Pill Identifier App

FY/2011: Merck Total Revenues Rise 11%, Surpassing ? 10 Billion

FY/2011: Merck Total Revenues Rise 11%, Surpassing € 10 Billion
•Company delivers on revenue and profit guidance in a challenging year
•Transformation process begins
•Proposed dividend increase of 20% to € 1.50 per share

Darmstadt, Germany, March 6, 2012 - Total revenues of the Merck Group increased by 11% to € 10,276 million in 2011 from € 9,291 million in 2010. This performance was slightly above the company’s guidance despite a challenging global economic environment. All four of Merck’s divisions contributed to this growth. The reported revenue increase was primarily due to the acquisition of Millipore Corporation, which closed in July 2010. In the fourth quarter of 2011, total revenues rose 3.1% to € 2,626 million compared to the year-ago quarter.


 

Key Figures:

Merck Group (€ million)

Q4/2011

Q4/2010

(+/- %)

FY/2011

FY/2010

(+/- %)

Total Revenues

2,625.7

2,545.9

3.1

10,276.4

9,290.6

10.6

Operating Result

291.7

129.1

126.0

985.1

1,113.5

-11.5

Underlying core OR1

565.2

538.0

5.1

2,294.4

2,095.8

9.5

Net Profit2

135.6

46.5

191.8

617.5

632.1

-2.3

EPS (€)

0.62

0.21

195.2

2.84

2.91

-2.4

Underlying Core EPS (€)3

1.69

1.78

-5.1

7.53

6.73

11.9

1.Operating result excluding Merck Serono- and Merck Millipore-related amortization of intangible assets and integration costs as well as impairment losses on intangible assets in the Performance Materials division, and without one-time items; 2. Net profit after non-controlling interests 3. EPS excluding net of tax effects for Merck Serono- and Merck Millipore-related amortization of intangible assets and integration costs, impairment losses on intangible assets in the Performance Materials division, and without one-time and exceptional items


“Merck delivered a good operational result in a challenging year, including surpassing € 10 billion in total revenues for the first time in the company’s history,” said Karl-Ludwig Kley, Chairman of the Merck Executive Board. “We managed to deliver on our profitability guidance despite facing a softening economy and significant one-time charges. However, we recognize that the competitive and market pressures we face in our businesses are likely to increase over the next few years. As a result, we recently initiated an efficiency program across all businesses and regions to enable us to address our inefficiencies and free up resources to invest in promising growth markets.”

Merck reported organic revenue growth of 4.8% in 2011. The impact from acquisitions and divestments increased total revenues by 6.4% while foreign exchange rates lowered total revenues by 0.6% compared to 2010. At € 370 million, royalty, license and commission income was slightly higher than in 2010.

Full-year cost of sales rose by 17% to € 2,788 million and the gross margin rose by 8.4% to € 7,488 million in 2011. In the fourth quarter, cost of sales decreased 7.0% and the gross margin rose 7.5% to € 1,917 million.

Full-year marketing and selling expenses increased by 7.1% to € 2,393 million, largely due to the fact that in 2010, marketing and selling expenses of the Millipore companies were only included for six months. Royalty, license and commission expenses rose to € 512 million from € 480 million, mainly due to increased sales of Rebif® and Erbitux®.

Other operating income and expenses were 49% higher at € -582 million. This sharp increase was due largely to the asset impairment of the Large-Scale Biotech production plant (LSB) at the Merck Serono Biotech Center in Switzerland during the second quarter, which amounted to € 165 million. Also under other operating expenses and income were: € 13 million for the discontinuation of development of cladribine tablets for multiple sclerosis; transaction and integration costs for Millipore of € 38 million (€ 87 million in 2010).

Research and development spending increased 8.6% to € 1,517 million in 2011 mainly due to expensive late-stage clinical trials of Merck Serono. This figure also includes expenses of € 42 million for research and development activities still to be performed in connection with the return of the rights to safinamide to Newron Pharmaceuticals. For the fourth quarter, R&D rose by 9.6% to € 397 million.

Amortization of intangible assets rose 23% to € 1,005 million in 2011 from € 819 million in the previous year. This mainly includes amortization of intangible assets in connection with the purchase price allocation for Serono and Millipore. It should be noted that in 2010, amortization for Millipore was only booked for half the year. In addition, in the second quarter of 2011, the estimate of the remaining useful life of Rebif® was shortened by two years owing to the increasing market influence of oral forms of treatment for multiple sclerosis. Other Merck Serono impairments included € 50 million for the residual book value of cladribine and € 63 million for safinamide, as well as € 35 million for the discontinuation of the development of the cancer treatment candidate IMO-2055.

Due to the one-time expenses mentioned above, the Group’s full-year operating result declined 12% to € 985 million, in line with the company’s guidance. For the fourth quarter, the Group operating result more than doubled to € 292 million from € 129 million in the year-ago quarter, which was burdened by several one-time charges.

The full-year underlying core operating result, which excludes Merck Serono- and Merck Millipore-related amortization of intangible assets and other one-time charges, was slightly above the company’s guidance of € 2,250 million at € 2,294 million, or 22.3% of total revenues, compared to € 2,096 million, or 22.6% of total revenues, in 2010. For the fourth quarter, the underlying core operating result increased 5.1% to € 565 million.

Exceptional items in 2011 amounted to € 152 million compared to € -0.8 million in the previous year. A gain of € 157 million on the divestment of the Crop BioScience business was the main contributor. Full-year earnings before interest and tax (EBIT) rose 2.2% to € 1,137 million, or 11.1% of total revenues, compared to € 1,113 million, or 12.0% of total revenues, in 2010.

The financial result rose to € -286 million in 2011 from € -252 million in the previous year. The marked increase of 14% was due mainly to expenses resulting from the financing for Millipore and exchange rate differences. Adjusted for exceptional items, the tax ratio was 26.1%, compared to 25.3% in 2010.

Profit after tax amounted to € 629 million, which is 2.0% less than in 2010. Fourth-quarter profit after tax jumped to € 139 million in 2011 from € 46 million in the year-ago quarter, which had lower total revenues and higher amortization expenses.

Merck had 40,676 employees worldwide on December 31, 2011, compared to 40,562 on December 31, 2010.

Merck Divisions
Merck Serono’s total revenues increased 2.9% to € 5,920 million in 2011 compared to € 5,754 million in the previous year – a solid performance in a difficult environment. Organically, i.e. excluding the effects of divestments and foreign currency exchange rates, the division’s total revenues rose 5.1% in 2011. Fourth-quarter total revenues rose 2.7% to € 1,544 million.

Global sales of Rebif® for the treatment of relapsing forms of multiple sclerosis increased 3.4% on an organic basis to € 1,691 million in 2011, boosted by higher sales in the United States. Sales of the targeted cancer treatment Erbitux® rose 3.5% organically in 2011 to € 855 million owing to strong growth in emerging markets.

The division’s full-year operating result declined by 46% to € 304 million from € 565 million in the previous year owing to one-time write-downs. The fourth-quarter operating result rose to € 128 million in 2011 from just € 14 million in 2010. The 2011 underlying core operating result, which excludes amortization of intangible assets and one-time charges, was € 1,336 million, or 22.6% of total revenues, compared to € 1,279 million, or 22.2% of total revenues, in 2010. The division’s EBIT margin for 2011 was 5.6% compared to 11.0% in the previous year.

The Consumer Health Care division reported a 5.1% rise in total revenues to € 496 million in 2011 with improved sales in both established and emerging markets and stronger consumer demand for key brands such as Bion® (+17%) and Kytta®/Flexagil® (+18%). Fourth-quarter revenues grew 2.4% to € 129 million in 2011 from € 126 million in 2010.

The division’s operating result jumped to € 46 million in 2011 from € 14 million in 2010 due to tighter cost controls and the absence of one-time negative effects that occurred in the previous year. The fourth-quarter operating result was € 12 million in 2011 compared to just € 1.7 million in 2010. The division’s EBIT margin for 2011 was 9.3% compared to 2.9% in the previous year.

The Merck Millipore division’s total revenues rose 48% to € 2,393 million in 2011 compared to € 1,613 million in 2010, which had included Millipore for only six months. Excluding the effects of foreign exchange rates (-1.2%) and acquisitions and divestments (45%), the division’s 2011 revenues grew 4.3%. Fourth-quarter total revenues rose 5.2% to € 610 million. The division’s solid performance in 2011 was led by sales growth in North America (7.2% organic growth), Latin America (8.7% organic growth) and Asia (5.1% organic growth).

The BioScience business unit, which provides products and services to support life science researchers, reported annual sales of € 421 million. Growth was driven by a broad portfolio of products and services. Geographically, sales gains were primarily attributable to Asian and Latin American markets. Lab Solutions sales amounted to € 1,006 million in 2011. Growth was fueled by strong sales in Lab Water and BioMonitoring. Process Solutions sales totaled € 956 million in 2011. Growth was driven by strong performance in emerging markets, e.g. China, and sales to global biotech customers, who increased their production of biologic drugs and vaccines in the second half of 2011.

The division’s 2011 operating result was € 226 million, and included higher operational spending on marketing, selling and R&D as well as € 190 million in amortization of intangible assets connected to the Millipore acquisition. The operating result for 2010 was € 48 million and included € 86 million for the step-up of Millipore inventories, € 96 million for amortization of intangible assets. For the fourth quarter, the operating result was € 55 million compared to just € 1 million in the year-ago quarter. The division’s full-year EBIT margin was 9.4% in 2011 compared to 3.0% in 2010. The 2011 underlying core operating result, which is adjusted for one-time charges and amortization of purchased intangibles, was € 457 million, or 19.1% of total revenues, compared to € 317 million, or 19.6% of total revenues, in 2010.

The Performance Materials division’s 2011 total revenues rose 1.0% to € 1,467 million despite declining demand from customer segments of the Pigments business, as well as the partially stagnating liquid crystal display market. Total revenues grew organically by 4.1% as the divestment of the Crop BioScience business lowered revenues by 3.1%. Fourth-quarter total revenues increased 1.7% to € 344 million.

Full-year revenues for the Liquid Crystals business unit increased 8.5% to € 1,092 million as higher volumes were able to compensate for increased pricing pressures. Revenues for the Pigments & Cosmetics business unit declined 5.2% to € 372 million in 2011 due to lower volumes and softer demand across all business fields.

The division’s full-year operating result fell 8.9% to € 525 million, mainly as the result of decreased production-capacity utilization at times, increased raw materials costs, as well as additional expenses for new product launches. EBIT, which included an exceptional gain of € 157 million on the divestment of the Crop BioScience business, rose 19% to € 682 million. The EBIT margin was 46.5% in 2011 and 39.6% in 2010.

Dividend
For fiscal 2011, Merck will propose to the Annual General Meeting that the dividend payment be increased by 25 cents to € 1.50 per share, an increase of 20%.

Merck Group forecast for 2012 and 2013
The Executive Board assumes that total revenues of the Merck Group will increase slightly in 2012 and 2013. At Group level, EBITDA before exceptional items will rise slightly in 2012 and then improve further in 2013. Reported EBITDA could, however, be lower due to one-time expenses within the scope of the efficiency-enhancement and cost-reduction programs.

Merck Serono total revenues are expected to increase slightly in 2012 and 2013. The efficiency-enhancement and cost-reduction program could adversely affect reported EBITDA primarily in 2012, but also in 2013. However, in 2012 EBITDA before exceptional items should slightly exceed the good level of 2011. If efficiency measures are implemented, EBITDA before exceptional items should increase further in 2013.

Total revenues of the Consumer Health Care division should increase slightly in 2012 and 2013. However, in both these years the focus will be on raising profitability. Therefore, EBITDA before exceptional items is expected to rise in 2012 and 2013.

The Merck Millipore division is expected to achieve moderate total revenue growth in 2012 and 2013. Following the strong rise in EBITDA in 2011 due to the full-year consolidation of the Millipore business, EBITDA before exceptional items is expected to rise again in 2012. The division also assumes that EBITDA before exceptional items will rise further in 2013.

The Performance Materials division expects total revenues to grow slightly in 2012 and 2013. Volume growth, especially in Liquid Crystals, could possibly be offset by price pressure in the market. Therefore, in 2012, EBITDA before exceptional items should remain approximately at the level of 2011 and also remain roughly constant in 2013. Efficiency-enhancement measures could adversely affect reported EBITDA especially in 2012, but also in 2013.

Notes to Editors:

· Merck’s Annual Report, available in an interactive online format, can be found on the Internet. This site allows quick access to the annual report with better navigation, downloading of financial tables as Excel spreadsheets, intelligent searches and much more.

· Click here to follow the press conference live at 10 a.m. CET. Click here for the analysts call at 2 p.m. CET, as well as the charts used for the call.

· Merck KGaA stock symbols:
Reuters: MRCG, Bloomberg: MRK GY, Dow Jones: MRK.DE
Frankfurt Stock Exchange: ISIN: DE 000 659 9905 - WKN: 659 990

Note regarding forward-looking statements
The information in this document contains “forward-looking statements.” Forward-looking statements may be identified by words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “will” or words of similar meaning and include, but are not limited to, statements about the expected future outcome or timing of the transactions described above. These statements are based on the current expectations of management of Merck KGaA and E. Merck KG, and are inherently subject to uncertainties and changes in circumstances. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are factors relating to changes in global, political, economic, business, competitive, market and regulatory forces. Merck KGaA and E. Merck KG do not undertake any obligation to update the forward-looking statements to reflect actual results, or any change in events, conditions, assumptions or other factors.

Posted: March 2012


View comments

Hide
(web4)