Business | Investment

Merck KGaA lifts outlook on screen chemicals

Outlook is upper half of previous target range

  • Reuters
  • Published: 16:02 November 15, 2012
  • Gulf News

Darmstadt: Merck KGaA bolstered its outlook and beat expectations for third-quarter results as it capitalised on cost cuts and its strong position in the market for chemicals for flat screens.

Family-controlled Merck, which traces its roots to a 17th century pharmacy, on Thursday said it now expects 2012 adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda ) of 2.90-2.95 billion euros ($3.7-$3.75 billion).

That is the upper half of its previous target range and compares with 2.9 billion euros expected on average by analysts.

The shares gained 1.1 per cent at 0826 GMT, while Germany’s blue chip index lost 0.5 per cent.

Merck benefited from an ongoing cost cutting programme and from continued price hikes in the United States for multiple sclerosis drugs, where the group sells its established Rebif injection.

Sales of Rebif, Merck’s best-selling drug, saw currency-adjusted gains of 10 per cent for two consecutive quarters.

“We believe that the restructuring taking place at Merck is bearing fruit and (is) important for future growth opportunities,” said Silvia Quandt Research analyst Claudia Lakatos.

The company is slashing jobs after a number of development setbacks left it without any significant drugs in late-stage clinical studies.

It is now buying rights to experimental compounds in early stages of development to gradually rebuild its pipeline.

Restructuring costs have come to more than 400 million euros so far this year.

Third-quarter adjusted Ebitda rose 15.6 per cent to 754 million euros, above a forecast for 740 million in a Reuters poll. Revenues also exceeded expectations.

Merck’s dominant position in the market for liquid crystals for flat-panel displays allows it to hold its own even as economic uncertainty puts consumers off purchases of pricey flat-screen TVs. Soaring tablet computer and smartphone sales also help Merck.

It reiterated, however, that the liquid crystals business would weaken in the remainder of the year and that the unit’s fourth-quarter operating earnings would be flat from a year earlier.

Screen maker LG Display said last month it expected TV display to remain subdued next year. Japanese TV maker Sharp even warned it might not be able to survive on its own and slashed its full-year TV sales forecast.

But Panasonic Corp said on Thursday its display business was on track for its first profit in five years in January-March, driven by stronger sales of liquid crystal display (LCD) panels for tablets and PCs.

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