Merck Kgaa · XETR:MRK
Merck Kgaa — FY2023 Earnings Presentation
53 slides from Merck Kgaa's earnings presentation, Mar 7, 2024
Slide 1: Proven resilience during transitional year
Proven resilience during transitional year Merck FY 2023 results Belén Garijo, CEO Helene von Roeder, CFO March 7, 2024
Slide 2: Disclaimer
Disclaimer Cautionary Note Regarding Forward-Looking Statements and financial indicators 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 wor
Slide 3: Agenda
Agenda Executive summary Strategic review Financial overview ESG update Outlook & Guidance 3 Merck Q4 2023 Results Presentation | March 7, 2024
Slide 4: Executive summary
Executive summary 01
Slide 5: Merck Group - Guidance delivered
Merck Group - Guidance delivered 2023 Guidance 2023 Results Net sales €20.5 – 21.9 bn €21.0 bn ▪ Guidance: Met ▪ Robust performance during transitional EBITDA pre €5.8 – 6.4 bn €5.9 bn year ▪ Resilience of multi- industry business EPS pre €8.25 – 9.35 €8.49 model demonstrated 5 Merck Q4 2023 Results
Slide 6: Highlights 2023: Operations Group Financials
Highlights 2023: Operations Group Financials Life Science: ▪ Core business1 sales -2% org., despite continued customer destocking, China macro weakness and SAP roll-out FY organic sales: -1.6% ▪ Sales down -8% org. as COVID-19 fades, reducing from ~€800 m to ~€250 m FY organic EBITDA pre: -9.0% Heal
Slide 7: Stable dividend signals confidence in future growth
Stable dividend signals confidence in future growth Dividend1 development 2016 - 2023 2023 dividend ▪ Resilient company performance supports stable dividend in FY23 2.20 2.20 ▪ Allows for dividend proposal1 of €2.20 per share for 2023 1.85 2 ▪ Dividend yield of 1.5% with payout ratio of 25.9% in 202
Slide 8: Strategic Review
Strategic Review 02
Slide 9: Life Science: Transitional 2023 with -2% core org.
Life Science: Transitional 2023 with -2% core org. (-7.9% org. incl. COVID- 19 decline) sales despite major customer destocking Business performance Sector focus ▪ Core org. sales -2% with Life Science Services ▪ Confident to return to growth during 2024 +12%; Science & Lab Solutions flat; Process ▪
Slide 10: Healthcare: Wave 1 launches driving strong growth
Healthcare: Wave 1 launches driving strong growth. Healthcare above mid- term target, competitor stock-outs supported established portfolio growth Business performance Sector focus ▪ Oncology growth of +17% org. driven by ▪ Strong confidence in renewed R&D engine continued Bavencio® ramp-up and Erbi
Slide 11: Electronics: Leveraging down cycle to increase efficiencies
Electronics: Leveraging down cycle to increase efficiencies and prepare for the market uptick; Semis already demonstrating sequential quarterly growth Business performance Sector focus ▪ Semiconductor Solutions outperformed ▪ Short-term industry outlook market with sales only down -4% org; ▪ Positiv
Slide 12: Financial overview
Financial overview 03
Slide 13: FY 2023: Overview
FY 2023: Overview Key figures Comments [€m] FY 2022 FY 2023 Δ ▪ Sales down -6%, impacted by lower org. sales and FX headwinds Net sales 22,232 20,993 -5.6% ▪ HC largely compensates lower sales EBITDA pre 6,849 5,879 -14.2% volumes in LS and EL Margin (in % of net sales) 30.8% 28.0% -2.8pp ▪ EBITDA p
Slide 14: FY 2023: Healthcare largely compensates market challenges in Life Science and Electronics
FY 2023: Healthcare largely compensates market challenges in Life Science and Electronics FY YoY Net Sales FY YoY EBITDA pre Organic Currency Portfolio Total €6,849 m Life Science -7.9% -2.7% 0.1% -10.6% €5,879 m -9.0% -4.9% -0.3% Healthcare 8.5% -5.8% 0.0% 2.7% Electronics -5.1% -4.1% 0.3% -8.8% Gr
Slide 15: FY 2023: Reported figures
FY 2023: Reported figures Reported results Comments ▪ EBIT declines more than EBITDA pre mainly due to high level of D&A and [€m] FY 2022 FY 2023 Δ restructuring provisions with high EBIT 4,474 3,609 -19.3% impairment comparables from 2022 Financial result -187 -125 -33.0% ▪ Favorable financial resu
Slide 16: Life Science Q4: Core business down -4% org.
Life Science Q4: Core business down -4% org. with customer destocking in Process Solutions; COVID-19 sales fading out as expected Life Science P&L Net sales bridge [€m] IFRS Pre €2,606 m 0.0% €2,249 m Q4 2022 Q4 2023 Q4 2022 Q4 2023 -9.7% -4.0% Net sales 2,606 2,249 2,606 2,249 M&S -605 -555 -605 -5
Slide 17: Healthcare Q4: Organic growth of +9%
Healthcare Q4: Organic growth of +9% supported across franchises, strong quarter for Bavencio® (+17% org.) and Mavenclad (+12% org.) Healthcare P&L Net sales bridge [€m] IFRS Pre €2,030 m 9.2% 0.0% €2,032 m Q4 2022 Q4 2023 Q4 2022 Q4 2023 -9.1% Net sales 2,030 2,032 2,030 2,032 M&S -439 -459 -429 -4
Slide 18: Electronics Q4: Semi Solutions delivers sequential growth of +8%
Electronics Q4: Semi Solutions delivers sequential growth of +8% Electronics P&L Net sales bridge €1,024 m 0.3% €943 m [€m] IFRS Pre Q4 2022 Q4 2023 Q4 2022 Q4 2023 -3.2% -5.0% Net sales 1,024 943 1,024 943 M&S -171 -141 -170 -140 +0.0% Q4 2022 Organic Currency Portfolio Q4 2023 Admin -34 -39 -29 -2
Slide 19: Balance sheet
Balance sheet Assets [€bn] Liabilities [€bn] 48.5 48.5 48.5 48.5 Cash & cash equivalents 1.9 2.0 4.1 4.0 Receivables 4.6 4.6 Inventories 26.8 26.0 Net equity Intangible assets 25.7 24.4 9.9 10.4 Financial debt Property, plant 3.4 3.4 Payables/refund liabilities 8.2 9.1 2.1 & equipment 2.3 Provisions
Slide 20: ESG update
ESG update 04
Slide 21: Successfully achieved water and waste targets - ahead of schedule
Successfully achieved water and waste targets - ahead of schedule Reduction of Merck Water Intensity Score1 Comments -25% ▪ Target: -10% by 2025 vs. 2020 25% ▪ Achievement: -24.8% in 2023 20% ▪ Successful investments and initiatives to make processes more 15% water efficient and to reduce water-use
Slide 22: Setting new ambitions on improving water efficiency and circularity
Setting new ambitions on improving water efficiency and circularity Improve ratio of water intake by 50% until 20301 Achieve a circularity rate of 70% until 20302 Water intake water intake (m³) Circularity recycled waste + avoided waste = = ratio revenue (m€) rate total waste3 1,000 100% 792 90% 800
Slide 23: Outlook & Guidance
Outlook & Guidance 05
Slide 24: Merck Group Full-year 2024 guidance
Merck Group Full-year 2024 guidance Net sales: Slight to moderate organic growth Adverse FX of 0% to -3% YoY EBITDA pre: Slight to moderate organic growth Adverse FX of -1% to -4% YoY 24 Merck Q4 2023 Results Presentation | March 7, 2024
Slide 25: 2024 business sector guidance
2024 business sector guidance1 Net sales EBITDA pre Life Science ▪ Slight organic decline up to slight organic growth ▪ Moderate organic decline up to slight ▪ Gradual recovery during 2024 organic growth ▪ H2 stronger than H1; H1 declining against high base ▪ About stable to slight adverse FX ▪ COVI
Slide 26: Appendix
Appendix
Slide 27: Geographical diversification supports resilient portfolio
Geographical diversification supports resilient portfolio Regional breakdown of net sales [€m] Regional organic development Europe -1.3% org. ▪ North America: Mavenclad®, Bavencio® 29% and Semi DS&S partially mitigate Life Science and Semi Materials decline ▪ Europe: Healthcare largely offsets sales
Slide 28: Additional financial guidance 2024
Additional financial guidance 2024 Further financial details Higher than last year, Corporate & Other EBITDA pre driven by lower hedging gains Interest result ~ €-90 m to -120 m Effective tax rate ~ 21% to 23% Capex on PPE1 ~ €1.6 to 1.8 bn FY 2024 overall hedge ratio ~ 50% Hedging EUR/USD hedging @
Slide 29: Credit details
Credit details Maturity profile as of December 31, 2023 Credit rating information Coupon [€m / $m] 3.250% Last LT LT ST 0.125% Rating Outlook Rating Rating Change 1.625% 1.875% A3 21.10.21 Stable P-2 1,600 1.625% 3.375% 0.875% 842 0.500% 2.875% A 29.05.13 Stable A-1 0.375% 500 2.375% 750 750 800 500
Slide 30: Clear metrics to drive execution and progress towards 2030 ambition
Clear metrics to drive execution and progress towards 2030 ambition Goal Metric 2023 (2022) Target 1 Percentage of newly published patent families with positive sustainability impact 28% (27%) n.a. People treated with our HC products and pharma products enabled by LS* Apr. 11 (n.a.) 1 bn people ambi
Slide 31: Diverse human capital: Thinking, talking, and leading differently
Diverse human capital: Thinking, talking, and leading differently Indicator Status Focus areas Aspirations 2023 (2022) Gender parity Gender Percentage of women in leadership globally 39% (38%) until 2030 Percentage of underrepresented ethnic Increase to 30% 23% (21%) colleagues in US leadership unti
Slide 32: Group resilient as Healthcare uncorrelated from decline in Life Science and Electronics
Group resilient as Healthcare uncorrelated from decline in Life Science and Electronics Q4 YoY Net Sales Q4 YoY EBITDA pre Organic Currency Portfolio Total €1,628 m Life Science -9.7% -4.0% 0.0% -13.7% €1,293 m 9.2% -9.1% 0.0% 0.1% -13.7% -6.5% -0.3% Healthcare Electronics -3.2% -5.0% 0.3% -7.9% Mer
Slide 33: Q4 2023: Overview
Q4 2023: Overview Key figures Comments [€m] Q4 2022 Q4 2023 Δ ▪ Sales down -8% with FX headwinds and Net sales 5,660 5,225 -7.7% slight organic decline EBITDA pre 1,628 1,293 -20.6% ▪ Healthcare partially compensates declines Margin (in % of net sales) 28.8% 24.7% -4.1pp in Life Science and Electron
Slide 34: Q4 2023: Reported figures
Q4 2023: Reported figures Reported results Comments ▪ EBIT decline with lower sales and [€m] Q4 2022 Q4 2023 Δ adverse mix in EL / LS, with EBIT 890 621 -30.1% integration and efficiency costs ▪ Regular D&A increased YoY with Financial result -50 19 n.m. continued investment in PPE as Profit before
Slide 35: Q4 2023: Cash flow statement
Q4 2023: Cash flow statement Cash flow statement Comments [€m] Q4 2022 Q4 2023 Δ ▪ Decline in profit after tax from reduced Profit after tax 659 588 -71 EBIT, partially compensated by lower tax rate D&A 599 507 -92 ▪ Lower D&A as prior year included one- Changes in provisions 154 113 -41 time impair
Slide 36: FY Life Science: Core business -2% org.
FY Life Science: Core business -2% org. as LSS growth partially offsets headwinds in PS; declining COVID-19 demand as expected Life Science P&L Net sales bridge [€m] IFRS Pre €10,380 m 0.1% €9,281 m FY 2022 FY 2023 FY 2022 FY 2023 -7.9% -2.7% Net sales 10,380 9,281 10,380 9,281 M&S -2,400 -2,245 -2,
Slide 37: Process Solutions: Core -11% org. on destocking
Process Solutions: Core -11% org. on destocking; COVID-19 headwinds Sales development [€m] - org. growth [%] YoY 1,139 ▪ Core sales -11% org. amid still muted activity, no inflection; -8% org. COVID-19 headwinds, as expected; overall Q4 -18% org. 10% 1,022 ▪ Order intake in Q4 flat sequentially, no
Slide 38: Science & Lab Solutions: Sales -2% org.
Science & Lab Solutions: Sales -2% org.; negligible COVID-19 headwinds Sales development [€m] - org. growth [%] YoY 1,276 1,220 ▪ Sales down -2% org., mainly due to cautious 1,182 spending environment with pharma in North 1,111 1,137 America, China softness, SAP migration ▪ COVID-19 with negligible
Slide 39: Life Science Services: Core sales up +14% org.
Life Science Services: Core sales up +14% org.; COVID-19 headwinds Sales development [€m] - org. growth [%] YoY 247 ▪ Core business growth of +14% org. mainly 220 driven by positive project phasing in CDMO 206 ▪ Org. sales down -8% with sharp decline in 188 COVID-19 sales 178 ▪ CDMO up in the core o
Slide 40: FY Healthcare: Organic growth of +9%
FY Healthcare: Organic growth of +9% driven by another strong year for Bavencio® (+23% org.) and Mavenclad® (+16% org.) Healthcare P&L Net sales bridge [€m] IFRS Pre €7,839 m 8.5% 0.0% €8,053 m FY 2022 FY 2023 FY 2022 FY 2023 -5.8% Net sales 7,839 8,053 7,839 8,053 M&S -1,644 -1,668 -1,631 -1,639 FY
Slide 41: Healthcare organic growth by franchise/product
Healthcare organic growth by franchise/product Q4 2023 organic sales growth [%] FY 2023 organic sales growth [%] by key product [€m] by key product [€m] 183 713 17% 23% 172 611 245 1,026 16% 11% 249 1,023 232 12% 956 16% 220 856 175 -15% 709 -17% 219 887 219 21% 847 11% 205 825 233 -1% 882 -1% 248 9
Slide 42: Oncology: +18% org. growth driven by Bavencio mUC 1L ramp-up
Oncology: +18% org. growth driven by Bavencio mUC 1L ramp-up and continued Erbitux volume growth across regions ® Sales development Oncology, [€m] YoY Bavencio net sales, [€m] ▪ FY growth momentum of +23% org. 185 org. org. org. org. org. 200 172 167 178 183 ▪ Two quarters of sole global [€m] 11.3%
Slide 43: Neurology & Immunology: Mavenclad sales up +12% org.
Neurology & Immunology: Mavenclad® sales up +12% org. driven by continued uptake in the US ® Sales development N&I, [€m] YoY Mavenclad Y1+Y2 patients1 ▪ Strong finish in Q4, Mavenclad ® achieving blockbuster status org. org. org. org. org. [€m] -3.7% -2.0% 12.2% -11.5% -1.3% ▪ Continued U.S. prescri
Slide 44: Fertility: Sales trend normalizing as competitors' stock out starting to ease
Fertility: Sales trend normalizing as competitors’ stock out starting to ease Sales development Fertility, [€m] YoY Gonal-f® net sales, [€m] 250 org. org. org. org. org. 219 213 219 205 197 [€m] 11.5% 6.7% 24.7% 14.0% 13.9% 200 450 150 ▪ China: Further market 409 400 380 386 385 100 growth post reco
Slide 45: CM&E: Key products contributing to +5% org. franchise growth
CM&E: Key products contributing to +5% org. franchise growth ® Sales development CM&E, [€m] YoY Glucophage net sales, [€m] ▪ Q4 growth stable amid tough org. org. org. org. org. [€m] 6.4% 3.0% 0.9% 6.8% 4.8% comps 248 235 233 250 218 200 197 ▪ Continued strong volume 800 uptake of Glucophage in Lati
Slide 46: Merck pipeline
Merck pipeline March 7, 2024 Healthcare pipeline Phase 1 Phase 2 Phase 3 Registration xevinapant (IAP inhibitor) LA squamous cell carcinoma of the head and neck – unresected, cisplatin-eligible1 xevinapant (IAP inhibitor) LA squamous cell carcinoma of the head and neck – resected, cisplatin-ineligib
Slide 47: Healthcare catalysts
Healthcare catalysts Q1 2024 Q2 2024 Q3 2024 Q4 2024 Cladribine capsules (Immune Reconstitution Therapy) Phase III generalised Myasthenia Gravis – study initiation Enpatoran Enpatoran (Oral TLR7/8 inhibitor ) (Oral TLR7/8 inhibitor ) Phase II CLE program Phase II SLE program – read-out – read-out Xe
Slide 48: FY Electronics: Semi Solutions successfully weathering down cycle
FY Electronics: Semi Solutions successfully weathering down cycle; Display Solutions environment remains challenging Electronics P&L Net sales bridge [€m] IFRS Pre €4,013 m 0.3% €3,659 m FY 2022 FY 2023 FY 2022 FY 2023 -5.1% -4.1% Net sales 4,013 3,659 4,013 3,659 M&S -662 -591 -659 -588 FY 2022 Org
Slide 49: Semiconductor Solutions delivers two quarters of sequential growth
Semiconductor Solutions delivers two quarters of sequential growth Sales development [€m] - org. growth [%] YoY 711 660 ▪ Semiconductor Solutions slows due to 612 weaker semi market with YoY mid- 604 602 teens decline in MSI in Q4 ▪ 3rd consecutive year of record sales in 12% DS&S, driven by Fab con
Slide 50: Cash flow statement
Cash flow statement FY 2023 – cash flow statement Cash flow drivers [€m] FY 2022 FY 2023 Δ ▪ Lower PAT as lower tax and interest Profit after tax 3,339 2,834 -505 costs partly compensate lower EBIT ▪ Lower D&A as prior year included one- D&A 2,030 1,880 -150 time impairments in relation to HC R&D Ch
Slide 51: Adjustments in Q4 2023
Adjustments in Q4 2023 Adjustments in EBIT [€m] Q4 2022 Q4 2023 Adjustments thereof D&A Adjustments thereof D&A Life Science 28 23 46 2 Healthcare 155 96 39 11 Electronics 35 9 72 23 Corporate & Other 50 0 45 1 Total 268 128 202 37 51 Merck Q4 2023 Results Presentation | March 7, 2024
Slide 52: Adjustments in FY 2023
Adjustments in FY 2023 Adjustments in EBIT [€m] FY 2022 FY 2023 Adjustments thereof D&A Adjustments thereof D&A Life Science 106 24 122 34 Healthcare 279 187 8 10 Electronics 75 20 140 42 Corporate & Other 117 0 207 1 Total 577 232 477 87 52 Merck Q4 2023 Results Presentation | March 7, 2024
Slide 53: Meet the Merck Team
CONSTANTIN FEST NADJA GROSSCHMIDT SUSAN KUEHN EET THE ERCK TEAM Head of Investor Relations Assistant Investor Relations Assistant Investor Relations +49 6151 72-5271 +49 6151 72-3321 +49 6151 72-3321 [email protected] [email protected] [email protected] DATE EVEN