Merck KGaA · XETR:MRK

Merck KGaA — DZ DAX Lunch (May 2013)

39 slides from Merck KGaA's conference presentation, May 2013

  1. Slide 1: Q1 2013 A solid start to the year

    Q1 2013 A solid start to the year DZ DAX Lunch Matthias Zachert, CFO Frankfurt, May 2013

  2. Slide 2: Disclaimer

    Disclaimer Remarks All comparative figures relate to the corresponding last year’s period. Important information This presentation does not constitute an offer of securities for sale or a solicitation of an offer to purchase securities in the United States. The shares referred to herein have not bee

  3. Slide 3: Agenda

    Agenda Business overview Transforming the company Financial review Guidance

  4. Slide 4: Merck - A balanced portfolio of four divisions

    Merck - A balanced portfolio of four divisions The Merck Group Merck Serono Consumer Health Performance Materials Merck Millipore Leading in certain specialty Present in OTC niche No. 1 in display materials Top 3 in life science tools pharma markets markets  Life cycle management  Vitamins  Custo

  5. Slide 5: Strong businesses with attractive margins

    Strong businesses with attractive margins Divisional sales and operating profitability Merck Margin1 Millipore 25% Merck Serono Merck Millipore 19% 24.2% Performance Materials 25% 49.2% 55% Consumer Health 12.3% Performance 16% Materials 4% Merck Serono 55% 31.8% Consumer Health Q1 2013 sales: €2,66

  6. Slide 6: Emerging Markets key driver of absolute and relative sales growth

    Emerging Markets key driver of absolute and relative sales growth Merck Group Q1 2013 sales by region Regional development of sales [€ m] +4% Organic sales North America 2,660 growth Europe 2,564 19% 1,013 +1% 38% Europe 1,000 +1% North America 487 +6% 516 +6% 35% 8% Emerging Emerging 845 +9% 924 +1

  7. Slide 7: We have added scale while strengthening the attractiveness of assets in our portfolio

    We have added scale while strengthening the attractiveness of assets in our portfolio 2002 Revenues €7.5 bn Transaction volume 2011 Revenues €10.3 bn Laboratory Distribution Millipore Merck Millipore Divestments Life Science Products Performance Analytics & Reagents Materials CropBioscience Electron

  8. Slide 8: Our stronger portfolio has enabled us to fundamentally improve our profitability

    Our stronger portfolio has enabled us to fundamentally improve our profitability Merck Group total revenues and adjusted EBIT margin* 2002-2011 Acquisition of Millipore €m Acquisition of Serono 10,276 adj. EBIT 10,000 Divestment of Generics margin* 9,291 30% 8,000 7,473 7,558 7,747 7,202 7,057 6,259

  9. Slide 9: Agenda

    Agenda Business overview Transforming the company Financial review Guidance

  10. Slide 10: Portfolio evolution improved our profitability structure, but further potential remains

    Portfolio evolution improved our profitability structure, but further potential remains Assessment of long-term financial performance relative to peers Sales growth Gross margin SG&A R&D productivity Merck Serono Consumer Health Performance Materials Merck Millipore above peers in-line with peers be

  11. Slide 11: We now focus on efficiency

    We now focus on efficiency Transformation process 2012-2018 2012 2013 2014 2015 2016-18 Efficiency  De-complex organization  Optimize cost structure  Increase R&D productivity Organic growth  Exploit leading market positions  Execute selected bolt-on acquisitions Portfolio  No portfolio divest

  12. Slide 12: New management in key positions and across the entire organization

    New management in key positions and across the entire organization Management changes Divisions Merck Serono Corporate Head of Merck Serono Head of Head of Head of Head of Consumer Chief Operating Merck Serono Corporate Merck Millipore Corporate HR Health Officer Development Controlling Merck Group

  13. Slide 13: Fit for 2018: Faster implementation and new initiatives added

    Fit for 2018: Faster implementation and new initiatives added Net annual savings Details Savings 2012 2013 2014 2015 2016 2017 Total  Merck Serono with swift Previous disclosure MS 50 200 300 300 implementation of initiatives: CH 5 15 25 25  €50 m savings pulled forward MM 10 30 40 40  Earlier pe

  14. Slide 14: Agenda

    Agenda Business overview Transforming the company Financial review Guidance

  15. Slide 15: Q1 2013: A strong quarter

    Q1 2013: A strong quarter [€ m] Q1 2013 Q1 2012 Δ Q1 2013 dynamics Sales 2,660 2,564 4%  Merck Serono and Performance Materials key contributors to EBITDA pre 801 674 19% sales growth Margin (% of sales) 30.1% 26.3%  Visible improvement in EBITDA pre EPS pre [€] 2.11 1.66 27% and margin driven by

  16. Slide 16: Merck Serono: Organic growth and higher productivity deliver strong business performance

    Merck Serono: Organic growth and higher productivity deliver strong business performance [€ m] Q1 2013 Q1 2012 Comments  Organic growth leads to sales increase, mitigated by FX Sales 1,454 1,417  Rebif with solid pricing in the U.S. (Rebidose introduction) but Marketing and selling -312 -332 slugg

  17. Slide 17: Consumer Health: Seasonal demand meets improved cost base

    Consumer Health: Seasonal demand meets improved cost base [€ m] Q1 2013 Q1 2012 Comments  Sales increase on strong organic growth slightly mitigated Sales 116 108 by currency Marketing and selling -51 -52  Cough and cold benefits seasonally, more so due to Admin -4 -5 extended winter period in Eur

  18. Slide 18: Performance Materials: Ongoing strength in Liquid Crystals and first successful Pigments quarter

    Performance Materials: Ongoing strength in Liquid Crystals and first successful Pigments quarter [€ m] Q1 2013 Q1 2012 Comments  Strong demand for Liquid Crystals fuels organic growth with Sales 421 386 volume increases being slightly mitigated by pricing Marketing and selling -35 -33  PS-VA and I

  19. Slide 19: Supply chain levels are expected to burden Liquid Crystals demand in the second half

    Supply chain levels are expected to burden Liquid Crystals demand in the second half of the year Inventory levels over last 2 years Comments  Downstream inventory levels high 5  Precise forecast when potential 4 Excess destocking will occur cannot be 3 Weeks of inventory made 2 1 Balanced 0 -1 -2

  20. Slide 20: Merck Millipore: Stable performance amid continued investments

    Merck Millipore: Stable performance amid continued investments [€ m] Q1 2013 Q1 2012 Comments  Volume and price increases as well as positive portfolio effects Sales 669 653 are mitigated by FX Marketing and selling -169 -167  Process Solutions drives turnover increase; healthy demand Admin -27 -2

  21. Slide 21: Balance sheet strength

    Balance sheet strength [€ m] March 2013 Dec 2012 Δ Comments Total assets 21,954 21,643 1%  Cash-generating nature of business drives increase in Equity 10,514 10,415 1% cash and other liquid funds Cash and other liquid funds 2,901 2,528 15%  Ongoing deleveraging: net financial debt down by €359 m

  22. Slide 22: Strong operating cash-generation continues

    Strong operating cash-generation continues [€ m] Q1 2013 Q1 2012 Δ Comments Profit after tax 269 175 94  Profit after tax reflects good D&A 354 343 12 business performance Changes in provisions 23 24 -1  Sales expansion main element of Changes in other assets / liabilities 72 -52 124 working capit

  23. Slide 23: Agenda

    Agenda Business overview Transforming the company Financial review Guidance

  24. Slide 24: With successful acceleration of transformation Merck aims to deliver its mid-term targets already in 2013

    With successful acceleration of transformation Merck aims to deliver its mid-term targets already in 2013 Old mid-term guidance for 2014 Merck guidance for 2013 Merck Group Sales: ~ €10.7 - 10.9 bn Merck strives for realistic Group targets Sales (€m) EBITDA pre (€m) EPS pre (€) +4% - 8% +10% - 17% +

  25. Slide 25: 2013 guidance details

    2013 guidance details Merck Serono Consumer Health Performance Materials Merck Millipore Sales Sales Sales Sales Moderate organic Moderate organic Stable Stable growth growth EBITDA pre EBITDA pre EBITDA pre EBITDA pre ~ €1.9 – 2.0 bn ~ €70 – 75 m ~ €700 – 740 m ~ €620 – 640 m Merck 2013 guidance: ~

  26. Slide 26: ' MERCK

    ' MERCK

  27. Slide 27: Appendix

    Appendix

  28. Slide 28: Additional financial guidance

    Additional financial guidance Further financial details  Royalty, license and commission income : To decline to ~€180-200 m in 2014  Corporate EBITDA pre : ~€-210 m  Underlying tax ratio : ~25% to 26%  Capex on PPE : ~€450 m  Hedging / USD assumption : 2013 and 2014 hedge ratio between ~30% to

  29. Slide 29: Merck Serono and Performance Materials largest contributors to top- and bottom-line improvement

    Merck Serono and Performance Materials largest contributors to top- and bottom-line improvement Q1 yoy sales Organic Currency Portfolio Total  All divisions realize solid organic Merck Serono 4% -1% 0% 3% growth Consumer Health 9% -1% 0% 8%  Merck Serono biggest absolute contributor to organic gro

  30. Slide 30: Business performance, lower financial and tax expenses drive strong net income expansion

    Business performance, lower financial and tax expenses drive strong net income expansion [€ m] Q1 2013 Q1 2012 Δ Comments EBIT 399 311 29%  Top-line growth, mix and yield variances increase EBIT Financial result -59 -66 -11%  Gross debt reduction benefits financial result, lowers interest cost Pro

  31. Slide 31: Merck Serono organic growth performance by product

    Merck Serono organic growth performance by product Q1 2013 organic sales growth by key products [€ m] 454 +6% 430 222 214 +7% 145 -4% 152 92 -5% 99 104 +25% 85 54 -8% 59 Q1 2012 Q1 2013 31

  32. Slide 32: Rebif – U.S. pricing yields strong organic growth

    Rebif – U.S. pricing yields strong organic growth Regional sales evolution [€ m] Rebif performance  €454 m global sales with 6% organic growth Trend North America Q1 drivers  North America benefits from pricing Price 200 Price increase Price Price increase  Price (Rebidose) while volume decreases

  33. Slide 33: Erbitux – Emerging Markets drive solid performance

    Erbitux – Emerging Markets drive solid performance Erbitux sales by geography Erbitux performance  Global sales of €222 m reflect 7% +7% Q1 yoy [€ m] organic growth organic sales growth and -3% FX 250 impact 200  Emerging Markets and Russia as main growth drivers +2% 150  Ongoing difficult market

  34. Slide 34: Strong performance of Glucophage; Gonal-f and Endocrinology softer

    Strong performance of Glucophage; Gonal-f and Endocrinology softer Sales evolution Q1 growth Gonal-f Q1 drivers  -4% organic sales in Gonal-f due to [€ m] Price high U.S. inventory levels being 160 Volume adjusted in Q1 2013 and facing 140 120 tougher comps from the successful Q1 2012 Q2 2012 Q3 20

  35. Slide 35: Merck Serono pipeline

    Merck Serono pipeline Phase I Phase II Phase III In registration  ATX-MS-1467  ONO – 4641  L-BLP25 (Stimuvax®)4  Erbitux® (cetuximab) Immune tolerizing agent Oral S1P receptor modulator MUC1 antigen-specific cancer Anti-EGFR mAb Multiple sclerosis Multiple sclerosis immunotherapy Squamous cell c

  36. Slide 36: Merck Serono pipeline newsflow

    Merck Serono pipeline newsflow Project Indication Current phase Timing Event Futility analysis TH-302 Soft tissue sarcoma Phase III Mid-2013 ONO-4641 Multiple sclerosis Phase II 2013 Phase III ‘go/no go’ decision Atacicept Systemic lupus erythematosus Phase II H1 2013 Publication of results (APRIL S

  37. Slide 37: Phase II of cost allocation elimination implemented

    Phase II of cost allocation elimination implemented 2012 reclassification - elimination of corporate cost allocation to divisions Rationale [€ m] Q1 2012 Q2 2012 Q3 2012 Q4 2012 FY 2012  With 2013, phase II of cost allocation elimination implemented Merck -9 -10 -10 -10 -39  Phase I eliminated all

  38. Slide 38: One-time items in Q1 2013 and Q1 2012

    One-time items in Q1 2013 and Q1 2012 One-time items [€ m] Q1 2013 Q1 2012 One-time thereof One-time thereof items D&A items D&A Merck Serono 56 27 18 9 Consumer Health 0 0 1 0 Performance Materials 4 0 1 0 Merck Millipore 10 0 7 0 Corporate & Other 3 0 2 0 Total 74 27 30 9 Totals may not add up due

  39. Slide 39: IR contact detail

    IR contact detail Investor Relations contact detail Constantin Fest Eva Sterzel Head of Investor Relations Communication Tools +49 6151 72-5271 +49 6151 72-5355 Dr. Thomas Kornek Alessandra Heinz Equity Holders Assistant Investor Relations +49 6151 72-7434 +49 6151 72-3321 Claudia Nickolaus Silke Me

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