Merck KGaA · XETR:MRK
Merck KGaA — Merck KGaA, Darmstadt, Germany — FY2022 Earnings Presentation
56 slides from Merck KGaA's earnings presentation, Mar 2, 2023
Slide 1: Profitable growth despite challenges
Profitable growth despite challenges Merck KGaA, Darmstadt, Germany FY 2022 results Belén Garijo, CEO Marcus Kuhnert, CFO March 2, 2023
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: Agenda
Agenda Executive summary Strategic review Financial overview ESG update Outlook & Guidance 3 Merck KGaA, Darmstadt, Germany Q4 2022 Results Presentation | March 2, 2023
Slide 4: Executive summary
Executive summary 01
Slide 5: Highlights 2022: Operations and Financials
Highlights 2022: Operations Financials Life Science: ▪ +8% org. sales growth despite COVID-19 decline, driven by mid-teens core1 growth with Process Solutions as key driver ▪ Largest growth contribution to Group (org. +€737 m) FY organic sales: growth of +6.4% ▪ Growth in all business units and geog
Slide 6: Guidance delivered
Guidance delivered 2022 Guidance 2022 Results Net Sales €22.00 – 22.90 bn €22.23 bn EBITDA pre €6.80 – 7.20 bn €6.85 bn EPS pre €9.90 – 10.70 €10.05 6 Merck KGaA, Darmstadt, Germany Q4 2022 Results Presentation | March 2, 2023
Slide 7: Company performance drives solid growth in dividend
Company performance drives solid growth in dividend Dividend1 development 2016 - 2022 2022 dividend ▪ Dividend of €2.20 (+19% YoY) per share proposed1 for 2022 2.20 ▪ Payout ratio of 21.9% of EPS pre in 2022; aiming for 20% to 25% 1.85 2 ▪ Dividend yield of 1.2% 1.40 1.25 1.25 1.30 1.20 1Final decis
Slide 8: Strategic Review
Strategic Review 02
Slide 9: Life Science: Sales crossing €10 bn mark with +8% org. growth
Life Science: Sales crossing €10 bn mark with +8% org. growth driven by buoyant core business (+14% org.) against significant COVID-19 decline Business performance Sector focus ▪ Growth across all business units fueled by ▪ Capturing key growth trends as leading Process Solutions (+11% org.), furthe
Slide 10: Healthcare: Recent launches drive +6% org. growth
Healthcare: Recent launches drive +6% org. growth, in line with mid- term guidance Business performance Sector focus ▪ Oncology growth of +17% org. fueled by ▪ Pipeline supporting focused leadership continued Bavencio® ramp-up; Erbitux® ▪ Evobrutinib and xevinapant Phase III assets reaches blockbust
Slide 11: Electronics: Unchanged long-term market growth expectations
Electronics: Unchanged long-term market growth expectations and focus on capacity increases in Semiconductor Solutions and supply chain efficiency Business performance Sector focus ▪ Semiconductor Solutions growth ▪ Challenging short-term industry outlook accelerating to +15% org., above market ▪ In
Slide 12: Financial overview
Financial overview 03
Slide 13: FY 2022: Overview
FY 2022: Overview Key figures Comments [€m] FY 2021 FY 2022 Δ ▪ Sales up +13%, driven by solid organic Net sales 19,687 22,232 12.9% performance and significant FX boost EBITDA pre 6,103 6,849 12.2% ▪ Life Science fuels organic EBITDA pre Margin (in % of net sales) 31.0% 30.8% -0.2pp growth, boosted
Slide 14: FY 2022: +13% growth led by Life Science
FY 2022: +13% growth led by Life Science and supported by significant FX tailwinds across all sectors FY YoY Net Sales FY YoY EBITDA pre Organic Currency Portfolio Total 6.1% 6.4% €6,849 m Life Science 8.2% 6.4% 0.8% 15.4% €6,103 m -0.3% Healthcare 5.5% 5.1% 0.0% 10.6% Electronics 3.7% 7.6% 0.0% 11.
Slide 15: FY 2022: Reported figures
FY 2022: Reported figures Reported results Comments ▪ Life Science main organic driver of +7% EBIT growth, further supported by [€m] FY 2021 FY 2022 Δ favorable FX effects amid inflationary EBIT 4,179 4,474 7.1% pressures Financial result -255 -187 -26.7% ▪ Improved financial result reflecting conti
Slide 16: Life Science Q4: Strong performance of core business
Life Science Q4: Strong performance of core business (+11% org.) continues to deliver growth Life Science P&L Net sales bridge [€m] IFRS Pre €2,386 m 4.2% 4.3% 0.7% €2,606 m Q4 2021 Q4 2022 Q4 2021 Q4 2022 Net sales 2,386 2,606 2,386 2,606 M&S * -584 -605 -582 -605 +0.0% Q4 2021 Organic Currency Por
Slide 17: Healthcare Q4: Bavencio ramp-up drives growth
Healthcare Q4: Bavencio ramp-up, complemented by strong Fertility and CM&E, drive +6% organic growth Healthcare P&L Net sales bridge [€m] IFRS Pre €1,875 m 5.5% 2.8% 0.0% €2,030 m Q4 2021 Q4 2022 Q4 2021 Q4 2022 Net sales 1,875 2,030 1,875 2,030 * M&S -452 -439 -453 -429 Q4 2021 Organic Currency Por
Slide 18: Healthcare: Evobrutinib could address significant unmet needs in RMS
Healthcare: Evobrutinib could be the first to address significant unmet needs in RMS by tackling multiple drivers of disability progression Evobrutinib could address Treated RMS Patients Significant Unmet Needs in RMS (US RMS; 235k Treated Pts)* ▪ Majority of RMS patients continue to Dynamic Non-Dyn
Slide 19: Largest and longest Phase II dataset for Evobrutinib
Healthcare: Largest and longest Phase II dataset supports dual efficacy in RMS for Evobrutinib Long-term (up to Week 228) Control of Relapses in Ballpark of anti CD20’s1 Stable EDSS over Time (up to Week 192)2 Overall (pooled) patient population* at timepoint: Overall (pooled) patient population* We
Slide 20: Electronics Q4: Strong Semi performance drives sector growth
Electronics Q4: Strong Semi performance drives sector growth; Display weighs on margins Electronics P&L Net sales bridge €952 m 2.4% 5.2% 0.0% €1,024 m [€m] IFRS Pre Q4 2021 Q4 2022 Q4 2021 Q4 2022 Net sales 952 1,024 952 1,024 M&S * -154 -171 -152 -170 +0.0% Q4 2021 Organic Currency Portfolio Q4 20
Slide 21: Balance sheet
Balance sheet Assets [€ bn] Liabilities [€ bn] 48.5 48.5 45.4 1.9 45.4 Cash & cash equivalents 1.9 4.1 Receivables 3.6 4.6 Inventories 3.9 26.0 21.4 Net equity 25.7 Intangible assets 24.6 10.8 Financial debt 10.4 3.2 Payables/refund liabilities Property, plant 3.4 7.2 8.2 2.3 3.6 Provisions for empl
Slide 22: ESG update
ESG update 04
Slide 23: Environmental targets on track, mitigating growth-related impact
Environmental targets on track, mitigating growth-related impact Scope 1+2 GHG emissions: -50% 80% of electricity from renewable 10% improvement of the Group absolute reduction by 20301 sources by 2030 Water Intensity Score by 20251 kt 2010 1843 100% 2,000 1667 Goal: 80% Goal: 10% 80% 10% 8.6% 1,500
Slide 24: Reduction of GHG emissions on track
Reduction of GHG emissions on track; technology roll-out ahead for NF3 reduction Scope 1+2 vs. Sales CO2 2 equivalents Sales Scope 1 reduction (-6.4% to 1,425 kt in 2022): 1667 kt 1843 kt €22.2 bn ▪ Business growth more than offset by improved 2010 kt €19.7 bn production processes Sales ambition 25
Slide 25: Outlook & Guidance
Outlook & Guidance 05
Slide 26: Full-year 2023 guidance
Full-year 2023 guidance Net sales: Slight to solid organic growth (ex-COVID: solid to strong organic growth) Adverse FX of -1% to -4% YoY EBITDA pre: Organically from moderate decline to about stable Adverse FX of -1% to -4% YoY 26 Merck KGaA, Darmstadt, Germany Q4 2022 Results Presentation | March
Slide 27: 2023 business sector guidance
2023 business sector guidance1 Net sales EBITDA pre Life Science ▪ Organic moderate decline up to ▪ Slight to moderate organic growth ▪ Solid to strong organic growth in core business (ex–COVID) about stable ▪ Process Solutions as main contributor to core growth ▪ Slight adverse FX ▪ Total COVID-19
Slide 28: Appendix
Appendix
Slide 29: Additional financial guidance 2023
Additional financial guidance 2023 Further financial details Corporate & Other EBITDA pre Lower costs driven by hedging Interest result ~ €-90 m to -130 m Effective tax rate ~ 21% to 23% Capex on PPE1 ~ €1.8 to 2.0 bn FY 2022 overall hedge ratio ~50% Hedging EUR/USD hedging @ ~1.07 2023 Ø EUR/USD as
Slide 30: Europe fastest growing major region
Europe fastest growing major region; Life Science primary growth driver in all major regions Regional breakdown of net sales Regional organic development Europe +9.4% org. ▪ APAC: Double-digit growth in Semi and 28.1% strong Healthcare and SLS performance more than offset Display decline ▪ North Ame
Slide 31: Underlying tax rate guidance lowered further
Underlying tax rate guidance lowered further to new range of 21% to 23% Tax rate development 2018-2022; guidance for 2023 40.0% Old guidance range ~24 - 26% Previous guidance range ~22 - 24% Rationale for 30.0% New guidance range ~21 - 23% update Change in country mix, 25.2% 25.3% 24.2% in particula
Slide 32: Credit details
Credit details Maturity profile as of December 31, 2022 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% 1.000 0.875% 0.500% 2.875% A 29.05.13 Stable A-1 0.005% 500 0.375% 2.375% 750 75
Slide 33: Clear metrics to drive progress towards 2030 ambition
Clear metrics to drive execution and progress towards 2030 ambition Sustainability Report to be Goal Metric 2022 (2021) Target 1 published Percentage of newly published patent families with positive sustainability impact 27% n.a. April 13, 2023 People treated with our Healthcare products* April 13 (
Slide 34: Q4 2022: Sales growth of 9% across all sectors
Q4 2022: Sales growth of 9% driven by growth across all sectors; organic performance further supported by FX Q4 YoY Net Sales Organic Currency Portfolio Total Q4 YoY EBITDA pre 12.5% 0.6% €1,628 m Life Science 4.2% 4.3% 0.7% 9.2% €1,464 m -1.9% Healthcare 5.5% 2.8% 0.0% 8.3% Electronics 2.4% 5.2% 0.
Slide 35: Q4 2022: Overview
Q4 2022: Overview Key figures Comments [€m] Q4 2021 Q4 2022 Δ ▪ Net sales up +9%, driven by solid org. Net sales 5,213 5,660 8.6% performance in Healthcare and Life 1,464 1,628 11.2% Science and positive FX tailwinds EBITDA pre Margin (in % of net sales) 28.1% 28.8% 0.7pp ▪ EBITDA pre up +11%, drive
Slide 36: Q4 2022: Reported figures
Q4 2022: Reported figures Reported results Comments ▪ EBIT decline despite higher gross profit due to higher R&D spending and [€m] Q4 2021 Q4 2022 Δ impairments EBIT 1,039 890 -14.4% ▪ Lower profit before tax reflects lower Financial result -47 -50 7.8% EBIT Profit before tax ▪ Tax rate temporarily
Slide 37: Q4 2022: Cash flow statement
Q4 2022: Cash flow statement Cash flow statement Comments [€m] Q4 2021 Q4 2022 Δ ▪ Decline in profit after tax driven by Profit after tax 807 659 -147 decreased EBIT and higher tax rate D&A 474 599 125 ▪ Higher D&A mainly driven by impairments in relation to Healthcare Changes in provisions -50 154
Slide 38: FY Life Science: Sales crossing €10bn
FY Life Science: Sales crossing €10bn, mainly driven by strong performance of core business (+14% org.) and supported by FX Life Science P&L Net sales bridge [€m] IFRS Pre adjustments 8.2% 6.4% 0.8% €10,380 m €8,992 m FY 2021 FY 2022 FY 2021 FY 2022 Net sales 8,992 10,380 8,992 10,380 M&S * -2,119 -
Slide 39: Process Solutions: Double-digit growth again
Process Solutions: Double-digit growth again despite fading COVID-19 demand Sales development [€m] - org. growth [%] 1,190 1,149 1,136 ▪ Continuously strong core business (+24%) drives double-digit organic sales growth in Q4 1 1,050 991 ▪ As expected, COVID-19 sales significantly down YoY and down Q
Slide 40: Life Science Services: Near-term volatility
Life Science Services: Near-term volatility but mid-term prospects intact Sales development [€m] - org. growth [%] 262 1 266 ▪ Core business down in Q4 (-9%) amid tough 244 250 comps and near-term volatility in CDMO, esp. unfavorable batch phasing and attrition in clinical pipelines of customers 196
Slide 41: Science & Lab Solutions: Solid core business
Science & Lab Solutions: Solid core business, COVID-19 with modest negative effect Sales development [€m] - org. growth [%] 1,233 1,246 1,220 1 1,199 ▪ Solid core business in Q4 (+5% org.) with 1,133 robust demand across franchises, regions and customer segments ▪ Pull-forward effect in Q3 ahead of
Slide 42: FY Healthcare: recent launches drive organic growth of +6%
FY Healthcare: recent launches drive organic growth of +6%, building on a solid established portfolio Healthcare P&L Net sales bridge [€m] IFRS Pre €7,089 m 5.5% 5.1% 0.0% €7,839 m FY 2021 FY 2022 FY 2021 FY 2022 Net sales 7,089 7,839 7,089 7,839 M&S * -1,600 -1,644 -1,593 -1,631 +0.0% FY 2021 Organ
Slide 43: Healthcare organic growth by franchise/product
Healthcare organic growth by franchise/product Q4 2022 organic sales growth [%] FY 2022 organic sales growth [%] by key product [€m] by key product [€m] 172 611 39% 58% 121 373 249 1,023 -1% 3% 261 987 220 10% 856 17% 191 693 219 -15% 887 -13% 244 952 205 5% 825 3% 190 767 248 6% 930 0% 225 864 143
Slide 44: Neurology & Immunology: Mavenclad up, Rebif decline
Neurology & Immunology: FY Mavenclad® sales up +17% organically, balancing Rebif ® decline of -13% ® Sales development N&I, [€m] Mavenclad Y1+Y2 patients1 ® ▪ Mavenclad most prescribed oral HE drug in the U.S. and EU-4 in org. org. org. org. org. [€m] -5.2% 0.8% -1.2% 2.3% -3.7% dynamic market segme
Slide 45: Oncology: FY sales up +17% org.
Oncology: FY sales up +17% org.; Bavencio growing +58% amid continued mUC 1L ramp-up. Erbitux sales first time ever crossing €1 bn mark ® Sales development Oncology, [€m] Erbitux net sales, [€m] ▪ Erbitux Q2W approved in 300 274 Japan, major markets to follow org. org. org. org. org. 261 258 249 [€m
Slide 46: Fertility: Growing FY +4% org.
Fertility: Growing FY +4% org. amid headwinds from China lockdowns Sales development Fertility, [€m] Gonal-f® net sales, [€m] 250 org. org. org. org. org. 221 200 198 205 [€m] 8.8% 4.3% -2.7% 2.6% 11.5% 200 190 400 373 380 150 ▪ Q4 +11.5% org. growth 341 351 100 supported by competitor 350 334 50 st
Slide 47: CM&E: All key products contributing to growth
CM&E: All key products contributing to +4.5% org. growth for full year ® Sales development CM&E, [€m] Glucophage net sales, [€m] ▪ Glucophage® organic growth org. org. org. org. org. 2.8% 2.5% 2.7% 6.0% 6.4% of +6% in Q4 across major [€m] 237 248 250 225 218 228 markets 200 800 730 733 150 691 700 6
Slide 48: Group pipeline
Group pipeline March 02, 2023 Healthcare pipeline Phase 1 Phase 2 Phase 3 Registration Marketed9 evobrutinib (BTK inhibitor) Relapsing multiple sclerosis enpatoran (TLR7/8 antagonist) Cutaneous lupus erythematosus enpatoran (TLR7/8 antagonist) Systemic lupus erythematosus enpatoran (TLR7/8 antagonis
Slide 49: Healthcare catalysts
Healthcare catalysts Q1 2023 Q2 2023 Q3 2023 Q4 2023 Enpatoran Enpatoran (Oral TLR7/8 inhibitor ) (Oral TLR7/8 inhibitor ) Phase II DM/PM Phase II CLE/SLE program – study initiation – futility analysis Tepotinib Evobrutinib (c-Met–inhibitor) (BTK inhibitor) Phase II EGFRm METamp in NSCLC Phase III r
Slide 50: FY Electronics: Strong Semi performance
FY Electronics: Strong Semi performance drives sector growth; inflationary challenges and reduced Display contribution weighing on sector margins Electronics P&L Net sales bridge [€m] IFRS Pre adjustments €3,606 m 3.7% 7.6% 0.0% €4,013 m FY 2021 FY 2022 FY 2021 FY 2022 Net sales 3,606 4,013 3,606 4,
Slide 51: Semiconductor Solutions continues to grow organically
Semiconductor Solutions continues to grow organically with a slight sequential decline amid softening market Sales development [€m] - org. growth [%] 729 711 ▪ Semiconductor Solutions remains 24% 653 strong amid first signs of Semi market 1 601 581 slowdown 20% ▪ Semiconductor Materials and DS&S 16%
Slide 52: Cash flow statement
Cash flow statement FY 2022 – cash flow statement Cash flow drivers [€m] FY 2021 FY 2022 Δ ▪ +9% profit after tax growth driven by strong operational performance, Profit after tax 3,065 3,339 274 particularly in Life Science D&A 1,767 2,030 263 ▪ D&A driven by higher impairments in Healthcare Change
Slide 53: Adjustments in Q4 2022
Adjustments in Q4 2022 Adjustments in EBIT [€m] Q4 2021 Q4 2022 Adjustments thereof D&A Adjustments thereof D&A Life Science 14 11 28 23 Healthcare -17 3 155 96 Electronics 26 8 35 9 Corporate & Other -49 1 50 0 Total -26 23 268 128 53 Merck KGaA, Darmstadt, Germany Q4 2022 Results Presentation | Ma
Slide 54: Adjustments in FY 2022
Adjustments in FY 2022 Adjustments in EBIT [€m] FY 2021 FY 2022 Adjustments thereof D&A Adjustments thereof D&A Life Science 40 11 106 24 Healthcare 14 6 279 187 Electronics 91 33 75 20 Corporate & Other 65 3 117 0 Total 210 53 577 232 54 Merck KGaA, Darmstadt, Germany Q4 2022 Results Presentation |
Slide 55: Financial Calendar
Financial Calendar Date Event March 2, 2023 Q4 2022 Earnings release April 28, 2023 Annual General Meeting May 11, 2023 Q1 2023 Earnings release August 3, 2023 Q2 2023 Earnings release November 9, 2023 Q3 2023 Earnings release 55 Merck KGaA, Darmstadt, Germany Q4 2022 Results Presentation | March 2,
Slide 56: Investor Relations contacts
CONSTANTIN FEST SVENJA DJAVAHERI PETRA HOLTZ 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] ADRIAN GORSKI GUNNAR ROMER FLORIAN
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