Frankfurt The business with semiconductor materials and precursors for the biotech and pharmaceutical industries as well as some new developments in the pharmaceuticals division continue to prove to be very strong growth drivers for the Darmstadt-based Merck Group, which clearly overcompensate for weaknesses in some other divisions.
This is made clear by the detailed quarterly figures that the specialty chemicals and pharmaceuticals company published on Thursday morning. Merck boss Belén Garijo also promised further growth for the coming years. “2021 is just the prelude to a new era of growth for Merck. Our momentum is super strong, ”said Garijo. The Darmstadt-based company now wants to increase sales to 25 billion euros by 2025, an average of one billion euros per year. The current growth drivers should deliver around 80 percent of the growth.
A week ago, Merck raised its annual forecast for 2021. The company now expects sales of up to 19.8 billion euros and earnings per share of between 8.50 and nine euros. This corresponds to an adjusted net profit of 3.7 to 3.9 billion euros and an increase of 27 to 34 percent compared to the previous year.
The Group now expects the operating result before depreciation and amortization (Ebitda) adjusted for various special factors, which Merck also regards as an important performance indicator, at 6.0 to 6.3 billion euros, compared to the previously forecast 5.6 to 6.0 billion euros. The Merck share was quoted on Thursday morning almost unchanged at 206 euros. Since the beginning of the year, however, it has already gained almost 50 percent in value.
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In the third quarter, the group increased its sales by 11.7 percent to almost five billion euros. Adjusted Ebitda, on the other hand, was 1.55 billion euros, below the previous year’s figure of 1.7 billion euros, as did adjusted earnings per share, which shrank from 2.34 to 2.24 euros. It was noticeable here that in the previous year Merck had posted a profit contribution of 365 million euros from the reversal of provisions for a patent dispute in adjusted earnings. This effect did not repeat itself in 2021.
For the first nine months, the group reports a twelve percent increase in sales to 14.5 billion euros. The operating profit increased by a third to 3.14 billion euros, the net profit even by 45 percent to 2.2 billion euros.
The cash flow development at Merck is even stronger. The inflow of funds from the operating business rose by two thirds to 3.6 billion euros. Despite increasing investments, free cash flow improved from 1.3 to 2.4 billion euros in the first nine months. The Darmstadt-based company is now generating significantly more free cash flow than its much larger competitors BASF and Bayer.
The semiconductor sector has been expanded in a targeted manner in recent years
The Darmstadt-based group is currently benefiting primarily from its extensive business with reagents and primary materials for biotechnology and pharmaceutical production. This includes, in particular, preliminary products for vaccine production, including the lipids for the mRNA vaccine from Biontech.
The “Life Science” division, in which these businesses are bundled, grew by 17 percent in the third quarter and by 20 percent in the first nine months. The division’s operating profit (EBIT) improved by almost two thirds to 1.8 billion euros. It now contributes a good half to Merck’s operating profit.
According to Merck, the business in connection with the Covid pandemic, including above all precursors for vaccines, contributes around two thirds to the growth of the Life Science division and is expected to generate a total of around 1.1 billion euros in sales in the current year.
The group supplies 18 vaccine manufacturers and developers, among others. For 2022, Merck still expects sales of 900 million euros in this area. “Vaccines should definitely remain a very important part of fighting pandemics,” estimates company boss Garijo.
In the Electronics division, which represents the specialty chemicals business of the Merck Group, 20 percent sales growth in semiconductor materials more than compensated for further losses in the business with display materials (liquid crystals, Oleds). Merck had purposefully expanded the semiconductor sector in recent years, for example through the takeover of the US company Versum Materials. In view of the semiconductor boom, this is now paying off for the Darmstadt-based company. At the same time, the pigments business also posted strong growth compared to the previous year’s weak figure due to the pandemic.
In the pharmaceutical sector, on the other hand, the drugs Bavencio (cancer) and Mavenclad (multiple sclerosis), newly introduced in recent years, are providing a boost. Here sales grew by a total of six percent to 5.2 billion euros in the first nine months, while EBIT fell by seven percent to 1.4 billion euros due to the positive special effect in the previous year.
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