of Performance Materials decreased in comparison with the year-earlier period owing to declines in the Liquid Crystals business. Yet with an EBITDA margin pre exceptionals of 39.1%, Performance Materials remained the most profitable of the three Merck KgaA business sectors (Q2 2016: 44.1%).