The German pharmaceutical company can increase profits and sales in the corona pandemic.
(Photo: dpa)
Frankfurt The Darmstadt-based Merck Group is unimpressed by the crisis in Ukraine in terms of its business development and, after record figures last year, also wants to grow significantly in 2022. Strong organic growth in sales and adjusted operating earnings before depreciation (Ebitda) is expected for 2022, Merck announced on Thursday when the annual financial statements were presented. In addition, for the first time in years, positive currency effects of two to five percent should boost earnings.
Merck underscores the positive outlook with a significant increase in the dividend by 45 cents to EUR 1.85 per share. The amount distributed will also rise to a new high in the new year.
Merck intends to present concrete forecasts for the business figures only after the end of the first quarter. Overall, however, the statements indicate that the Darmstadt-based group will be able to continue relatively seamlessly in 2022 from the very strong development of the previous year.
Investors liked to hear it. In morning trading, the Darmstadt-based company’s shares rose by more than 2.5 percent after initially losing around 1.5 percent in early trading.
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According to the company, the main growth driver will remain the business with biotech preliminary products bundled in the Life Science division. In particular, strong demand in the area of fighting pandemics is responsible for growth. Among other things, Merck is a pre-supplier for numerous vaccine manufacturers and has recently significantly expanded its production of pre-products for the mRNA vaccine from Biontech and Pfizer, for example.
Analysts assume normalization in the life sciences sector from 2023
But Merck also sees further growth in the health (pharmaceuticals) and electronics (display and semiconductor materials) sectors. Many analysts are now assuming that developments in the life sciences sector will return to normal from 2023.
After three forecast increases in a row, the Darmstadt-based group closed the 2021 financial year with a twelve percent increase in sales to 19.7 billion euros and a 54 percent increase in net profit to almost 3.1 billion euros. Earnings before interest and taxes (EBIT) increased by 40 percent to 4.2 billion euros. Adjusted Ebitda, Merck’s preferred earnings indicator for operational development, improved by 17 percent to 6.1 billion euros. In addition to interest and taxes, this also excludes depreciation and some irregularly occurring expense and income items.
The earnings figures represent new records for Merck in almost every respect. This also applies to free cash flow, which increased by two-thirds to EUR 3.2 billion. Despite higher dividend payments, Merck was therefore able to reduce its net debt by EUR 2 billion to EUR 8.8 billion.
In 2021, Merck benefited greatly from the expansion of its activities in the field of biotech materials and semiconductor chemicals. The group had significantly expanded both segments over the past decade through major acquisitions. Most recently, the group strengthened its Life Science division by acquiring Exelead, a biopharmaceutical contract developer and manufacturer.
In the Electronics division, which Merck strengthened in 2019 with the acquisition of Versum Materials, double-digit growth in semiconductor materials overcompensated for a drop in sales in liquid crystals last year. The business with pigments for the automotive and cosmetics industry has also recovered significantly after the pandemic-related slump in the previous year and grew by twelve percent.
In the pharmaceuticals sector, meanwhile, the newer products Bavencio (against cancer) and Mavenclad (multiple sclerosis) were the main drivers of sales growth. Overall, the division grew by 8.5 percent and should therefore grow a little faster than the industry as a whole, as far as the special boom in the field of Covid vaccines is disregarded.
More: Merck expands business with mRNA technology through acquisition