Merck KGaA raises outlook after forecast-beating Q2 profit

BERLIN, Aug 5 (Reuters) – Merck KGaA (MRCG.DE) raised its outlook after posting forecast-beating second quarter profits on Thursday, boosted by demand for its lab gear and supplies from pharma companies making treatments and vaccines against the coronavirus.

Adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) rose 46.7% to 1.6 billion euros ($1.89 billion), above the consensus estimate of 1.46 billion euros in a poll of analysts provided by the company.

“We have succeeded in mobilizing for accelerated, efficient growth in all business sectors,” said CEO Belen Garijo, highlighting the contribution of Merck’s three main divisions – Healthcare, Life Science and Electronics.

“We are poised to deliver sustainable growth due to our optimal position to address all Covid and post-Covid macro trends,” she added. Merck shares rallied by 3.7% on the results, extending year-to-date gains to 30%.

Reported group sales increased by 18.2% in the quarter and by 23% when adjusted for currency movements. EBITDA grew by 53% on an organic basis.

Commenting on the outlook, Merck said it expected the recovery that began in late 2020 to continue, while Life Sciences in particular would expect “significantly positive contributions” owing to the COVID-19 pandemic.

Merck now expects group net sales to grow in 2021 by 12%-14%, on an organic basis, up from a previous forecast of 10%-12%. It now sees adjusted EBITDA rising by 21%-25%, up from an earlier view of 16%-20% growth.

Should governments order vaccine booster shots to counter new COVID-19 variants that would lift revenue at Merck, CFO Markus Kuhnert told reporters on a call, while further lockdowns that could weigh on sales were unlikely.

Commenting on the mid-term outlook, Merck dialed back its expectations for revenues from pipeline sales in its Healthcare division to 1.6-1.8 billion euros next year from 2 billion euros previously.

This was mainly due to lower expectations for sales of its Mavenclad treatment for multiple sclerosis. Merck still expects Mavenclad to achieve peak sales of 1-1.4 billion euros, although this would be later than earlier expected.

LIFE SCIENCES LEAD

Merck’s Life Science unit, mostly made up of businesses formerly known as Millipore and Sigma Aldrich, cemented its role as Merck’s main growth driver, achieving an organic revenue increase of 28.2% and half of group profits.

The unit, which supplies gear and chemicals for biotech labs, announced $47 million in investments last December at facilities in Massachusetts and New Hampshire to make supplies for developers of COVID-19 vaccines and therapies.

This would begin to increase output from 2021, it said at the time, for products like filters and single-use plastic bags and tubes for bioreactors.

The group’s healthcare division achieved the strongest quarterly growth in profitability, with adjusted EBITDA up by 55.3%. Its oncology franchise achieved organic sales growth of 49% while its fertility line grew by 87.6%.

In electronics, organic revenue grew by 10.3% in the second quarter while adjusted EBITDA grew 8.3%.

($1 = 0.8448 euros)Reporting by Douglas Busvine Editing by Tomasz Janowski

Our Standards: The Thomson Reuters Trust Principles.

Source: https://www.reuters.com/business/merck-kgaa-raises-outlook-after-forecast-beating-q2-profit-2021-08-05/