Merck Q3 2013 Results Press Conference
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Merck Q3 2013 Results Press Conference

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Q3 results press conference presentation of Merck

Q3 results press conference presentation of Merck

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Merck Q3 2013 Results Press Conference Merck Q3 2013 Results Press Conference Presentation Transcript

  • Q3 Results – Press Conference Transformation well on track Karl-Ludwig Kley Chairman of the Executive Board Matthias Zachert Chief Financial Officer Darmstadt | November 14th, 2013
  • Disclaimer Remarks All comparative figures relate to the corresponding last year’s period. Important information This presentation does not constitute an offer of securities for sale or a solicitation of an offer to purchase securities in the United States. The shares referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States absent registration under the Securities Act or an available exemption from such registration. Note regarding forward-looking statements The information in this document may contain “forward-looking statements”. Forward-looking statements may be identified by words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “will” or words of similar meaning and include, but are not limited to, statements about the expected future business of Merck KGaA. These statements are based on the current expectations of management of Merck KGaA and E. Merck KG, and are inherently subject to uncertainties and changes in circumstances. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are changes in global, political, economic, business, competitive, market and regulatory forces. Merck KGaA and E. Merck KG do not undertake any obligation to update the content of this presentation and forward-looking statements to reflect actual results, or any change in events, conditions, assumptions or other factors. All trademarks mentioned in the presentation are legally protected.
  • Agenda Executive overview – Karl-Ludwig Kley Business and financial review Q3 2013 – Matthias Zachert Update on transformational journey – Karl-Ludwig Kley
  • 9M 2013 – Transformation well on track Sales [€ m] EBITDA pre [€ m] Net income [€ m] 0% +13% +>100% +4% organic 8,029 8,064 2,458 922 2,175 295 9M 2012 9M 2013 9M 2012 9M 2013 9M 2012 9M 2013 4
  • Q3 2013 – Solid quarter amid a challenging environment Merck Serono shows strong organic sales growth of 5% driven by EM* and Japan Consumer Health turnaround on track underlined by strong Q3 performance Operations Performance Materials solid, first signs of destocking Merck Millipore outperforms due to strength of balanced portfolio Accelerated implementation of efficiency measures Solid organic sales growth, total sales slightly decreasing due to FX effects Continuingly increasing EBITDA pre despite major FX headwinds Financials EPS and Net Income increase more than 80% Net financial debt reduction continued Merck’s solid business performance of the first half continued in the third quarter of 2013 *Emerging Markets 5
  • Operational update – Merck Serono and Consumer Health  Erbitux shows strong organic growth Update Merck Serono  Good performance of Rebif despite challenging markets  Continuation of Tecemotide development program  Further partnering with Ablynx (Nanobodies) and Selvita (cancer lead discovery)  Focus on core strategic brands yields growth Update Consumer Health  Better resource allocation improves profitability  Turnaround fully on track 6
  • Operational update – Performance Materials and Merck Millipore Update Performance Materials Update Merck Millipore  Continuation of long term growth trend of Liquid Crystals driven by demand for larger TVs  Technology improvements support leadership position  Turnaround of pigments fully on track  Balanced portfolio of three business units performs well amid visible economic headwinds  Healthy demand for Merck’s premium products results in organic growth for all business units  Continued excellent performance 7
  • Emerging Markets and Japan drive organic growth, reported sales burdened by strong FX headwinds Merck Group Q3 2013 sales by region Regional development of sales [€ m] -2% 2,722 Europe North America 2,659 Europe 956 0% North America 562 Emerging Markets 20% Organic sales growth 959 +1% -7% 525 -1% 964 +1% 971 +11% 240 -15% 204 +6% 36% 37% Emerging Markets 8% Japan & Others* Japan & Others* Q3 2012 Q3 2013 First time Emerging Markets share exceeds Europe *Australia/Oceania, Africa 8
  • Agenda Executive overview – Karl-Ludwig Kley Business and financial review Q3 2013 – Matthias Zachert Update on transformational journey – Karl-Ludwig Kley
  • Q3 2013 – Strong margin and profitability expansion amid significant FX headwinds [€ m] Δ Q3 2013 Q3 2012 2,659 2,722 -2% 831 754 10% 31.2% 27.7% EPS pre [€] 2.29 1.98 16% Operating cash flow 827 908 -9% Sales EBITDA pre Margin (% of sales) [€ m] Sept 30, 2013 Net financial debt Working capital Employees Dec 31, 2012 Δ 536 1,926 -72% 2,290 2,360 -3% 37,976 38,847 -2% Q3 2013 dynamics  Sales decline slightly as solid organic growth of 5% is being more than offset by FX  EBITDA pre increase driven by cost control and gains from proactive hedging approach  Strong operating cash flow despite restructuring cash-outs of ~€45 m; previous year driven by exceptional improvements in working capital management  Cash generating nature of portfolio drives net debt reduction Over ~€1.4 bn net financial debt reduction in nine months 10
  • EBITDA pre improves while currency headwinds hurt Q3 yoy sales Organic Currency Portfolio Total Merck Serono 5% -7% 0% -2% Consumer Health 15% -8% 0% 7% Performance Materials -2% -7% 0% -9% Merck Millipore 6% -7% 1% -1% Merck Group 5% -7% 0% -2% Q3 yoy EBITDA pre contributors [€ m] 754 36 5 0 5 31 831  Merck Serono and Merck Millipore strongest absolute contributors to organic growth  All divisions continue to experience significant currency headwinds, stemming mainly from the U.S. dollar and the Japanese yen  Cost efficiencies and resource allocation in marketing and selling fuel Merck Serono improvement  Corporate & Other reflects hedging gains and cost efficiencies EBITDA pre Q3 2012 Merck Serono Consumer Health Performance Materials Merck Millipore Corporate & Other EBITDA pre Q3 2013 11
  • Reported earnings strong, driven by operational and financial improvements Δ [€ m] Q3 2013 Q3 2012 EBIT 482 318 51% Financial result -52 -58 11% Profit before tax 430 260 65% Income tax -87 -71 -23% Reported results  EBIT increases due to good business performance and lower one-time costs  Strong debt deleveraging drives financial result improvement  Lower tax rate, due to one-time tax benefits  Increase of reported EPS reflects operational and financial improvements Tax ratio (%) 20% 27% Net income 340 185 83% EPS (€) 1.56 0.85 84% 12
  • Merck Serono – Good organic growth combined with strong margin improvement [€ m] Q3 2013 Q3 2012 1,483 1,511 -301 -339 -51 -59 R&D -297 -287  Branded mature products outperforming in Emerging Markets EBIT 274 152  Cost savings accelerated especially in marketing and selling EBITDA 480 383 EBITDA pre 501 466  Slight R&D increase due to investments in life-cycle management and increase in early stage projects 33.8% 30.8% Sales  XXX Marketing and selling Admin Margin (% of sales) Comments  Solid organic sales growth of 5% driven by Emerging Markets and Japan; FX overshadows underlying growth  Rebif - U.S. volume decline as guided  Strong Erbitux performance driven by Emerging Markets & Japan  Solid profitability improvement despite significant FX headwinds and loss of Avonex royalty income of ~€30 m in Q3 Sales bridge €1,511 m  XXX 5% -7% Q3 2013 share of group sales 0% €1,483 m  XXX Merck Serono 56% Q3 2012 Organic Currency Portfolio Q3 2013 13
  • Consumer Health – Turnaround fully on track [€ m] Q3 2013 Q3 2012  XXX Sales 131 122 Marketing and selling -55 -53 Admin -4 -5 R&D -4 -5 EBIT 21 8 EBITDA 23 11 EBITDA pre 24 19 18.4% 15.7% Margin (% of sales) Comments  High organic sales growth driven by Germany, France & Emerging Markets as well as a soft comparable base, mitigated by FX  Strategic brands (Kytta, Bion 3, Nasivin) show strong growth due to improved resource allocation and tightly managed expenses  Restructuring efforts of product pruning and market exits continue to improve the business model  Profitability improvement driven by sales growth while costs are kept under control Sales bridge  XXX €122 m 15% -8% Q3 2013 share of group sales 0% €131 m  XXX 5% Q3 2012 Organic Currency Portfolio Consumer Health Q3 2013 14
  • Performance Materials – Liquid crystal mix and leaner Pigments & Cosmetics drive margin expansion [€ m] Q3 2013 Q3 2012  XXX Sales 406 446  Sales down due to strong FX and moderate inventory destocking Marketing and selling -35 -38 -7 -9  Healthy demand for continuously improved flagship technologies PS-VA and IPS support volumes and profitability R&D -37 -35 EBIT 177 164 EBITDA 202 194 EBITDA pre 197 197  EBITDA pre stable due to favorable mix in liquid crystals and improved Pigments cost structure offsetting FX headwinds 48.4% 44.2%  Inventory destocking expected to become more visible in Q4 Admin Margin (% of sales) Comments  Market shares kept at high levels due to product innovation and trend to larger displays  Faster implementation of Pigments efficiency measures, leading to visible improvement of profitability versus previous years Sales bridge  XXX €446 m -2% -7% Q3 2013 share of group sales 0% €406 m  XXX 15% Q3 2012 Organic Currency Portfolio Performance Materials Q3 2013 15
  • Merck Millipore – Resilient portfolio delivers solid sales and profitability despite difficult environment [€ m] Q3 2013 Q3 2012 639 643 -171 -166 Admin -25 -26 R&D -40 -43 EBIT 67 68 EBITDA 145 145 EBITDA pre 157 152 24.6% 23.7% Sales  XXX Marketing and selling Margin (% of sales) Comments  Volume and price increases in Process and Lab Solutions compensate for U.S. sequestration pressure in Bioscience (-8%*)  Solid organic performance and portfolio effects are offset by FX headwinds (Japanese yen and U.S. dollar)  All business units with double-digit organic growth in Emerging Markets and ongoing solid performance in Europe  Continued biopharma demand drives volume and price increases in Process Solutions  Despite difficult economic environment business proves resilient maintaining high profit and cash contribution Sales bridge  XXX €643 m 6% -7% Q3 2013 share of group sales 1% €639 m  XXX 24% Q3 2012 Organic Currency Portfolio Merck Millipore Q3 2013 *reported 16
  • 9M 2013 – Jump in profitability fuelled by Merck restructuring [€ m] Δ 9M 2013 9M 2012 Sales 8,064 8,029 0% EBITDA pre 2,458 2,175 13% 30.5% 27.1% 6,66 5.56 20% 1,785 2,074 -14% Margin (% of sales) EPS pre [€] Operating cash flow [€ m] Sept 30, 2013 Net financial debt Δ 536 1,926 -72% 2,290 2,360 -3% 37,976 Working capital Employees Dec 31, 2012 38,847 9M 2013  Good organic sales growth of 4% is being offset by FX leading to stable top line development  340 bps EBITDA pre margin uplift reflects strong restructuring execution  2012 operating cash flow driven by exceptional working capital improvement -2%  Continuous net financial debt reduction reflecting strong cashgenerating nature of business EBITDA and margin upgraded to a new level 17
  • 9M 2013 – Record Net Income and EPS levels Δ [€ m] 9M 2013 9M 2012 EBIT 1,347 652 >100% -159 -194 18% 1,188 458 >100% Income tax -260 -155 -68% Tax ratio (%) 22% 34% Net income 922 295 >100% EPS (€) 4.24 1.36 Reported results >100% Financial result Profit before tax  EBIT doubles due to strong 2013 performance, prior year burdened by one-time items  Ongoing deleveraging process and €500 m December 2012 bond repayment improve financial result  9M 2012 income tax ratio reflects ~€530 m one-time items  Record EPS level stemming from strong financial and operational performance 18
  • Precision of divisional 2013 guidance – Performance Materials and Consumer Health to come out stronger Merck Serono Consumer Health Performance Materials Merck Millipore Sales Sales Sales Sales Moderate organic growth Moderate organic growth Stable Moderate organic growth EBITDA pre EBITDA pre EBITDA pre EBITDA pre ~ €1.9 – 2.0 bn ~ €73 - 77 m ~ €750 - 770 m ~ €620 – 640 m Merck 2013 guidance: ~ €3.2 – 3.25 billion EBITDA pre 19
  • Agenda Executive overview – Karl-Ludwig Kley Business and financial review Q3 2013 – Matthias Zachert Update on transformational journey – Karl-Ludwig Kley
  • Transformational journey since 2007 Aspirations 2018 Growth Opportunities Efficiency Measures Organizational Realignment Management Changes Portfolio Rebuilding 2007 - 2011 Portfolio & Management Portfolio Organic Growth Initiatives 2012 - 2013 Processes & Efficiencies 2014 - 2018 Sustainable Business Development 21
  • Focus on business initiatives and organic growth Continued growth in Emerging Markets through strong platforms in all divisions Operational perspective Development of new consumer brands in over-thecounter business Foster performance culture and a continuous improvement process Presence in innovative technologies: immunology, oncology and disposables in life-science-tools Innovation perspective Strong position in OLED vapor and printing technologies; ready to capture future opportunities Strengthen our leadership position through ongoing focused investments in R&D across the Merck portfolio 22
  • Aspirations 2018 – Merck will be… known for liked for respected for Innovation Customer orientation Values Quality Entrepreneurial spirit Responsibility and Sustainability Performance and Efficiency Career opportunities Thinking beyond generations 23
  • Solid financial performance Transformation fully on track Full-year guidance upgraded 24