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

August 06/2020

MOSCOW (MRC) -- Merck KGaA (Darmstadt, Germany) says its net profits in the second quarter of 2020 dropped 38.5% year on year (YOY), to EUR290 million (USD343 million), despite revenue growing 3.7% YOY, to EUR4.12 billion, driven primarily by acquisition-related growth in the performance materials business and organic growth in the life-science business, reported Chemweek.

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 EUR1.05 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 companys healthcare business recorded a 10.6% YOY drop in sales, to EUR1.50 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 EUR359 million. 

Life-science sales rose by 5.9% to EUR1.81 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 EUR584 million, it says.

Mercks performance materials business recorded a 38.1% YOY increase in sales, to EUR814 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 EUR219 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 EUR16.9 billion and EUR17.7 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.

As MRC wrote previously, Merck KGaA has announced the opening its M Lab Collaboration Center in Shanghai, China. Merck Innovation Hub, the first in China, started in late 2019, with the company announcing a 100 million renminbi (USD14 million) seed fund injected into the China Innovation Hub.

We remind that Merck celebrated the opening of its new packaging center at the science and technology companys headquarters in Darmstadt, Germany, in October, 2018. The new 161,458-square-foot facility is dedicated to the packaging and shipping of Mercks current portfolio of pharma medicines in more than 90 countries and help meet increasing patient needs for flagship medicines Glucophage, Concor and Euthyrox in the areas of diabetes, cardiovascular diseases and thyroid disorders respectively. It will also provide capacity for potential future pharma products currently in clinical development such as evobrutinib in the area of neurology-immunology or tepotinib in the area of oncology.

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.


mrcplast.com
Author:Margaret Volkova
Tags:PP, PE, homopolymer PP, HDPE, medicine, petrochemistry, packaging, pharmaceuticals, Merck, Germany, Russia.
Category:General News
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