Merck KGaA Stock Dips On Weak Q3 Profit; Cuts FY18 EBITDA Pre View

Merck KGaA (MKGAY.PK) reported Wednesday a sharp decline in its third-quarter profit, while sales increased despite negative currency impacts. Further, the German drugmaker lowered its fiscal 2018 forecast for EBITDA pre, but confirmed organic EBITDA pre view. The company also lifted its organic net sales growth forecast.

Stefan Oschmann, Chairman of the Executive Board and CEO of Merck, said, “2018 was a challenging year for Merck. We made future-oriented decisions that will lead to profitable growth as of 2019.”

For the third quarter, net income fell 47.2 percent to 340 million euros from last year’s 644 million euros. Earnings per share dropped to 0.78 euro from 1.48 euros a year ago.

The prior year results included a gain of 321 million euros on the divestment of the Biosimilars business.

Earnings per share pre declined 7.7 percent to 1.32 euros from 1.43 euros a year ago.

Group EBIT decreased 43.1 percent to 491 million euros from last year’s 862 million euros. EBITDA pre, the key financial indicator used to steer operating business, decreased 5.9 percent from last year to 963 million euros, owing to strong negative foreign exchange effects. EBITDA pre grew organically by 3.7 percent.

Group sales in the third quarter rose 6.6 percent to 3.7 billion euros from 3.5 billion euros a year ago. Organically, sales grew 8.8 percent.

The company noted that Healthcare and Life Science segments delivered very strong organic sales growth, while Performance Materials reported moderate sales growth. Net sales of the Consumer Health business are no longer reported in Group sales, as this business is to be classified as a discontinued operation.

Looking ahead for the year, Merck now expects the adverse foreign exchange effects will lower EBITDA pre by between 8 percent and 10 percent from last year, compared to previously expected decline of 5 percent to 7 percent. Therefore, Merck expects that Group EBITDA pre will be in a corridor of between 3.7 billion euros and 3.9 billion euros in 2018, compared to previous view of 3.75 billion euros to 4.0 billion euros. In 2017, Group EBITDA pre was 4.25 billion euros.

However, the company confirmed its previous forecast of a slight organic decline of 1 percent to 3 percent in Group EBITDA pre compared with the previous year.

Further, following strong organic sales growth in the third quarter, Merck now expects a solid organic net sales increase in full year 2018 of 4 percent to 6 percent, compared to previous estimate of 3 percent to 5 percent.

Overall, taking into account the treatment of the Consumer Health business as a discontinued operation, Merck forecasts Group net sales in a range of between 14.4 billion euros and 14.8 billion euros in 2018, compared to previous estimate of 14.1 billion euros to 14.6 billion euros. Last year’s net sales were 14.5 billion euros.

In Germany, Merck shares were trading at 92.36 euros, down 1.22 percent.

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