Merck FY2010 Profit After Tax Climbs 70% to EUR 642 Million

23-02-2011: The Merck Group’s total revenues for 2010 increased 20% to a record EUR 9,291 million from EUR 7,747 million in 2009, boosted by the EUR 5.1 billion acquisition of Millipore Corporation in July. Acquisitions, mainly Millipore, accounted for 8.4 percentage points of the increase, positive currency effects 3.7 percentage points and organic growth 7.9 percentage points of the increase. Fourth-quarter 2010 total revenues rose 26% to EUR 2,546 million from EUR 2,029 million in the year-ago quarter.

Cost of sales increased by 18% in 2010. In the course of the purchase price allocation, the inventories from the Millipore acquisition were already recognized at fair value based on realizable sales revenues, and thus stepped up by EUR 86 million. This amount was fully expensed in cost of sales in the second half of 2010, and had a one-time negative impact on gross margin. Overall, the gross margin for 2010 rose by 21% to EUR 6,905 million. Full-year marketing and selling costs increased relatively sharply by 20% since the costs of the Millipore companies were included for six months compared to 2009. Excluding the impact of the acquisition and currency effects, the increase amounted to 7.9%. The marked 12% increase in administration expenses was due mainly to the first-time consolidation of the Millipore companies, as well as to currency effects. Excluding acquisition and currency effects, administration expenses rose by only 1.9% in 2010.

Research and development costs increased by 3.9% to EUR 1,397 million in 2010. Thus, the ratio of R&D expenses to total revenues was 15% compared to 17% in 2009. In the fourth quarter, R&D expenses rose 1.2% to 363 million.
Amortization of intangible assets, which previously related mainly to the Serono purchase price allocation, now also include amortization of the intangible assets identified within the scope of the purchase price allocation for Millipore. Consequently, depreciation and amortization rose significantly, totaling EUR 96 million for the Merck Millipore division. Due to a reassessment of the potential future sales for safinamide, Merck recorded an impairment of EUR 134 million to a residual value of EUR 63 million.
Thus, the operating result of the Merck Group for 2010 amounted to EUR 1,113 million, corresponding to an increase of 72% over 2009. For the fourth quarter, the Group operating result nearly tripled, rising to EUR 129 million from EUR 44 million in the year-ago quarter. The Group full-year core operating result (operating result excluding Serono- and Millipore-related amortization of intangible assets) was EUR 2,096 million compared to EUR 1,296 million in 2009. The core operating result in the fourth quarter of 2010 was EUR 538 million versus EUR 258 million in the year-ago quarter.