“We are pleased that all three business sectors grew despite a challenging environment,” said Karl-Ludwig Kley, CEO of Merck. “We continue to expect slight organic sales growth for the full year as well.”
Group net sales rose by 15.7% to €3.0 billion in the first quarter of 2015 (Q1 2014: €2.6 billion). Organically, sales grew by 1.3%. Reported sales also reflect not only noticeably positive currency effects of 8.9%, but also portfolio effects due to the integration of AZ Electronic Materials (AZ) amounting to 5.5%.
All three business sectors of the Merck Group posted sales increases. From a geographic perspective, organic sales growth was mainly driven by the Asia-Pacific and Latin America regions.
EBITDA pre-exceptionals, the key earnings indicator of the Group, rose by 5.7% to €853 million due to good operational performance and a favorable currency environment (Q1 2014: €807 million). Group EBIT rose by 2.5% to €480 million. Net income declined in the first quarter of 2015 by -13.4% to €282 million (Q1 2014: €325 million). This figure was lowered by the financing costs incurred in advance of the planned acquisition of Sigma-Aldrich.
Taking into account the share split in 2014, earnings per share pre-exceptionals amounted to €1.12 in the first quarter of 2015 (Q1 2014: €1.15).
Net financial debt declined to €78 million as of March 31, 2015; in mid-2014, it had temporarily risen to €2.2 billion owing to the acquisition of AZ. The rapid and substantial reduction of debt is evidence of Merck’s strong internal financing capacity in the run-up to the planned acquisition of Sigma-Aldrich. Merck had 39,842 employees worldwide on March 31, 2015.
The Healthcare business sector generated organic sales growth of 0.3% in the first quarter of 2015. Including positive foreign exchange effects of 7.1%, net sales rose overall by 7.4% to €1.7 billion (Q1 2014: €1.6 billion).
In the first quarter of 2015, the Life Science business sector posted moderate organic sales growth of 3.4%, which was primarily driven by the good business development of Process Solutions. Sales developed particularly well in North America. Including pronounced positive currency effects of 9.8% and the sale of the Discovery and Development Solutions business field, Life Science net sales rose by a total of 12.4% to €738 million (Q1 2014: €657 million).
Net sales of the Performance Materials business sector, which comprises Merck’s specialty chemicals business, soared by 53.4% to €617 million in the first quarter of 2015 (Q1 2014: €402 million). This was mainly attributable to the additional contribution to sales by the AZ acquisition (37.0%) as well as significant foreign exchange effects (14.8%). Sales also saw organic growth of 1.6%, to which all business units contributed.
The newly formed Display Materials business unit, consisting of Merck’s successful liquid crystals business and the complementary AZ display materials business, benefited from energy-saving UB-FFS technology used in the liquid crystal displays of the latest mobile device generation.
The established liquid crystal technologies were also robust, benefiting from the demand for high-end televisions, for example ultra-HD sets with ever larger display diagonals.
The renamed business unit Pigments & Functional Materials (formerly Pigments & Cosmetics) generated slight organic sales growth in the first quarter of 2015. Growth drivers were pigments for coating applications, mainly the Xirallic pigments, which are primarily used in automotive coatings. The Integrated Circuit (IC) Materials business unit includes the AZ business with materials used to manufacture integrated circuits. Compared with the year-earlier figures, IC materials posted a moderate organic increase in sales. Thanks to higher demand for OLED displays and LED phosphors, the Advanced Technologies business unit also generated organic growth.
For 2015, Merck continues to expect slight organic sales growth and a slight portfolio effect due to the inclusion of AZ for a full fiscal year. Overall, Merck assumes an increase in net sales to between €12.3 billion and €12.5 billion in 2015. Merck anticipates EBITDA pre-exceptionals of between €3.45 billion and €3.55 billion in 2015 despite higher R&D spending in the Healthcare business sector, the downturn in the development of Rebif in the United States and Europe, as well as the absence of royalty and license income. Business free cash flow of the Merck Group is expected to lie between €2.4 billion and €2.5 billion in 2015.