“2018 was a year of transition and investment for us. We achieved solid results in a dynamic market environment and achieved the financial targets we had set for ourselves. At the same time, we pressed further ahead with the strategic refocusing of our company on innovation-driven businesses. In addition, by divesting Consumer Health we decreased our debt significantly. Our objective for 2019 is clear: We want to resume sustainable growth of our key indicators, namely net sales, EBITDA pre and EPS pre,” said Stefan Oschmann, chairman of the Executive Board and CEO of Merck KGaA.
Group sales rose in 2018 by 2.2% to €14.8 billion (2017: €14.5 billion). All three business sectors and all regions contributed to the strong organic sales growth of 6.1%. This was amid negative exchange rate effects of -3.9%, primarily attributable to the weakening of the US dollar against the euro as well as significant declines in the value of Latin American currencies.
The operating result (EBIT) fell sharply by -28.7% to €1.7 billion (2017: €2.4 billion); among other things, in the previous year, the gain on the divestment of the Biosimilars business had a positive effect. EBITDA pre, the company’s most important earnings indicator, declined by -10.5% to €3.8 billion (2017: €4.2 billion). This decrease was attributable to negative foreign exchange effects of -8.9%. Organically, EBITDA pre declined by -1.6%. Net income surged by 29.5% to €3.4 billion, particularly owing to the gain on the divestment of the Consumer Health business (2017: €2.6 billion).
Earnings per share pre (EPS pre), which is decisive for the dividend to be paid by Merck KGaA, Darmstadt, Germany, decreased in 2018 by -13.9% to €5.10 (2017: €5.92).
Due to the gain on the divestment of Consumer Health and despite continued strong investment activity, Merck KGaA, Darmstadt, Germany, lowered its net financial debt as of Dec. 31, 2018, by €3.4 billion to €6.7 billion (2017:€10.1 billion). At year-end, the net financial debt of the company was thus 1.8x EBITDA pre; consequently, Merck KGaA, Darmstadt, Germany, met the target it had set for itself by lowering this ratio of net financial debt to EBITDA pre to less than 2 by the end of 2018.
In the fourth quarter of 2018, Group sales rose by 6.6% to €3.9 billion (Q4 2017: €3.6 billion). This was mainly attributable to strong organic growth of 7.2% driven by all three business sectors. Group EBITDA pre declined slightly in the fourth quarter by -1.3% and amounted to €950 million (Q4 2017: €962 million). This was due to negative foreign exchange effects of -4.5%, which more than canceled out the organic growth of EBITDA pre of 3.2% in the fourth quarter.
In 2018, Performance Materials generated organic sales growth of 1.7%, which was however canceled out by a negative foreign exchange impact of -3.4%. In 2018, net sales of the Performance Materials business sector declined by -1.7% to €2.4 billion (2017: €2.4 billion).
The Semiconductor Solutions business unit delivered strong organic sales growth in 2018 as expected. Reported for the full year for the first time, net sales of Semiconductor Solutions were €596 million in 2018. The Display Solutions business unit posted a slightly positive organic sales performance due also to increasing demand for OLED materials. In addition, the liquid crystals business temporarily benefited, mainly in the second half of 2018, from projects by international panel makers in China to build up production capacities. Display Solutions reported sales of €1.3 billion in 2018.