Merck KGaA Reports Best Year in 333-Year History
Merck 2001 Operating Result Climbs 18%, Sales Up 12% Lab Distribution Sales Rise 16%, Earnings Double; IPO Process to Begin Dividend of EUR 0.95 per Share Proposed for 2001 Merck Prepared to Face the Challenges of the Next Two to Three Years
Merck Group reported double-digit growth on all lines for 2001 - sales up 12% to EUR 7.5 billion, operating result up 18% to EUR 877 million and profit after tax and before exceptionals up 17% to EUR 357 million. Growth was driven by Pharmaceuticals (sales rose 14%) and Laboratory Distribution (sales increased 16%). As Merck's intent is to increase its dividend slowly but steadily, a dividend increase of 6 percent to EUR 0.95 per share will be recommended for 2001. Darmstadt and Frankfurt am Main, Germany - The Merck Group recorded the best financial year in its 333-year history, with revenue in 2001 increasing 12 percent, boosted by sales of the oral anti-diabetic Glucophage and strong performances in general from the Pharmaceuticals and Laboratory Distribution businesses. All sectors reported annual sales increases. Full-year net profit after minorities jumped 155% to EUR 629 million, or EUR 3.66 per share, from EUR 247 million, or EUR 1.44 per share.
"Once again, Merck has produced excellent results for its shareholders and accomplished this feat during trying economic conditions," Merck CEO Bernhard Scheuble said at the company's annual press conference in Frankfurt. "We see challenges ahead in the next two to three years but we have made, and are continuing to make, preparations to meet these challenges."
Merck's full-year operating result increased 18% to EUR 877 million. Exceptional items totaling EUR 410 million raised earnings before interest and taxes (EBIT) by 72% to EUR 1,286 million. Profit before taxes doubled to EUR 1,078 million. Merck's tax rate of 39% resulted in taxes paid of EUR 423 million.
Full-year profit before taxes and before exceptionals increased 28% to EUR 669 million. Before exceptionals, the income tax rate would have been 47% and taxes would have been EUR 311 million. Profit after tax and before exceptionals increased 17% to EUR 357 million.
Fourth-quarter sales increased 5% to EUR 1.8 billion compared to the year-ago quarter, held back for a variety of reasons. Specialty Chemicals sales fell 7% due to the worldwide slowdown in the high-technology industries while Pharmaceutical sales increased only a modest 5% as wholesalers reduced orders of Glucophage in anticipation of generic competitors. In addition, Pharmaceutical Resources Inc. was deconsolidated from corporate results as the 43% stake in PRI was sold in the third quarter. The increases in annual and fourth-quarter sales were due entirely to organic growth.
The fourth quarter operating result declined 39% to EUR 113 million due to the above reasons as well as increased costs, such as for research and development. Exceptional items in the quarter totaled EUR 56 million, including gains on divestments of minority holdings and funds set aside for environmental and litigation risks and closures. Profit after tax and before exceptionals dropped 68% to EUR 30 million. For the year, Merck achieved an ROS (return on sales) of 11.6% compared to 11.1% in 2000, while ROCE (return on capital employed) rose to 13.5% from 11.6%. In the fourth quarter, ROS was 6.1% compared to 10.6% in the year-ago quarter and ROCE declined to 6.8% from 11.4%.
Geographically, annual sales in North America climbed 21% to EUR 3,132 million or 42% of total sales. Annual sales in Europe rose 7% to EUR 2,729 million or 36% of the total. Sales in Latin America and Asia, Africa and Australia increased 7% and 3%, respectively.
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