Merck raised its forecast for the year a week ago.
(Photo: dpa)
Frankfurt The business with semiconductor materials, 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 published by the specialty chemicals and pharmaceuticals company on Thursday morning. Merck CEO Belén Garijo spoke of a quarter “with strong profitable growth, to which all business sectors and regions contributed.”
Merck raised its forecast for the year a week ago. He now expects sales of up to 19.8 billion euros and earnings per share of 8.50 to 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. The adjusted Ebitda, on the other hand, at 1.55 billion euros, was below the previous year’s figure of 1.7 billion euros, as did the adjusted earnings per share, which shrank from 2.34 euros 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 12 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. The free cash flow improved despite increasing investments 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, for example, 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.
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 display materials business (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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