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Merck finishes record year 2015 stronger 08 March 2016

Organically, Merck increased sales by 2.6% over 2014

Merck, a leading science and technology company, reported record results for 2015, emerging stronger from the transformation process that started in 2007. Net sales and EBITDA pre exceptionals were higher than ever before in Merck’s history of nearly 350 years.

Net sales of the Merck Group rose sharply by 13.0% to € 12.8 billion in 2015 (2014: € 11.4 billion). The acquisitions of AZ Electronic Materials (AZ) and Sigma-Aldrich were responsible for 4.3% of the sales growth. Organically, Merck increased sales by 2.6% over 2014. Favourable exchange rate effects, primarily thanks to the strength of the US dollar, contributed 6.2% to sales growth.

The operating result (EBIT) rose by 4.6% to € 1.8 billion (2014: € 1.8 billion). EBITDA pre exceptionals, the key financial indicator used to steer operating business, climbed significantly by 7.1% to € 3.6 billion (2014: € 3.4 billion) thanks to the Life Science and Performance Materials business sectors.

Net income, i.e. profit after tax attributable to Merck shareholders, declined in 2015 by –3.7% to € 1.1 billion (2014: € 1.2 billion). This was attributable to one-time expenses in connection with the Sigma-Aldrich takeover and integration as well as higher interest expenses to finance the acquisition.

Life Science becomes Merck’s growth engine in 2015

Amid growing profitability, net sales by the Life Science business sector soared in 2015 by 25.1% to € 3.4 billion (2014: € 2.7 billion). This was attributable not only to strong organic growth of 6.5% and favourable exchange rate effects of 8.4%, but mainly to acquisition-related increases of 10.2% resulting from the purchase of Sigma-Aldrich.

The Process Solutions business area, which markets products and services for the entire pharmaceutical production value chain, generated organic sales growth of 11.6%. The increase was mainly fuelled by higher demand for products used in biopharmaceutical production in Europe and the United States. With its broad range of products for researchers and scientific laboratories, the Lab Solutions business area delivered organic sales growth of 3.1%. The Bioscience business area, which provides products and services to support research for pharmaceutical, biotechnological and academic research laboratories, reported a slight organic sales increase of 0.7%. The first-time consolidation of Sigma-Aldrich on November 18, 2015 boosted Life Science sales by € 279 million, accounting for 8% of the business sector’s net sales in 2015.

In 2015, the Life Science business sector reported a sharp 30% rise in EBITDA pre exceptionals to € 856 million (2014: € 659 million), which was attributable to good operating performance in all businesses as well as the contribution from Sigma-Aldrich.

“With the acquisition of Sigma-Aldrich, the biggest takeover in our corporate history, Merck has become one of the leading players in the global life science industry,” said Karl-Ludwig Kley. “We can now offer our customers a broader product portfolio than before. Additionally, we now have the leading e-commerce platform in the sector.”

Performance Materials benefits from business with innovative products
In 2015, net sales of the Performance Materials business sector rose sharply by 24.1% to € 2.6 billion (2014: € 2.1 billion). Apart from a significantly positive currency effect of 13.1%, revenues from acquired businesses also contributed considerably to sales growth, accounting for 10.4% of the increase. These acquisition-related sales effects were largely attributable to the integration of AZ, which was acquired in 2014. In addition, the first-time consolidation in mid-November of the SAFC Hitech business of Sigma-Aldrich contributed around € 10 million to the sales increase in the Performance Materials business sector. Organically, net sales were at the previous year’s level, with growth of 0.6%.

The Display Materials business unit, which was established at the beginning of 2015, saw a strong increase in sales driven by currency and acquisitions and solidified its global market leadership position. The increases in sales volumes of innovative technologies overcompensated for the decline in sales volumes for older liquid crystal technologies. For the Pigments & Functional Materials business unit, 2015 was a stable business year with sales at the previous year’s level. The Integrated Circuit Materials business unit, which includes the former AZ business with materials used to manufacture integrated circuits as well as the Sigma-Aldrich Hitech business acquired in November 2015, recorded slight organic sales growth. Within the Performance Materials business sector, the highest growth rates were achieved by the Advanced Technologies business unit. Its emerging OLED materials business showed a particularly dynamic development. In June 2015, Merck laid the cornerstone for a new OLED materials production unit in Darmstadt, involving an investment of around € 30 million.

EBITDA pre exceptionals of Performance Materials soared by 26.5% to € 1.1 billion (2014: € 0.9 billion), driven by currency effects, the integration of AZ, as well as good volume developments.

2016 guidance: Merck expects slight organic sales growth and a low double-digit increase in EBITDA pre exceptionals

In 2016, Merck expects slight organic sales growth. Additionally, owing to the acquisition of Sigma-Aldrich, the company expects a positive portfolio effect on sales in the low double-digit percentage range. For 2016, owing to the expected operating performance and the acquisition of Sigma-Aldrich, Merck forecasts a low double-digit percentage increase in EBITDA pre exceptionals over 2015.