Fiscal 2023: Proven Resilience During Transitional Year

2024-03-06

·Merck Group

财报

Financial results of fiscal 2023

Net sales decrease organically by 1.6% to € 21.0 billion

EBITDA pre down organically by 9.0% to € 5.9 billion

“Transitional year” 2023 characterized by demanding market conditions in Life Science and Semiconductor Materials

Strong sales and earnings performance of Healthcare demonstrates benefits of diversified business model of the Group

Stable dividend proposal: € 2.20 per share

Forecast for fiscal 2024

Return to organic growth expected in 2024

Sales and EBITDA pre: slight to moderate organic growth

Merck KGaA, Darmstadt, Germany, a leading science and technology company, reported financial results for 2023 in line with its guidance published in August despite a challenging market environment, thus demonstrating the robustness of its business model. The strong development of the Healthcare business sector partly compensated for the market-related declines in sales and earnings in Life Science and Electronics. The company expects to gradually return to organic growth in the course of fiscal 2024.

Fiscal 2023 was characterized by difficult market conditions:

the significant decline in Covid-19-related demand as expected

persistent inventory destocking by key customers in Process Solutions

and the cyclical slowdown in demand for semiconductor materials.

Overall, Group net sales decreased by 5.6% (organically: ‑1.6%) to € 20,993 million. EBITDA pre declined by 14.2% (organically: ‑9.0%) to € 5,879 million.

“We delivered solid results in a transitional year 2023 despite difficult market conditions, demonstrating the robustness of our businesses. Our diversified business will continue to benefit from the attractive market growth opportunities also in the medium term,” said Belén Garijo, Chair of the Executive Board and CEO of Merck KGaA, Darmstadt, Germany. “Now, we are fully focusing on gradually returning to growth during fiscal 2024, while defining our strategic roadmap to ensure long term profitable and sustainable growth for our company.”

Negative foreign exchange effects weigh on sales and earnings

In fiscal 2023, Group net sales decreased organically by 1.6% in comparison with the previous year. Foreign exchange effects, primarily from the development of the U.S. dollar and the Chinese renminbi, had an adverse impact of 4.1% on sales. EBITDA pre declined organically by 9.0%. Foreign exchange had an additional negative impact on earnings of 4.9%. The EBITDA pre margin was 28.0%.

Earnings per share pre were € 8.49. On this basis, the Executive Board and Supervisory Board will propose to the Annual General Meeting on April 26, 2024, a dividend of € 2.20 per share. This corresponds to the dividend of the previous year.

Life Science: Market environment affected by decline in Covid-19-related demand and inventory destocking among key customers

In fiscal 2023, the sales and earnings performance of the Life Science business sector was mainly impacted by two market factors. As expected, Covid-19-related sales declined significantly from around € 800 million in the previous year to around € 250 million. In addition, the core business of Process Solutions slowed down considerably due to inventory destocking by key customers, who consequently placed fewer new orders. This led to an overall organic sales decline in the core business (excluding Covid-19-related sales) of Life Science of around 2%.

Overall, sales of the business sector decreased by 10.6% to € 9,281 million. Organically, the decline amounted to 7.9%. Foreign exchange had a negative impact of 2.7% on sales. As a result of the aforementioned market factors, the Process Solutions (‑14.4%) and Life Science Services (‑14.6%) business units recorded organic sales declines.

Science & Lab Solutions, which generated around half of the net sales of Life Science in fiscal 2023, saw an organic sales decline of 0.6%. The business unit offers products and services to support research, diagnostics and testing activities.

In fiscal 2023, EBITDA pre of Life Science decreased organically by 21.4% to € 2,820 million. Foreign exchange had a negative impact of 3.3% on earnings. The EBITDA pre margin was 30.4%.

Healthcare: Wave 1 launches remain major growth drivers, supported by resilient growth of the established product portfolio

Net sales of the Healthcare business sector increased organically by 8.5% in fiscal 2023. Amid negative foreign exchange effects of 5.8%, sales rose overall by 2.7% to € 8,053 million.

The key growth drivers were once again the so-called Wave 1 launches. The oncology medicine Bavencio grew organically by 23.4%. Sales of Mavenclad for the treatment of relapsing multiple sclerosis increased organically by 15.9%. Mavenclad exceeded the equivalent of US$ 1 billion in sales per year for the first time since its market launch, thus achieving blockbuster status. The same applied for the second year to the oncology drug Erbitux with sales of € 1,025 million. The Fertility (organically: +14.9%) and Cardiovascular, Metabolism & Endocrinology (organically: +4.0 %) franchises also generated organic sales increases. In Fertility, this was further supported by stock-outs of competitor products.

EBITDA pre of Healthcare rose organically by 17.1% to € 2,543 million. Foreign exchange had a negative impact of 14.4% on earnings. The EBITDA pre margin was 31.6%.

Electronics: Cyclical slowdown in demand for semiconductor materials impacts business performance

In the Electronics business sector, fiscal 2023 was mainly characterized by the ongoing cyclical slowdown in the semiconductor industry. Overall, sales decreased by 8.8% to € 3,659 million. In addition to the organic decline of 5.1%, foreign exchange had an adverse impact of 4.1% on the sales development.

In the Semiconductor Solutions business unit, sales decreased organically by 3.9%, outperforming the market. The decline was mainly the result of weaker demand for semiconductor materials. This was partly offset by the project and equipment business within Delivery Systems & Services, which benefited from continued investments by key customers in long-term capacity expansion.

Persistent price pressure and low-capacity utilization by customers in the liquid crystals field, especially in the first half of 2023, were the main reasons for the organic sales decline of 9.2% in the Display Solutions business unit.

EBITDA pre of Electronics amounted to € 913 million. Apart from the organic decline of 17.1%, foreign exchange had an adverse impact of 5.6% on the earnings development. The EBITDA pre margin was 25.0%.

Outlook for fiscal 2024: Return to growth

Merck KGaA, Darmstadt, Germany, expects a gradual return to organic growth during 2024. The year is expected to be characterized by the following developments:

In the Life Science business sector, order intake in Process Solutions will gradually improve. The company expects the inflection point during the first half of 2024. Sales will subsequently recover in the second half of 2024. In fiscal 2024, the Group expects the remaining Covid-19-related sales to phase out.

Sales of the Healthcare business sector are forecast to grow in line with medium-term expectations as tailwinds from competitor stock-outs fade out.

The semiconductor materials market in the Electronics business sector is expected to recover gradually in 2024 compared with 2023, with the turning point occurring early in the second half of the year.

Overall, the company assumes the following qualitative development. As in previous years, the company will announce a quantitative forecast with the publication of Q1 financial results on May 15, 2024.

The Group expects slight to moderate organic sales growth in fiscal 2024, with Healthcare as the main driver. Foreign exchange is expected to impact sales development by ‑3% to 0%.

For EBITDA pre, the company also expects slight to moderate organic growth. Earnings growth will be mainly driven by the Healthcare business sector in fiscal 2024. Foreign exchange will likely have an impact of ‑4% to ‑1% on the earnings development.

Overview of the key figures for fiscal 2023

Group

Key figures

Change

€ million

2023

2022

€ million

Net sales

20,993

22,232

-1,239

-5.6%

Operating result (EBIT)1

3,609

4,474

-865

-19.3%

Margin (% of net sales)1

17.2%

20.1%

EBITDA2

5,489

6,504

-1,015

-15.6%

Margin (% of net sales)1

26.1%

29.3%

EBITDA pre1

5,879

6,849

-970

-14.2%

Margin (% of net sales)1

28.0%

30.8%

Profit after tax

2,834

3,339

-505

-15.1%

Earnings per share (€)

6.49

7.65

-1.16

-15.2%

Earnings per share pre (€)1

8.49

10.05

-1.56

-15.5%

Operating cash flow

3,784

4,259

-475

-11.2%

1 Not defined by International Financial Reporting Standards (IFRS).

2 Not defined by International Financial Reporting Standards (IFRS); EBITDA corresponds to operating result (EBIT) adjusted by depreciation, amortization, impairment losses, and reversals of impairment losses.

Life Science

Net sales by business unit

€ million

2023

Organic growth1

Exchange rate effects

Acquisitions /

divestments

Total change

20222

Science & Lab Solutions

4,706

51%

-0.6%

-3.3%

–

-3.9%

4,898

47%

Process Solutions

3,782

41%

-14.4%

-2.3%

–

-16.7%

4,540

44%

Life Science Services

792

-14.6%

-2.0%

0.6 %

-15.9%

943

Life Science

9,281

100%

-7.9%

-2.7%

0.1 %

-10.6 %

10,380

100%

1 Not defined by International Financial Accounting Standards (IFRS).

2 Prior-year figures have been adjusted due to internal realignment.

Healthcare

Net sales by major product lines/products

€ million

2023

Organic

growth1

Exchange

rate effects

Total change

2022

Oncology

1,819

22%

17.3%

-9.2%

8.1%

1,683

22%

thereof: Erbitux®

1,025

13%

10.9%

-10.6%

0.3%

1,023

13%

thereof: Bavencio®

713

23.4%

-6.8%

16.6%

611

Neurology & Immunology

1,665

21%

-0.9%

-3.5%

-4.5%

1,743

22%

thereof: Mavenclad®

956

12%

15.9%

-4.3%

11.7%

856

11%

thereof: Rebif®

709

-17.2%

-2.9%

-20.1%

887

11%

Fertility

1,547

19%

14.9%

-7.8%

7.0%

1,446

18%

thereof: Gonal-f®

847

11%

10.5%

-7.8%

2.7%

825

11%

Cardiovascular, Metabolism and Endocrinology

2,786

35%

4.0%

-4.6%

-0.7%

2,805

36%

thereof: Glucophage®

882

11%

-0.5%

-4.6%

-5.1%

930

12%

thereof: Concor®

571

1.6%

-4.9%

-3.3%

590

thereof: Euthyrox®

565

5.4%

-3.2%

2.2%

553

thereof: Saizen®

332

35.7%

-10.6%

25.1%

266

Other

235

161

Healthcare

8,053

100%

8.5%

-5.8%

2.7%

7,839

100%

1 Not defined by International Financial Reporting Standards (IFRS).

Electronics

Net sales by business unit

€ million

2023

Organic growth¹

Exchange rate effects

Acquisitions/

divestments

Total change

2022

Semiconductor Solutions

2,479

68%

-3.9%

0.5%

-7.3%

2,674

67%

Display Solutions

770

21%

-9.2%

-5.3%

–

-14.5%

900

22%

Surface Solutions

411

11%

-3.6%

-2.9%

–

-6.5%

439

11%

Electronics

3,659

100%

-5.1%

-4.1%

0.3%

-8.8%

4,013

100%

¹ Not defined by International Financial Accounting Standards (IFRS).

Notes to editors:

The press conference for media representatives will take place at 10:00 a.m. (CET).

The respective presentation and further information for journalists, including a digital press kit, can be found here

The annual report 2023 can be found here

Merck KGaA, Darmstadt, Germany, on LinkedIn

Photos and videos can be found here

Stock symbols

Reuters: MRCG, Bloomberg: MRK GY, Dow Jones: MRK.DE

Frankfurt Stock Exchange: ISIN: DE 000 659 9905 – WKN: 659 990

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About Merck KGaA, Darmstadt, Germany

Merck KGaA, Darmstadt, Germany, a leading science and technology company, operates across life science, healthcare and electronics. Around 63,000 employees work to make a positive difference to millions of people’s lives every day by creating more joyful and sustainable ways to live. From providing products and services that accelerate drug development and manufacturing as well as discovering unique ways to treat the most challenging diseases to enabling the intelligence of devices – the company is everywhere. In 2023, Merck KGaA, Darmstadt, Germany, generated sales of € 21 billion in 65 countries.

The company holds the global rights to the name and trademark “Merck” internationally. The only exceptions are the United States and Canada, where the business sectors of Merck KGaA, Darmstadt, Germany, operate as MilliporeSigma in life science, EMD Serono in healthcare and EMD Electronics in electronics. Since its founding in 1668, scientific exploration and responsible entrepreneurship have been key to the company’s technological and scientific advances. To this day, the founding family remains the majority owner of the publicly listed company.