I N T E R I M R E P O R T 2nd Quarter 2001 M

Transcription

1 I N T E R I M R E P O R T M

2 2 nd quarter Organic growth, driven by the pharmaceuticals and laboratory distribution divisions, resulted in: Sales + 16 % to EUR 1,949 million. 2 Indicators of earnings strength: Operating result + 34 %, Earnings before interest and tax (EBIT) + 93 %. 2 Profit before tax rose 205% to EUR 191 million. Profit after tax soars to EUR 101 million. 2 Guidance for the full year: Confirmation of the original forecast of double-digit growth for net profit. Merck Group The Merck Group continued on an excellent course for the year 2001, producing its best-ever sales and operating result in the 2 nd quarter. Compared to the same period last year, 2 nd quarter sales increased by 16% to EUR 1,949 million and the operating result was up by 34% to EUR 249 million. The return on sales (ROS: operating result/sales) rose to 12.8% from 11.1%. The company made no major acquisitions or divestments during the 2 nd quarter. The main contributor to the 2 nd quarter sales increase was a strong organic growth of 13%. Currency effects contributed 2.6% to sales growth while acquisitions accounted for an increase of only 0.4% during the quarter. Domestic sales rose 1%, with foreign sales again accounting for most of the rise. COMPONENTS OF GROWTH Merck Group Change in sales compared to last year in % 1 st quarter 2 nd quarter Jan. June Organic Currency effects Acquisitions TOTAL Business sectors shares of 2 nd quarter sales totaling EUR 1.9 billion 45% Pharmaceuticals 15% Specialty Chemicals 4% Laboratory Products 36% Laboratory Distribution 2 3

3 Sales by quarter 2,000 1,949 1,778 1,677 1,583 1,500 1, Q I Q II 1,712 1,768 Q III Q IV EFFECTS OF EXCEPTIONALS Operating results Exceptionals 56.6 Profit before tax before exceptionals Income tax before exceptionals Profit after tax before exceptionals Tax rate before exceptionals 47% 54% Operating result by quarter Profit before tax more than doubled to EUR 191 million for the 2 nd quarter. The tax rate for the 2 nd quarter was 47% Profit after tax rose to EUR 101 million in the 2 nd quarter after the company posted no profit in the year-ago quarter because of the afore-mentioned charges, which were not all tax deductible Q I Q II Q III Q IV EUR million The operating result of the Merck Group rose 34% to EUR 249 million in the 2 nd quarter of 2001 compared to the same quarter last year. Operating result by Business Sector Earnings before interest and tax (EBIT) nearly doubled to EUR 249 million in the 2 nd quarter. Again in this quarter, the company recorded no exceptional items. In the 2 nd quarter of 2000, the Merck Group posted a total of EUR 57 million of exceptional items, with the largest single item being EUR 33 million for the write-down of fixed assets for the ascorbic acid business. 65% Pharmaceuticals 22% Specialty Chemicals 4% Laboratory Products 9% Laboratory Distribution 4 5

4 Business sectors All four business sectors Pharmaceuticals, Specialty Chemicals, Laboratory Products and Laboratory Distribution increased their sales in the 2 nd quarter. The increases were mainly due to organic growth rather than currency effects or acquisitions and divestments. COMPONENTS OF GROWTH IN THE 2 nd QUARTER Pharmaceuticals Change in sales compared to last year in % Pharma- Specialty Laboratory Laboratory Merck ceuticals Chemicals Products Distribution Group Organic Currency effects Acquisitions Total The Pharmaceuticals business sector contributed 45% to sales and 65% to the operating result in the 2 nd quarter. Sales rose a very satisfactory 19% compared to the year-ago quarter, mostly due to organic growth rather than acquisitions. The operating result rose 40% to EUR 162 million largely due to increased sales for the Glucophage franchise of oral antidiabetics. PHARMACEUTICALS Sales Operating result Exceptionals 5.9 EBIT The return on sales (ROS) rose to 18.6% from 15.8% in the yearago period. Sales of Ethicals increased significantly, by 22% to EUR 564 million, during the 2 nd quarter, mainly due to an organic growth rate of 18%. Ethicals comprise 65% of total Pharmaceutical sales. The Glucophage franchise, together the world s best-selling treatments for type 2 diabetes, recorded its best quarterly sales figures ever a 64% increase to EUR 926 million (including sales by licensees). More than 41% of new prescriptions written in the U.S. for the diabetes market by the end of the 2 nd quarter were for Glucophage products the original Glucophage, Glucovance that combines the active ingredients metformin and glibenclamide in one tablet or the once-a-day Glucophage XR tablet. Glucovance, launched last fall, posted 2 nd quarter sales of EUR 151 million while Glucophage XR, launched in November, has sales of EUR 125 million in the 2 nd quarter. Sales of the Concor line of betablocker products increased by 12% in the 2 nd quarter, boosted by local sales through Merck subsidiaries, the new treatment indication of chronic heart failure, and the recent launch in France of the new low-dose combination product Lodoz. USA: 41% of new Type-2 Diabetes Rx Jun 00 Aug 00 Oct 00 Dec 00 Feb 01 Apr 01 Jun 01 % of new Rx Glucophage, BMS Glucovance Glucophage XR 9.3% 7.2% 24.7% The Generics division maintained its strong growth pattern. Sales rose 19% over the same quarter last year to EUR 227 million. The increase was due completely to organic growth. Alphapharm in Australia, Merck Génériques in France, Pharmaceutical Resources Inc. (Par) in the U.S. and Genpharm in Canada all produced outstanding 2 nd quarter results. For example, Merck Générique s 2 nd quarter sales jumped 47% due to new product launches. 6 7

5 The Consumer Health Care division achieved 2 nd quarter sales of EUR 79 million, an 11% increase. Merck s innovative multivitamins were strong performers in the quarter. Femibion became the market leader in Germany for multivitamins before and during pregnancy while BION3 with vitamins, minerals and probiotics is the fastest growing product in the U.K. multivitamin market The production capacity expansion for mica/metal-oxide pigments is on schedule. During the 2 nd quarter, additional new colors for the innovative Xirallic special-effect pigments had an especially positive reception in the marketplace. The Technical Chemicals business continued to post good results on sales of its high-purity chemicals for optical coatings. Specialty Chemicals The Specialty Chemicals business sector contributed 15% to sales and 22% to the operating result in the 2 nd quarter. Sales rose by 5.2%, the operating result by 24%. The quarterly return on sales (ROS) increased to 18.9% from 16.1% last year. SPECIALTY CHEMICALS Sales Operating result Exceptionals _ 53.4 EBIT The Cosmetics, Health, Nutrition division increased its sales by 5.1% to EUR 91 million. Sales growth was aided by high demand from the cosmetics industry for effect pigments. Sales of Electronic Chemicals rose 18% to EUR 54 million. While demand from the semiconductor industry in Asia and Europe was still on a high level in the 2 nd quarter, we expect a moderate slow down for the 3rd quarter due to reduced demand and high inventories of chips. The Liquid Crystals division sales were little changed in the 2 nd quarter at EUR 67 million. The growing popularity of LCD computer monitors helped offset the effects of the ailing mobile phone business. During the quarter some customers began applying a new technology to make LCD-based television screens using a Merck Liquid Crystal mixture. Sales in the Pigments/Technical Industries division rose 2.7% to EUR 78 million in comparison to a very strong 2 nd quarter in Laboratory Products The Laboratory Products business sector recorded sales of EUR 141 million in the 2 nd quarter. Less the internal sales to our Laboratory Distribution business sector (EUR 56 million), Laboratory Products contributed 4% to sales and 4% to the operating result of the Merck Group. Sales increased by 6.9% while the operating result decreased 12% to EUR 9 million due to a temporary lack of high-margin product sales and adverse effects from inventory valuation. This resulted in a return on sales (ROS) of 6.4% compared to 7.8% in the same quarter the year before. Sales in the Laboratory Reagents division (including sales LABORATORY PRODUCTS Sales Operating result Exceptionals _ 2.6 EBIT to Merck's VWR International laboratory distribution business) increased by 7.8% to EUR 79 million. Sales growth was strong in the Americas. Demand for high-purity solvents and reference materials was especially good. Sales in the Scientific Laboratory Products division (including internal sales to VWR International) increased 5.8% to EUR 61 million, aided by good growth rates in life science reagents and processing. To meet the continuing high demand in pharmaceuti- 8 9

6 cal and bio-science research, a new manufacturing line for biological buffers was set up at Gernsheim, Germany. Laboratory Distribution The Laboratory Distribution business sector contributed 36% to sales and 9% to the operating result in the 2 nd quarter. The Laboratory Distribution business, now called VWR International Inc., increased its sales by 21% in the quarter to EUR 710 million and its operating result by 50% to EUR 23 million. The return on sales (ROS) increased to 3.2% compared to 2.6% in both the 1 st quarter of this year and the 2 nd quarter of last year. LABORATORY DISTRIBUTION Sales Operating result Exceptionals 99.8 EBIT As a global leader in life science laboratory distribution, VWR continues to win market share. Both divisions, VWR in North America and the Merck Eurolab Group, contributed to this strong development. Continued investment in infrastructure and process efficiency are starting to pay off and contributed to the significant profit improvement in the 1 st and 2 nd quarters. With continued excellent growth and improved profitability, VWR International remains on course for its planned IPO. The sales of VWR Scientific Products in North America rose 24% to EUR 505 million, aided by the strong US dollar. Sales by Merck Eurolab rose 15% to EUR 205 million. Outlook In general, we see little risk associated with exchange rates and no major impact from acquisitions or divestments. We stick to our guidance for double-digit growth on the bottom line for the full year. Our Pharmaceuticals business sector continues to produce strong organic growth. The life-cycle management of our top-selling oral antidiabetic, Glucophage, is progressing well. U.S. generic competition had not started by the end of the 2 nd quarter, giving our licensee more time to inform doctors and patients about the advantages of our newer diabetes treatments, Glucovance and Glucophage XR. By the end of June, these three products accounted for more than 41% of new prescriptions written for diabetes patients in the U.S. Of this record number of new U.S. prescriptions for the Glucophage franchise, 42% were for the two new formulations. As governments look for ways of cutting rising health-care costs, generic drugs will play a more prominent role in the pharmaceuticals business. Our Generics division, a market leader in several major countries, is ready to meet the challenges of the future. For example, the acquisition of Mohan Research Medicine Institute which is still subject to due diligence will provide a platform for growth in Japan, the world s second-largest drug market. The worldwide slowdown in the high technology industries is having a first, but modest, impact on our Specialty Chemicals business though margins remain at a high level. With continued excellent growth and improved profitability, VWR International remains on course for the planned IPO. We also expect to be able to announce further restructuring of the Group and details about a new corporate identity by the end of the 3 rd quarter. Darmstadt, July 26,

7 FINANCIAL POSITION AND PERFORMANCE Like the annual financial statements, the quarterly financial statements of the Merck Group are prepared in accordance with the rules of the International Accounting Standards Committee, London. Notes to the annual financial statements apply accordingly. Use of IAS 39 (Financial Instruments) began January 1, In accordance with these standards, certain securities are carried at their fair value and the gains or losses included separately under net equity (not recognized in income). The effects of this new standard on the Merck Group s balance sheet are presented in the statement of changes in net equity. BALANCE SHEET June 30, 2001 Dec. 31, 2000 Change ASSETS EUR million EUR million in % Noncurrent assets Intangible assets 2, , % Property, plant and equipment 2, , % Long-term investments % 5, , % Current assets Inventories 1, , % Trade accounts receivable 1, , % Other receivables and other assets % Cash and cash equivalents % 3, , % Deferred tax assets % 8, , % EQUITY AND LIABILITIES Net equity Equity capital % Reserves 1, , % 2, , % Minority interest % 2, , % Provisions Provisions for pensions and other post-employment benefits % Other provisions % 1, , % Current liabilities Financial obligations 3, , % Trade accounts payable % Other liabilities % 4, , % Deferred tax liabilities % 8, , % The total assets of the Merck Group increased during the first six months by about EUR 647 million (+7.8%). Along with an increase in working capital, investments in property, plant and equipment made a major contribution to this during the first two quarters of The measurement of securities and investments at their fair value under IAS 39 had additionally led to a significant increase in long-term investments. The equity ratio amounted to 27%, netted against cash and cash equivalents 29% (Compared to 26% and 28% respectively, at the end of 2000). Statement of changes in net equity including minority interest EUR million EUR million Balance as of Jan. 1 2, ,060.3 Profit after tax Dividend distributions Appropriation to special reserves by E. Merck partners 74.0 Currency translation Changes in companies consolidated Fair value based on IAS Other Balance as of June 30 2, ,005.3 Cash flow statement EUR million EUR million Cash and cash equivalents as of Jan Cash flows from operating activities Cash flows from investing activities Free cash flow Cash flows from financing activities Exchange rate movements/changes in companies consolidated Cash and cash equivalents as of June The free cash flow decreased by EUR million compared with last year. This was mainly due to the negative cash flow of investing activities resulting from higher capital expenditures (+ EUR 65 million or 38%) and costs for acquisitions or increases in shares in subsidiaries. In addition, the disposal of assets last year included part of the cash received from Bracco for the sale of the shares (EUR 154 million). The remaining proceeds from the sale are to be paid over a period of five years which will result in a cash inflow from Bracco of EUR 120 million in the current year

8 PROFIT AND LOSS STATEMENT 2 nd 2 nd quarter quarter Change Jan.-June Jan.-June Change EUR million Sales 1,949 1, ,728 3, Cost of sales ,803 1, Gross margin 1, ,924 1, Marketing and selling expenses General and administration Research and development Patent and license revenues Investment result Amortization of goodwill Operating result Exceptional items Earnings before interest and tax (EBIT) Financial result Profit before tax Income tax Profit after tax Minority interest Net profit after minority interest Earnings per share Free Cash flow Investments in property, plant and equipment No. of employees (as of June 30) 34,307 32, Further reporting dates October 25, 2001 Interim Report 3 nd Quarter 2001 Feb. 14, 2002 Annual Report 2001 April 24, 2002 Interim Report 1 st Quarter

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