Merck 2001 Operating Result Climbs 18%, Sales Up 12%
* Lab Distribution Sales Rise 16%, Earnings Double; IPO Process to Begin
* Dividend of EUR 0.95 per Share Proposed for 2001
* Merck Prepared to Face the Challenges of the Next Two to Three Years
Merck Group reported double-digit growth on all lines for 2001 -- sales up
12% to EUR 7.5 billion, operating result up 18% to EUR 877 million and profit
after tax and before exceptionals up 17% to EUR 357 million. Growth was driven
by Pharmaceuticals (sales rose 14%) and Laboratory Distribution (sales
increased 16%). As Merck's intent is to increase its dividend slowly but
steadily, a dividend increase of 6 percent to EUR 0.95 per share will be
recommended for 2001.
DARMSTADT and FRANKFURT AM MAIN, Germany, Feb. 14 /PRNewswire/ -- The
Merck Group recorded the best financial year in its 333-year history, with
revenue in 2001 increasing 12 percent, boosted by sales of the oral anti-
diabetic Glucophage and strong performances in general from the
Pharmaceuticals and Laboratory Distribution businesses. All sectors reported
annual sales increases. Full-year net profit after minorities jumped 155% to
EUR 629 million, or EUR 3.66 per share, from EUR 247 million, or EUR 1.44 per
share.
"Once again, Merck has produced excellent results for its shareholders and
accomplished this feat during trying economic conditions," Merck CEO Bernhard
Scheuble said at the company's annual press conference in Frankfurt. "We see
challenges ahead in the next two to three years but we have made, and are
continuing to make, preparations to meet these challenges."
Merck's full-year operating result increased 18% to EUR 877 million.
Exceptional items totaling EUR 410 million raised earnings before interest and
taxes (EBIT) by 72% to EUR 1,286 million. Profit before taxes doubled to EUR
1,078 million. Merck's tax rate of 39% resulted in taxes paid of EUR 423
million.
Full-year profit before taxes and before exceptionals increased 28% to
EUR 669 million. Before exceptionals, the income tax rate would have been 47%
and taxes would have been EUR 311 million. Profit after tax and before
exceptionals increased 17% to EUR 357 million.
Fourth-quarter sales increased 5% to EUR 1.8 billion compared to the
year-ago quarter, held back for a variety of reasons. Specialty Chemicals
sales fell 7% due to the worldwide slowdown in the high-technology industries
while Pharmaceutical sales increased only a modest 5% as wholesalers reduced
orders of Glucophage in anticipation of generic competitors. In addition,
Pharmaceutical Resources Inc. was deconsolidated from corporate results as the
43% stake in PRI was sold in the third quarter. The increases in annual and
fourth-quarter sales were due entirely to organic growth.
The fourth quarter operating result declined 39% to EUR 113 million due to
the above reasons as well as increased costs, such as for research and
development. Exceptional items in the quarter totaled EUR 56 million,
including gains on divestments of minority holdings and funds set aside for
environmental and litigation risks and closures. Profit after tax and before
exceptionals dropped 68% to EUR 30 million.
For the year, Merck achieved an ROS (return on sales) of 11.6% compared to
11.1% in 2000, while ROCE (return on capital employed) rose to 13.5% from
11.6%. In the fourth quarter, ROS was 6.1% compared to 10.6% in the year-ago
quarter and ROCE declined to 6.8% from 11.4%.
Geographically, annual sales in North America climbed 21% to
EUR 3,132 million or 42% of total sales. Annual sales in Europe rose 7% to
EUR 2,730 million or 36% of the total. Sales in Latin America and Asia, Africa
and Australia increased 7% and 3%, respectively.
Business sectors
Pharmaceuticals full-year sales increased 14% to EUR 3,323 million while
the operating result rose 28% to EUR 581 million, giving the business sector
an ROS ratio of 17.5% compared to 15.6% the year before. Fourth-quarter sales
rose 5% to EUR 801 million and the operating result dropped 35% to EUR 68
million. Pharmaceuticals contributed 44% to annual sales and 66% to the
operating result of the Merck Group. Sales of Ethicals increased 14% to 2,084
million for the year and 6% to EUR 489 million for the quarter. Sales of the
anti-diabetes family of drugs - Glucophage, Glucovance and Glucophage XR -
rose 43% to EUR 3,201 million for the year and 30% to EUR 791 million for the
quarter. December saw sales for these drugs flatten as U.S. wholesalers
anticipated approval of generic competitors. Sales of the generic version of
Glucophage, metformin, began in the U.S. on January 28, 2002.
Merck's Generic drug sales jumped 19% to EUR 925 million for the year and
4% to 230 million in the quarter. As Merck sold its 43% stake in
Pharmaceutical Resources Inc. (PRI) in September, sales from this U.S. generic
drug manufacturer were not included in this year's fourth-quarter results.
Consumer Health Care sales rose 7% to EUR 314 million in 2001 and 8% to EUR 82
million in the quarter.
Specialty Chemicals sales rose 3% to EUR 1,132 million for the year and
fell 7% to EUR 275 million in the fourth quarter. For the year and the quarter
respectively, operating results dropped 24% to EUR 165 million and 72% to
EUR 19 million. As Merck's Chemicals business focuses on more attractive and
less cyclical niche markets, it actually suffered less than many others from
the difficult economic environment in 2001. On an annual basis, Specialty
Chemicals contributed 15% to the Merck Group's total sales and 19% to overall
operating results. For the year, Electronic Chemicals sales rose 6% to EUR 203
million on slow demand from the semiconductor industry. Liquid Crystals sales
declined 1% to EUR 276 million as consumers cut back on purchases of PC-
notebooks and mobile phones.
Laboratory Products sales rose 5% to EUR 565 million in the year and 3% to
EUR 144 million in the quarter. The operating result increased 28% to
EUR 39 million in 2001 and 72% to EUR 3 million in the fourth quarter as
higher marketing costs and reorganization efforts in the previous year paid
off. Annual sales of Laboratory Reagents increased 5% to EUR 321 million while
Scientific Laboratory Products sales rose 4% to EUR 244 million.
The Laboratory Distribution business, VWR International Inc., exceeded
plan again in the fourth quarter. Annual sales improved 16% to EUR 2,754
million while quarterly sales were up 11% to EUR 691 million. The operating
result for the year more than doubled to EUR 92 million and nearly doubled for
the quarter to EUR 24 million. This was the sixth consecutive time sales and
results exceeded the year-ago quarter. Merck is confident this trend of strong
growth will continue in 2002. Merck and VWR management expect further
improvements in operating margins and market share, have planned for top-line
growth above market, and will retain an investment bank within the next few
weeks to begin the IPO process.
Outlook
While Merck is proud of its record year in 2001, the current year will be
a challenge. In general, the economic environment will remain difficult, with
the Chemicals business sector not expected to recover until the second half.
More specifically for Merck, generic competition for Glucophage in the U.S.
will have a significant impact. In the short term, there is no way to
compensate for the slowdown in profits although sales of other products and
other regions will compensate to a certain extent. Therefore, the company
expects single-digit growth in sales and an operating result that is lower
than in 2001.
Merck has made and will continue to make preparations to reach its long-
term goal of being number one in its core businesses. Merck has an excellent
pharmaceutical pipeline and will continue to support its research and
development as well as its expansion efforts in the United States. Merck's
equity-to-debt ratio improved substantially in 2001. This lower "gearing"
increases the company's strategic flexibility with regard to acquisitions and
similar options. Finally, the Laboratory Distribution business, VWR
International, improved to such an extent during the past year that in the
next few weeks Merck will retain a lead investment bank for its IPO.
Notes:
A live web cast of the presentation at the Merck press conference in
Frankfurt will be available in German (with English translation) on the
company website http://www.merck.de at 10 a.m. CEST.
The complete quarterly and annual reports in English and German also are
available for download on the company website: http://www.merck.de
All Merck Press Releases are distributed by e-mail at the same time they
become available on the Merck Website. Please go to http://www.merck.de/subscribe to
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questions, please contact the Media Hotline: +49 (0) 6151 72 5000.
Merck KGaA Stock Symbols:
Reuters: MRCG
Bloomberg: MRK GY
Frankfurt Stock Exchange: ISIN: DE 000 659 9905// WKN: 659 990
With more than 34,000 employees in 55 countries, the Merck Group generated
sales of EUR 7.5 billion in 2001. Founded in 1668 in Darmstadt, Germany, the
company aims to be a world leader in its core businesses of pharmaceuticals
and chemicals. The Merck Group strongly believes the key to its long-term
business success is innovative products created by entrepreneurial and
talented employees. Merck groups its operating activities under Merck KGaA, in
which the Merck family holds 74% and the remaining 26% is publicly traded. The
former U.S. subsidiary, Merck & Co., has been a completely independent company
since 1917.
Business Development Figures: Q4/2001 vs Q4/2000
Merck Group (EUR million) Q4/2001 Q4/2000 (+/- %)
Sales 1,849.1 1,768.3 4.6
Research & Development - 152.5 -136.6 11.6
Patent and license revenues 37.0 53.0 -30.2
Operating result 113.3 186.8 -39.3
Exceptional items 55.6 0.2 ---
EBIT 168.9 187.1 -9.7
Financial result - 35.8 -52.5 -31.8
Profit before tax 133.1 134.6 -1.1
Income tax - 40.3 -47.4 -14.9
Profit after tax 92.8 87.2 6.4
Minority interest - 3.4 -3.7 9.9
Net profit after minority interest 89.5 83.5 7.2
Earnings per share (EUR) 0.52 0.49 7.2
Free Cash-Flow 81.8 149.1 -45.1
Investments (property,
plant, equipment) 135.6 111.7 21.4
Sales by businesses (EUR million) Q4/2001 Q4/2000 (+/-%)
Pharmaceuticals 801.0 763.7 4.9
- Ethicals 489.4 462.9 5.7
- Generics 229.6 220.3 4.2
- Consumer Healthcare 82.0 76.1 7.7
Specialty Chemicals 275.3 294.5 -6.5
- Cosmetics, Health, Nutrition 88.5 88.2 0.4
- Pigments/Technical Industries 67.7 74.8 -9.5
- Liquid Crystals 75.0 79.4 -5.6
- Electronic Chemicals 43.6 51.9 -16.0
Laboratory Products (LP) 143.6 139.4 3.0
- Laboratory Reagents 82.7 79.5 4.1
- Scientific Laboratory Products 60.9 60.0 1.6
Laboratory Distribution (LD) 690.5 621.9 11.0
- Eurolab 222.1 200.7 10.7
- VWR 468.4 421.2 11.2
Interdivisional sales (LP/LD) - 61.4 -51.2 19.9
Sales by Regions (EUR million) Q4/2001 (+/- %) SalesShare (%)
Europe 703.9 2.6 38
North America 711.9 8.9 39
Latin America 116.0 1.9 6
Asia/Australia/Africa 317.2 0.8 17
Business Development Figures: FY/2001 vs FY/2000
Merck Group (EUR million) FY/2001 FY/2000 (+/- %)
Sales 7,528.4 6,740.4 11.7
Research & Development - 577.3 -546.0 5.7
Patent and license revenues 169.3 155.5 8.8
Operating result 876.6 746.1 17.5
Exceptional items 409.6 0.8 ---
EBIT 1,286.2 746.9 72.2
Financial result - 208.0 -223.2 -6.8
Profit before tax 1,078.2 523.7 105.9
Income tax - 423.2 -261.9 61.6
Profit after tax 655.0 261.8 150.2
Minority interest - 25.8 -14.6 76.4
Net profit after
minority interest 629.2 247.2 154.5
Earnings per share (EUR) 3.66 1.44 154.2
Free Cash-Flow 664.0 323.7 105.2
Investments (property,
plant, equipment) 470.3 426.8 10.2
Employees 34,294 33,520 2.3
Sales by businesses (EUR million) FY/2001 FY/2000 (+/- %)
Pharmaceuticals 3,322.7 2,914.0 14.0
- Ethicals 2,083.9 1,826.4 14.1
- Generics 925.3 777.6 19.0
- Consumer Healthcare 313.5 293.7 6.7
Specialty Chemicals 1,131.5 1,102.3 2.7
- Cosmetics, Health, Nutrition 352.4 336.9 4.6
- Pigments/Technical Industries 299.2 294.8 1.5
- Liquid Crystals 275.8 278.7 -1.0
- Electronic Chemicals 203.0 191.7 5.9
Laboratory Products (LP) 565.4 540.0 4.7
- Laboratory Reagents 320.9 305.2 5.2
- Scientific Laboratory Products 244.4 234.8 4.1
Laboratory Distribution (LD) 2,753.5 2,374.0 16.0
- Eurolab 843.0 731.1 15.3
- VWR 1,910.5 1,642.9 16.3
Interdivisional sales (LP/LD) - 244.8 -189.8 29.0
Sales by Regions (EUR million) FY/2001 (+/- %) SalesShare (%)
Europe 2,729.5 6.9 36
North America 3,131.7 21.1 42
Latin America 459.7 6.5 6
Asia/Australia/Africa 1,207.5 3.2 16
SOURCE Merck KGaA
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Related links:
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CONTACT:
Phyllis Carter of Merck KGaA,
+49-61-51-72-7144
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