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Merck KGaA’s net profit drops sharply on impairments, other expenses; acquisitions boost revenue

August 6, 2020
Chemical Value Chain

Merck KGaA (Darmstadt, Germany) says its net profits in the second quarter of 2020 dropped 38.5% year on year (YOY), to €290 million ($343 million), despite revenue growing 3.7% YOY, to €4.12 billion, driven primarily by acquisition-related growth in the performance materials business and organic growth in the life-science business.

The fall in profits is attributed mainly to impairment losses on intangible assets in performance materials, higher interest expenses, and other operating expenses, the company says. EBITDA and EBIT fell by 2.5% and 20.6%, to €1.05 billion and €491 million, respectively, Merck says.

“Despite considerable pandemic-related obstacles in some businesses, overall we did well in the second quarter. In recent months, we again proved the strengths of our diversified business model with three strong innovation-driven business sectors,” says Stefan Oschmann, chairman and CEO at Merck.
The company’s healthcare business recorded a 10.6% YOY drop in sales, to €1.50 billion, due to the impact of COVID-19, and negative currency and portfolio effects. Fertility was the segment hurt the most by the pandemic, with an organic decrease in sales of 38.9%, Merck says. EBITDA was down 31.3% YOY, to €359 million.
Life-science sales rose by 5.9% to €1.81 billion, with the process solutions segment the key growth driver due to continued high demand in the underlying business, but also as a result of increased orders in the course of the pandemic that drove 19.8% organic growth in sales, Merck says. However, sales of the research solutions segment declined 7.1% and remained flat in the applied solutions segment, the company says. EBITDA jumped 12.8% YOY, to €584 million, it says.

Merck’s performance materials business recorded a 38.1% YOY increase in sales, to €814 million, with a 50.1% sales contribution from the acquisitions of Versum Materials and Intermolecular driving the growth, the company says. The display solutions and surface solutions segments posted lower sales by 20.8% and 29.6%, respectively. Meanwhile, organic sales growth of the semiconductor solutions segment was 12.1%. The performance materials business’s EBITDA rose 35.9% YOY, to €219 million.

Merck has confirmed the assumptions it made, following the COVID-19 outbreak, in a forecast made on 31 March. The company continues to assume that its businesses will be impacted to varying degrees. For full-year 2020, it expects slight-to-moderate organic net sales growth compared with the previous year with sales between €16.9 billion and €17.7 billion. The company continues to expect that life sciences will be a major driver of its organic growth, healthcare will see a slight organic increase in net sales, and that the performance materials business will see a moderate-to-strong organic decline in net sales.

Merck has also raised the lower end of its expected full-year range for EBITDA before exceptional items and now forecasts slight-to-moderate organic growth to €4.45-4.85 billion. It expects strong organic growth in life sciences and a stable development in healthcare, but forecasts an organic decline in performance materials.

By: Sotirios Frantzanas

Source: Chemical Week

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