Merck transformation starts to yield first results

Merck KGaAMerck's second-quarter 2012 total revenues rose 12% to € 2,852 million compared to € 2,555 million in the second quarter of 2011. Sales were up 11% to € 2,743 million in second quarter compared to € 2,470 million in the year-ago quarter. This performance reflected organic sales growth of 5.1%, a 5.4% positive benefit from foreign exchange rates and a 0.5% increase from acquisitions and divestments.

Merck reported a second-quarter operating result (EBIT) of € 23 million due to € 394 million in one-time items including impairments, thereof € 376 million in charges relating to the "Fit for 2018" efficiency program. This program aims to bring Merck’s cost structure more in line with competitors and peers. In the second quarter of 2011, the operating result was € -24 million, lowered by material impairments.

"Merck reported solid second-quarter results due to healthy demand in all our businesses, tight cost management, and favorable currency exchange rates," said Karl-Ludwig Kley, Chairman of the Executive Board of Merck. "The financials show that we are making good progress in strengthening Merck for the future. Merck Serono performed particularly well, sustaining strong growth trends for a fifth consecutive quarter in Emerging Markets and in its Fertility and Endocrinology businesses."

EBITDA pre (earnings before interest, taxes, depreciation, amortization and one-time items) rose 14% to € 747 million, or 27.2% of sales, in the second quarter of 2012 from € 655 million, or 26.5% of sales, in the year-ago quarter. This improvement was driven primarily by the operating leverage created by higher sales and a very modest increase in marketing and selling spending (+2%).

Profit after tax was € -61 million in the second quarter of 2012 compared to € -87 million in the second quarter of 2011. On a reported basis, Merck’s earnings per share (EPS) was € -0.29 in the second quarter of 2012 compared to € -0.41 in the year-ago quarter. Adjusted for one-time costs, EPS pre increased 20% to € 1.92 compared to € 1.60 in last year's second quarter.

Merck's free cash flow (FCF) was € 626 million in the second quarter of 2012 compared to € 253 million in the year-ago period. The strong performance in FCF is a result of higher profitability and improved working capital management.

Merck had 40,085 employees worldwide on June 30, 2012. This was 591 fewer than at the end of 2011.

Merck is a global pharmaceutical and chemical company with total revenues of € 10.3 billion in 2011, a history that began in 1668, and a future shaped by more than 40,000 employees in 67 countries. Its success is characterized by innovations from entrepreneurial employees. Merck's operating activities come under the umbrella of Merck KGaA, in which the Merck family holds an approximately 70% interest and free shareholders own the remaining approximately 30%. In 1917 the U.S. subsidiary Merck & Co. was expropriated and has been an independent company ever since.