Merck Kgaa · XETR:MRK
Merck Kgaa — Merck KGaA, Darmstadt, Germany — FY2015 Earnings Presentation
52 slides from Merck Kgaa's earnings presentation, Mar 8, 2016
Slide 1: FY 2015 results
STRONGER Merck, KGaA Darmstadt, Germany FY 2015 results Karl-Ludwig Kley, CEO Marcus Kuhnert, CFO March 08, 2016
Slide 2: Disclaimer
Disclaimer Publication of Merck KGaA, Darmstadt, Germany. In the United States and Canada the group of companies affiliated with Merck KGaA, Darmstadt, Germany operates under individual business names (EMD Serono, Millipore Sigma, EMD Performance Materials). To reflect such fact and to avoid any mis
Slide 3: Disclaimer: Cautionary Note Regarding Forward-Looking Statements
Disclaimer Cautionary Note Regarding Forward-Looking Statements This communication may include “forward-looking statements.” Statements that include words such as “anticipate,” “expect,” “should,” “would,” “intend,” “plan,” “project,” “seek,” “believe,” “will,” and other words of similar meaning in
Slide 4: Agenda
Agenda Executive summary Strategic review Financial overview Outlook and guidance 4
Slide 5: Executive Summary
©) EXECUTIVE SUMMARY Sa aan
Slide 6: Highlights 2015
Highlights 2015 Sigma acquisition closed – integration on track – 2015 synergies realized Avelumab: Six Phase III trials initiated – breakthrough designation for Merkel cell Execution of strategy Strong development of innovative UB-FFS technology and dynamic growth of OLED Launch of the new brand an
Slide 7: Strong financials and delivery of targets
Strong financials and delivery of targets Net sales [€ m] EBITDA pre [€ m] EPS pre [€] +13.0% Guidance Guidance Guidance +7.1% +5.9% 11,363 12,845 3,388 3,630 4.60 4.87 FY 2014 FY 2015 FY 2014 FY 2015 FY 2014 FY 2015 7
Slide 8: Asia-Pacific continuously gaining share
Asia-Pacific continuously gaining share Group FY 2014 and FY 2015 net sales by region [in %] 32% 36% 2015 33% 2014 30% 19% 21% 11% 4% 10% 4% Europe Asia-Pacific Middle East & Africa Latin America North America 8
Slide 9: APAC, LatAm and MEA drive organic sales growth
APAC, LatAm and MEA drive organic sales growth Regional breakdown of net sales [€ m] Regional development +13.0% • Europe predominantly driven by Organic sales Life Science and Consumer Health 12,845 growth • Life Science growth in North America 11,363 more than offset by lower Rebif volumes 4,103 +
Slide 10: Sustainable dividend development
Sustainable dividend development Dividend1 development 2011-2015 2015 dividend and policy • Dividend of €1.05 per share proposed2 for 2015 • Last year’s dividend constitutes 1.05 the minimum level3 1.00 0.95 0.85 • Development of dividends in line 0.75 with business performance and earnings progress
Slide 11: Strategic Review
STRATEGIC REVIEW
Slide 12: From ambition to reality
From ambition to reality Acquisition of Acquisition of Start of Fit for 2018 Majority of efficiency program and savings management changes achieved Acquisition of Acquisition of Alliance with DAX listing New brand 2007 2010 2011 2013 2014 2015 Divestment of Generics Divestment of Theramex Divestment
Slide 13: We have created three leading businesses
We have created three leading businesses Healthcare Life Science Performance Materials Serono Millipore AZ Sigma • Leading biotech company • No. 2 in the world market • World market leader • Global footprint • Broad and global product portfolio • Technology and innovation leader • Strong presence in
Slide 14: Healthcare: Solid base business and further pipeline progress
Healthcare: Solid base business and further pipeline progress Healthcare 2015 Sales and EBITDA pre margin Maximize existing business +5% Further development of pipeline +1.6% organic Defending Rebif Intention to file Cladribine in Europe Successful product repatriations €6.9 bn Initiation of
Slide 15: Life Science: Profitable growth amid Sigma acquisition
Life Science: Profitable growth amid Sigma acquisition Life Science 2015 Sales and EBITDA pre margin Strong operational performance +25% Sigma acquisition completed +6.5% organic Quality growth in line with market Antitrust process successfully managed All businesses contributing €3.4 bn Acq
Slide 16: Performance Materials: A year of ongoing technology and market leadership
Performance Materials: A year of ongoing technology and market leadership Performance Materials 2015 Sales and EBITDA pre margin Display Materials +24% Integrated Circuit Materials +0.6% organic Market shares retained at high levels Strong underlying trends trigger €2.6 bn solid growth momentum
Slide 17: 2015 – a year of operational excellence and execution on strategy
2015 – a year of operational excellence and execution on strategy Organic growth across all businesses Significant progress in pipeline development Sigma closing and successful initiation of integration Delivery on financial targets 17
Slide 18: Financial Overview
FINANCIAL OVERVIEW
Slide 19: Organic growth and FX tailwinds at all businesses
Organic growth and FX tailwinds at all businesses FY 2015 YoY net sales • Organic growth in Healthcare as GM* & Organic Currency Portfolio Total Fertility more than offset Rebif decline Healthcare 1.6% 3.1% 0.0% 4.7% • Life Science shows organic growth from all businesses, Process Solutions main Lif
Slide 20: FY 2015: Overview
FY 2015: Overview Key figures Comments [€m] FY 2014 FY 2015 Δ • EBITDA pre increases, while margin Net sales 11,363 12,845 13.0% softens due to royalty loss, Rebif decline and higher corporate costs EBITDA pre 3,388 3,630 7.1% Margin (in % of net sales) 29.8% 28.3% • EPS pre carries higher interest
Slide 21: FY 2015 – solid reported figures
FY 2015 – solid reported figures Reported results Comments [€m] FY 2014 FY 2015 Δ • EBIT reflects increased EBITDA pre EBIT 1,762 1,843 4.6% amid higher exceptionals & D&A from acquisitions Financial result -205 -357 74.0% • Financial result impacted by higher Profit before tax 1,557 1,487 -4.5% int
Slide 22: Healthcare: Dynamic development of organic growth drivers
Healthcare: Dynamic development of organic growth drivers Healthcare P&L Comments [€m] Q4 2014 Q4 2015 • GM, Fertility and Consumer Health continue to drive organic growth Net sales 1,717 1,737 • Rebif shows continuous volume decline in Europe, while U.S. price -657 -728 increases mitigate erosion i
Slide 23: Life Science: Strong year-end performance thanks to growth in all businesses
Life Science: Strong year-end performance thanks to growth in all businesses Life Science P&L Comments [€m] Q4 2014 Q4 2015 • Process Solutions posts double-digit organic growth across all 706 1,085 businesses, main contributors are single-use & virus filtration Net sales Marketing and selling -235
Slide 24: Performance Materials: Solid performance amid challenging market conditions
Performance Materials: Solid performance amid challenging market conditions Performance Materials P&L Comments [€m] Q4 2014 Q4 2015 • Strong increase in sales reflects FX and Sigma’s High-Tech business Net sales 576 642 • LC with slight organic decline vs. high base, as TN-TFT & typical Marketing an
Slide 25: Balance sheet reflects Sigma acquisition
Balance sheet reflects Sigma acquisition Assets [€ bn] Liabilities [€ bn] 38.0 38.0 1.1 2.7 2.6 12.9 26.0 26.0 Cash & marketable securities 5.1 Receivables 2.2 11.8 Net equity 25.3 Inventories 1.7 13.7 Intangible assets 11.4 5.6 Financial debt 1.9 1.8 1.5 Payables Property, plant & equipment 1.8 Pro
Slide 26: Hedging optimized Sigma balance sheet effects
Hedging optimized Sigma balance sheet effects [€ bn] Purchase price breakdown ~16 16 ~14.6 • Purchase price fully hedged against ~1.4 EUR/USD movements 12 • Sizable cash position indicates Sigma’s ~2.2 ~0.4 cash generative business and reflects ~8.6 delayed closing • Intangibles amortization from Si
Slide 27: Healthy operating cash flow amid Sigma financing impacts
Healthy operating cash flow amid Sigma financing impacts FY 2015 – cash flow statement Cash flow drivers [€m] FY 2014 FY 2015 Δ • D&A increase due to AZ and Sigma Profit after tax 1,165 1,124 -41 • Changes in provisions reflect last year's D&A 1,361 1,511 150 release due to litigation settlement -34
Slide 28: Outlook and Guidance
OUTLOOK AND GUIDANCE
Slide 29: High focus on cash generation to ensure swift deleveraging
High focus on cash generation to ensure swift deleveraging Net debt and leverage development Focus on deleveraging [Net debt / EBITDA pre] • Commitment on swift deleveraging 4x to ensure a strong investment grade rating and financial flexibility • Strong cash flow will be used to 3x 3.5x drive down
Slide 30: Qualitative full-year 2016 guidance
Qualitative full-year 2016 guidance Net sales: Growth in the low double-digits from Sigma & slight organic growth from existing business EBITDA pre: Increase in the low double-digits Supporting factors Burdening factors Sigma-Aldrich contribution will be sizeable R&D costs in Healthcare to increase
Slide 31: 2016 business sector guidance including Sigma-Aldrich
2016 business sector guidance including Sigma-Aldrich Healthcare Performance Life Science Materials Net sales Net sales Net sales • Slight organic growth • Moderate organic growth • Slight organic growth • Continued organic Rebif decline • Main driver Process Solutions • Volume increases in all busi
Slide 32: Slide 32
Slide 33: Appendix
APPENDIX
Slide 34: Additional financial guidance 2016
Additional financial guidance 2016 Further financial details Corporate & Other EBITDA pre ~ -€370 – -400 m Interest result ~ -€270 – -300 m Intangibles amortization from Sigma PPA ~ €250 – 300 m p.a. Underlying tax rate ~23% to 25% Capex on PPE ~€750 – 800 m 2016 & 2017 hedge rate ~40-45% Hedging/US
Slide 35: Well-balanced maturity profile reflects Sigma-Aldrich related capital markets transactions
Well-balanced maturity profile reflects Sigma-Aldrich related capital markets transactions Maturity profile as of Dec. 31, 2015 2.4% 4.5% Coupon 2.95% [€ m/US $] 750 1.375% 3.25% L+35bps 4.25% 2.625% E+23bps 0.75% 1,000 250 70 1,600 5.875% 1,350 3.375% 4.0% 1.7% 1,000 700 800 250 400 550 500 60 2016
Slide 36: Sales and EBITDA pre growth mainly driven by Life Science
Sales and EBITDA pre growth mainly driven by Life Science Q4 2015 YoY net sales • Organic Growth in Fertility and General Organic Currency Portfolio Total Medicine more than offset Rebif decline Healthcare 2.6% -1.5% 0.0% 1.2% • Life Science shows strong organic growth driven by all businesses and S
Slide 37: Q4 2015 overview
Q4 2015 overview Key figures Comments [€m] Q4 2014 Q4 2015 Δ • EBITDA pre increase driven by good Net sales 2,999 3,464 15.5% organic performance, Sigma and FX 878 933 6.3% • Margin reflects Healthcare EBITDA pre Margin (in % of net sales) 29.3% 26.9% investments and corporate initiatives 1.14 1.13
Slide 38: Q4 2015 – reported figures reflect Sigma acquisition
Q4 2015 – reported figures reflect Sigma acquisition Reported results Comments [€m] Q4 2014 Q4 2015 Δ • Strong EBIT decrease reflects higher EBIT 424 298 -29.7% D&A & exceptionals related to Sigma • Financial result includes interest Financial result -63 -134 112.9% expenses from Sigma financing and
Slide 39: Healthcare: Stability in base business and investments in future growth
Healthcare: Stability in base business and investments in future growth FY 2015 YoY net sales Comments [€m] FY 2014 FY 2015 • Rebif decline due to competition partially mitigated by U.S. pricing Net sales 6,621 6,934 • Erbitux stable, as mandatory price cuts and competition in Europe -2,551 -2,801 o
Slide 40: Healthcare organic growth by franchise/product
Healthcare organic growth by franchise/product Q4 2015 organic sales growth [%] FY 2015 organic sales growth [%] by key products [€ m] by key products [€ m] 440 1,798 -8% -11% 450 1,840 237 899 +3% -1% 234 904 Consumer 189 +7% Consumer 833 +10% Health 197 Health 766 177 +3% 685 +4% 167 628 105 463 +
Slide 41: Rebif: Defending the franchise
Rebif: Defending the franchise – competitive pressure in the U.S. and Europe Rebif sales evolution Rebif performance North America Q4 drivers • Rebif sales of €440m in Q4 2015 [€ m] Price slightly lower despite FX tailwinds -8.6% org. increase 300 Price Price • Organic decline of -7.9% due to lower
Slide 42: Erbitux: A challenging market environment
Erbitux: A challenging market environment Erbitux sales by region Erbitux performance 3.3% Q4 YoY • Sales increase to €237m due to [€ m] organic growth solid volume development 250 • Europe impacted by mandatory -2.1% price cuts & increasing competition 200 offset by uptake in Russia 5.6% • Latin Am
Slide 43: Strong growth in Fertility, General Medicine and Endocrinology
Strong growth in Fertility, General Medicine and Endocrinology Sales evolution Q4 drivers Fertility [€ m] • Organic growth of Fertility driven by 260 all major regions, especially China Organic 220 • Endocrinology with strong growth of 180 Serostim in U.S. and Saizen with Q4 2014 Q1 2015 Q2 2015 Q3
Slide 44: Clinical pipeline
Clinical pipeline Phase I Phase II Phase III Registration Tepotinib M2736 (ATX-MS-1467) Avelumab1 – Anti-PD-L1 mAb Cladribine Tablets6 – c-Met kinase inhibitor Immune tolerizing agent Non-small cell lung cancer 1L3 Lymphocyte targeting agent Solid tumors Multiple sclerosis Relapsing-remitting multip
Slide 45: Life Science: Strong and profitable growth driven by Process Solutions
Life Science: Strong and profitable growth driven by Process Solutions FY 2015 YoY net sales Comments FY 2014 FY 2015 • Process Solutions strong organic growth mainly due to strong 2,682 3,355 demand from biopharma production in Europe and U.S. Net sales Marketing and selling -860 -1,038 • Demand fo
Slide 46: Performance Materials: Healthy trends & strong FX tailwinds drive growth
Performance Materials: Healthy trends & strong FX tailwinds drive growth FY 2015 YoY net sales Comments FY 2014 FY 2015 • Strong sales mainly reflect portfolio effect and FX tailwinds Net sales 2,060 2,556 • Liquid crystals volume trend remains largest contributor to growth Marketing and selling -17
Slide 47: Strong operating cash flow; Pfizer upfront payment last year
Strong operating cash flow; Pfizer upfront payment last year Q4 2015 – cash flow statement Cash flow drivers [€m] Q4 2014 Q4 2015 Δ • D&A increase due to AZ and Sigma Profit after tax 282 127 -155 • Changes in provisions reflect last year's D&A 380 505 125 release due to litigation settlement • High
Slide 48: Exceptionals in Q4 2015
Exceptionals in Q4 2015 Exceptionals in EBIT [€m] Q4 2014 Q4 2015 Exceptionals thereof D&A Exceptionals thereof D&A Healthcare 16 1 90 88 Life Science 28 0 111 1 Performance Materials 10 0 6 0 Corporate & Other 23 1 13 0 Total 76 2 220 89 48 Totals may not add up due to rounding
Slide 49: Exceptionals in FY 2015
Exceptionals in FY 2015 Exceptionals in EBIT [€m] FY 2014 FY 2015 Exceptionals thereof D&A Exceptionals thereof D&A Healthcare 59 5 122 90 Life Science 60 0 182 1 Performance Materials 91 0 12 0 Corporate & Other 65 5 51 1 Total 275 10 367 92 49 Totals may not add up due to rounding
Slide 50: Life Science: New reporting structure reflects customer-centric approach
Life Science: New reporting structure reflects customer-centric approach 2015 product centric structure New 2016 customer centric structure New sales breakdown Process Solutions Process Solutions ~35% ~30% Lab Solutions Research Solutions Bioscience Applied Solutions ~35% Customer-centric business a
Slide 51: Financial calendar
Financial calendar Date Event April 29, 2016 Annual General Meeting May 19, 2016 Q1 2016 Earnings release August 4, 2016 Q2 2016 Earnings release November 15, 2016 Q3 2016 Earnings release 51
Slide 52: Investor Relations contacts
CONSTANTIN FEST SVENJA BUNDSCHUH ALESSANDRA HEINZ Head of Investor Relations Assistant Investor Relations Assistant Investor Relations +49 6151 72-5271 +49 6151 72-3744 +49 6151 72-3321 [email protected] [email protected] [email protected] ANNETT WEBER JULIA SCHWIE
Merck KGaA, Darmstadt, Germany — FY2015 Earnings Presentation on 6ix