Merck KGaA posts higher earnings, profits across business segments

Merck KGaA posts higher earnings, profits across business segments

Despite the price increases for raw materials and logistics, EBITDA pre rose organically by 3.2% to € 1,782 million

  • By IPP Bureau | August 04, 2022
Merck KGaA continued its growth trajectory in the second quarter of 2022 despite a challenging environment. Net sales increased by 14.3% compared with the second quarter of 2021 to € 5,568 million. All business sectors contributed to the strong organic sales increase of 6.6%, especially the “Big 3” growth drivers of Merck: Process Solutions and Life Science Services in Life Science, new Healthcare products as well as Semiconductor Solutions in Electronics. Despite the price increases for raw materials and logistics, EBITDA pre rose organically by 3.2% to € 1,782 million. For fiscal 2022, Merck confirms its guidance for organic growth of Group net sales and EBITDA pre.
“The second quarter of 2022 underlines the resilience of our strategy to generate growth and with that, value for our patients and customers. We continued to deliver despite major external challenges in our operating environment. A record quarter in Life Science, strong performance of our new Healthcare products, and the double-digit growth of Semiconductor Solutions within our Electronics business demonstrate the strength of our globally diversified business,” said Belén Garijo, Chair of the Executive Board and CEO of Merck.
In the second quarter of 2022, Merck realized further strategically important investments that will contribute to its medium-term growth target of € 25 billion in sales by 2025. In Cork, Ireland, the company is investing around € 440 million until 2027 to expand its production capacity for filtration products and membranes. At the Chinese site in Wuxi, Merck is spending around € 100 million on additional local production capacities for biopharma single-use assemblies. Since opening a € 59 million facility in Verona, Wisconsin, United States, in June 2022, Merck is one of the leading contract development and manufacturing organizations (CDMO) of high-potent active pharmaceutical ingredients. These ingredients are used in novel cancer therapies, including antibody drug conjugates (ADCs). Targeted capital allocation measures such as these are enabling Merck to strengthen the basis for efficient future growth.
In the second quarter of 2022, Merck achieved strong organic sales growth of 6.6%. Foreign exchange effects had a positive impact of 7.2%. These were due especially to the development of the U.S. dollar, the Chinese renminbi and the Taiwanese dollar. The acquisition of the biopharmaceutical contract development and manufacturing organization Exelead Inc., USA, (Exelead) was responsible for a portfolio-related sales increase of € 25 million or 0.5%.
EBITDA pre, the most important financial indicator used to steer operating business, rose by 13.1% to € 1,782 million. Organic earnings growth was 3.2%, driven by the Life Science business sector. EBITDA pre benefited from a positive foreign exchange effect of 9.5%. Relative to net sales, the EBITDA pre margin was 32.0%.
Earnings per share pre improved by 17.9% to € 2.64. Net financial debt amounted to € 10.2 billion on June 30, 2022. Operating cash flow was € 852 million. The decrease of –4.1% compared with the second quarter of 2021 was mainly due to higher working capital. The increase in working capital reflects the strong overall business development but also the consequences of global supply chain disruptions.
Merck confirms the forecast for the organic growth of net sales (6% to 9%) and EBITDA pre (5% to 9%) for the Group. For fiscal 2022, the company expects stronger positive foreign exchange effects of 5% to 8% for net sales (previously: 3% to 6%) and of 6% to 10% for EBITDA pre (previously: 4% to 8%). Based on that, the guidance for fiscal 2022 is as follows:
· Group net sales of between € 21.9 billion and € 23.0 billion (previously: € 21.6 billion to € 22.8 billion)
· EBITDA pre in a corridor of € 6.75 billion to € 7.25 billion (previously: € 6.6 billion to € 7.1 billion)
· Earnings per share pre of € 9.85 to € 10.75 (previously: € 9.60 to € 10.50), based on a tax rate of 23%.

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