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• Good operating business and acquisition of AZ boost sales (+5.5%) and
EBITDA pre one-time items (+4.1%) to new record levels• Organic growth in all four divisions
• Business in Emerging Markets drives sales
• Merck lays foundations for future growth
• Forecast for sales and EBITDA pre one-time items met
• Merck proposes a 5.3% increase in the dividend to € 1.00 per share
Darmstadt, Germany, March 3, 2015 - Merck, a leading company for innovative, top- quality high-tech products in healthcare, life science and performance materials, has successfully completed a year of strategically important moves and achieved its objectives.
"We strengthened all three of Merck's business sectors: Healthcare, Life Science and Performance Materials. With the acquisition of AZ, the offer to acquire Sigma-Aldrich and the alliance with Pfizer in immuno-oncology, we have laid the foundations for future growth," said Karl-Ludwig Kley, Chairman of the Executive Board of Merck, on Tuesday in Darmstadt. "These developments are the result of our long-term transformation and growth strategy. Merck is transforming into a highly specialized, global technology company with the goal to improve the lives of patients and customers."
€ 11.1 billion). Sales grew by 5.5% to € 11.3 billion (2013: € 10.7 billion). This was primarily the result of organic growth of 4.0% as well as acquisition-related increases of
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News release
3.3%, which were attributable to the acquisition of AZ. At the same time, foreign exchange effects lowered sales by -1.8%.
Merck markedly increased its operating result (EBIT) by 9.4% to € 1.8 billion (2013:
€ 1.6 billion). The key financial indicator used to steer operating business, EBITDA pre one-time items, climbed 4.1% to € 3.4 billion (2013: € 3.3 billion), also thanks to good operating performance and the acquisition of AZ. Solid growth and the good development of operating business also contributed significantly to offsetting sharply lower royalty, license and commission income, which fell by -47% to € 209 million (2013: € 395 million). Net income, i.e. profit after tax attributable to Merck shareholders, for 2014 was € 1,157 million (2013: € 1,202 million), representing a decline of -3.7%, as the previous year 2013 benefited from the one-time effect of a very low tax ratio of 13%.
Even though the purchase price payment for AZ amounting to around € 1.9 billion was financed, net financial debt rose by only € 252 million to € 559 million (2013:
€ 307 million). As of June 30, 2014, this figure had temporarily risen to € 2.2 billion. This renewed evidence of the Merck Group's high internal financing power shows that Merck is well-prepared for the acquisition of Sigma-Aldrich. As of December 31, 2014, Merck had 39,639 employees worldwide (2013: 38,154).
Merck was thus able to meet its forecast of moderate growth in sales, EBITDA pre one- time items, as well as earnings per share before one-time items. However, business free cash flow, which was forecast to increase slightly, did not meet expectations.
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News release Q4 2014: Sales and EBITDA pre one-time items grow considerably
In the fourth quarter of 2014, Merck achieved strong sales growth of 12.9% to
€ 3.0 billion compared with the year-earlier period (Q4/2013: € 2.6 billion). Apart from organic growth of 4.4%, portfolio effects from the AZ acquisition and favorable foreign exchange effects were responsible for the considerable increase. Consequently, despite declining royalty, license and commission income, EBITDA pre one-time items grew 10.5% to € 878 million (Q4/2013: € 795 million). Earnings per share pre one-time items rose 7.5% to € 1.14 (Q4/2013: € 1.06).
Merck Serono, the biopharmaceutical business of Merck, recorded organic sales growth of 3.6% in 2014. Including negative foreign exchange effects of -1.9%, divisional sales rose overall by 1.7% to € 5.8 billion. Almost all of Merck Serono's franchises contributed to growth, with the highest absolute sales increase coming from the Fertility franchise. From a geographic perspective, Merck Serono achieved the strongest growth in the Emerging Markets region.
The drug Rebif, which is used to treat relapsing forms of multiple sclerosis, posted a slight organic sales decline of only -0.2% in 2014, despite increasing competitive pressure from oral formulations. Amid currency headwinds of -1.2%, Rebif sales amounted to € 1.8 billion. In 2014, sales of the oncology drug Erbitux grew organically by 5.9%. Including negative foreign exchange effects of -3.4%, sales of Erbitux rose overall by € 22 million to € 904 million. With Gonal-f, the leading recombinant hormone used in the treatment of infertility, Merck achieved organic sales growth of 9.1% in
2014. Including adverse foreign exchange effects, sales of Gonal-f rose to
€ 628 million.
In 2014, research and development costs of Merck Serono were higher following the continued focus on strategically important pipeline projects and the termination of individual, less promising research initiatives. At the same time, royalty, license and
commission income of Merck Serono fell sharply by -48.5% to € 192 million in 2014
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(2013: € 372 million). Other operating expenses and income (net) saw a strong improvement. This led to a -1.3% decline in EBITDA pre one-time items, which totaled
€ 1.8 billion (2013: € 1.9 billion).
"The business performance of our marketed medicines was robust in 2014," said Kley. "Furthermore, we set an important milestone in further developing our pharmaceutical pipeline in 2014 by entering into an alliance in immuno-oncology with Pfizer. This will help us to fully exploit the potential of our anti-PD-L1 compound avelumab," Kley added.
In 2014, sales by Consumer Health, the over-the-counter pharmaceutical business, rose by 3.2% to € 766 million (2013: € 742 million). The 5.4% organic increase in sales was countered by a negative foreign exchange impact of -2.2%. Organic sales were driven on the one hand by growth in the two key regions, namely Emerging Markets and Europe, and on the other hand by the growth of the strategic brands Neurobion, Femibion and Floratil as well as local brands in Germany. Consumer Health reported EBITDA pre one-time items of € 169 million (2013: € 172 million), thus nearly reaching the earnings level of 2013 despite significantly higher investments in marketing and sales in connection with efforts to strengthen strategic brands.
"The focus on core brands and core markets has proven to be the right path for our Consumer Health business with over-the-counter pharmaceuticals, which grew further in 2014," said Kley. "Since the beginning of 2015, our Consumer Health business has been part of the Healthcare business sector."
Sales of Performance Materials, Merck's specialty chemicals business, increased in
2014 by 25.4% to € 2.1 billion (2013: € 1.6 billion). Both solid organic growth of 4.1%
as well as acquisition-related sales increases of 22.8% or € 375 million contributed to
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News release
this sharp rise. Adverse foreign exchange effects lowered sales by -1.5%. Organic growth was delivered by all the existing business units, with Liquid Crystals making the largest absolute contribution to the increase in sales. In the Liquid Crystals business, in which Merck is the global market and innovation leader, the company benefited from the strong demand for high-quality and large-size televisions, for example ultra HD devices. This growth was also bolstered by sales volume developments of the new, energy-saving UB-FFS (Ultra-Brightness Fringe Field Switching) technology, which is used in the new generation of displays for smartphones and tablet PCs. The Pigments & Cosmetics business unit achieved slight organic sales growth in 2014. Xirallic pigments, which are primarily used in high-quality automotive coatings, as well as technical-functional materials were the main drivers. Due to higher demand for OLED displays, the Advanced Technologies business unit made a good contribution to the organic growth of Performance Materials.
EBITDA pre one-time items of Performance Materials rose in 2014 particularly as a result of the acquisition of AZ by 14.8% to € 895 million (2013: € 780 million).
"Merck is not only benefiting from the megatrend of digitization, but is also actively helping to shape it, for example by developing energy-saving and thus battery-saving display materials," explained Merck CEO Kley. "Apart from the good performance of the Liquid Crystals business with both established and innovative products, we are therefore particularly pleased by the sales growth resulting from the acquisition of AZ. Meanwhile AZ has been fully integrated and optimally complements our business portfolio."
Merck Millipore, the life science business of the Merck Group, posted solid organic sales growth of 4.5% in 2014, which was primarily driven by the good performance of the Process Solutions business area. From a geographic perspective, sales developed very positively in the Emerging Markets region. Including a negative foreign exchange
impact and taking into account the divestment of the Discovery and Development
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Solutions business field, sales rose overall by 2.1% to € 2.7 billion (2013: € 2.6 billion). EBITDA pre one-time items of Merck Millipore increased by 2.5% to € 659 million (2013: € 643 million).
The Process Solutions business area, which markets products used in pharmaceutical production, generated especially strong organic sales growth of 8.9%. This was mainly driven by increasing demand from the biopharmaceutical manufacturing industry for consumables as well as purification solutions. With its broad range of products for researchers and scientific laboratories, Lab Solutions achieved organic sales growth of 1.9%. The Bioscience business area, which markets products and services for pharmaceutical and academic research laboratories, recorded a slight organic sales decline of -0.5%. Among other things, lower demand for antibodies dampened sales.
"We provide patients, customers and society with solutions that deliver growth. Our Life Science business is a perfect example of this," said Kley. "Through the planned acquisition of Sigma-Aldrich, we want to expand it and offer our customers working in science and industry worldwide a considerably broader range of products."
For 2015, Merck expects a slight increase in organic sales over the previous year amid moderately positive foreign exchange effects. Moreover, due to the inclusion of AZ for a full fiscal year, a slightly positive portfolio effect is expected. Owing to the expected operating development and positive foreign exchange effects, Merck forecasts a slight increase in EBITDA pre one-time items in 2015. EBITDA pre one-time items in 2015
should, however, at least reach the previous year's level.
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News release Forecast for 2015• Slight organic sales growth
• EBITDA pre one-time items slight increase - at least stable
An overview of key figures for the Merck Group€ million 2014 2013
Change Q4/2014 Q4/2013 in %
Change in %
Total revenues 11,500.8 11,095.1 3.7 3,036.4 2,741.8 10.7
Sales 11,291.5 10,700.1 5.5 2,976.5 2,636.3 12.9
Operating result (EBIT) 1,762.0 1,610.8 9.4 432.8 264.2 60.4
Margin (% of sales) 15.6 15.1 14.2 10.0
EBITDA 3,122.9 3,069.2 1.7 804.2 725.9 10.8
Margin (% of sales) 27.7 28.7 27.0 27.5
EBITDA pre one-time items 3,387.7 3,253.3 4.1 878.4 795.2 10.5
Margin (% of sales) 30.0 30.4 29.5 30.2
Earnings per share pre one-time items (€)1 4.60 4.39 4.8 1.14 1.06 7.5
Earnings per share1 2.66 2.77 -4.0 0.64 0.65 -1.5
Business free cash flow 2,605.1 2,960.0 -12.0 674.7 730.5 -7.6
Net financial debt (as of Dec. 31) 559.1 306.6 82.3 - -
Net income 1,157.3 1,202.2 -3.7 280.0 280.6 -0.2
1 Taking into account the share split; previous year's figures have been adjusted accordingly.
Notes for editors:• Interactive online Annual Report 2014 optimized for mobile devices
• The press conference for media representatives will also be webcast live as of
10:00 a.m. (CET) (in Englishand German)
• The corresponding charts as well as further information for the press including a digital press kit with more information can be found here
• Merck on Facebook, Twitter, LinkedIn
• Merck photos and video footage can be found here
• Merck stock symbols
Reuters: MRCG, Bloomberg: MRK GY, Dow Jones: MRK.DE
Frankfurt Stock Exchange: ISIN: DE 000 659 9905 - WKN: 659 990
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News releaseAll Merck news releases are distributed by e-mail at the same time they become available on the Merck website. Please go to www.merckgroup.com/newsaboto register online, change your selection or discontinue this service.
Merck is a leading company for innovative, top-quality high-tech products in healthcare, life science and performance materials. The company has six businesses - Merck Serono, Consumer Health, Allergopharma, Biosimilars, Merck Millipore and Performance Materials - and generated sales of around
€ 11.3 billion in 2014. Around 39,000 employees work for Merck in 66 countries to improve the quality of life for patients, to further the success of customers, and to help meet global challenges. Merck is the world's oldest pharmaceutical and chemical company - since 1668, the company has stood for innovation,
business success and responsible entrepreneurship. Holding an approximately 70% interest, the founding family remains the majority owner of the company to this day. Merck, Darmstadt, Germany holds the global rights to the Merck name and brand. The only exceptions are Canada and the United States, where the company operates as EMD Serono, EMD Millipore and EMD Performance Materials.
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