The good performance of the Healthcare business sector partially offset the market-related declines in sales and earnings in Life Science and Electronics. The company expects a gradual return to organic growth over the course of the 2024 financial year.

The past financial year was characterised by difficult market conditions:

• the expected significant decline in demand due to Covid-19
• an ongoing reduction in inventories at Merck’s customers in the Process Solutions business unit
• and the subdued economic demand for semiconductor materials.

Overall, Group sales fell by 5.6% (organically: -1.6%) to € 20,993 million in the 2023 financial year. EBITDA pre fell by 14.2% (organically: -9.0%) to € 5,879 million.

“In the transition year 2023, we achieved solid financial results despite difficult market conditions. Our robust, diversified business will continue to benefit from the attractive growth prospects in our markets,” said Belén Garijo, Chairman of the Executive Board of Merck. “We are now focussing on a gradual return to growth over the course of fiscal 2024, while defining our strategic roadmap to ensure Merck’s long-term sustainable growth.”

Negative exchange rate effects weigh on sales and result

In organic terms, Merck’s sales declined by 1.6% in financial year 2023 compared to the previous year. In addition, sales were negatively impacted by exchange rate effects of 4.1%. These resulted primarily from the exchange rate development of the US dollar and the Chinese renminbi. EBITDA pre fell organically by 9.0%. Exchange rate effects had an additional negative impact of 4.9%. The EBITDA pre margin totalled 28.0%.

Earnings per share pre totalled € 8.49. On this basis, the Executive Board and Supervisory Board will propose a dividend of € 2.20 per share at the Annual General Meeting on 26 April 2024. This corresponds to the previous year’s dividend.

Life Science: Market environment characterised by decline in demand due to Covid-19 and destocking by Merck’s customers

In the 2023 financial year, sales and earnings development in the Life Science business sector was mainly impacted by two market factors: As expected, Covid-19-related sales declined significantly from around € 800 million in the previous year to € 250 million. In addition, the core business of the Process Solutions business unit weakened significantly as key customers reduced their inventories and held back on new orders accordingly. Overall, this led to an organic decline in sales in Life Science’s core business (excluding Covid-19-related sales) of around 2%.

Overall, sales in the business sector fell by 10.6% to € 9,281 million. The organic decline amounted to 7.9%. Negative exchange rate effects had an impact of 2.7% on the sales trend. Due to the aforementioned market factors, sales in the Process Solutions (-14.4%) and Life Science Services (-14.6%) business units fell organically.

Science & Lab Solutions, which generated around half of Life Science’s sales in the 2023 financial year, recorded an organic decline in sales of 0.6%. The business unit offers products and services to support research, diagnostics and testing activities.

Life Science’s EBITDA pre decreased organically by 21.4% in the 2023 financial year and totalled € 2,820 million. Exchange rate effects had a negative impact of 3.3% on earnings development. The EBITDA pre-margin was 30.4%.

Healthcare: “Wave 1” products remain growth drivers, supported by resilient growth of the established portfolio

The Healthcare business sector increased its sales organically by 8.5% in the 2023 financial year. Influenced by negative exchange rate effects of 5.8%, sales rose by 2.7% overall to € 8,053 million.

The main growth drivers were the market launches of the so-called first wave (“wave 1 launches”). The cancer drug Bavencio achieved organic sales growth of 23.4%. Sales of Mavenclad for the treatment of relapsing forms of multiple sclerosis increased organically by 15.9%. Mavenclad achieved annual sales of USD 1 billion for the first time since its market launch, making it a blockbuster drug. The same was true for the cancer drug Erbitux in its second year with sales of € 1,025 million. The Fertility (organic +14.9%) and Cardiovascular Diseases, Metabolic Disorders and Endocrinology (organic +4.0%) business units also achieved organic sales growth. In the Fertility segment, this was additionally supported by supply bottlenecks for competitor products.

Healthcare’s EBITDA pre increased organically by 17.1% and reached € 2,543 million. Exchange rate effects had a negative impact of 14.4% on the division’s earnings performance. The EBITDA pre-margin was 31.6%.

Electronics: weak economic demand for semiconductor materials weighs on business development

In the Electronics business sector, the 2023 financial year was characterised in particular by the ongoing economic slowdown in the semiconductor industry. Overall, sales fell by 8.8% to € 3,659 million. In addition to the organic decline of 5.1%, exchange rate effects of 4.1% had a negative impact on sales development.

Organic sales in the Semiconductor Solutions business unit fell by 3.9%, outperforming the market. The reason for the decline was the weaker demand for semiconductor materials (Semiconductor Materials). This was partially offset by the project and equipment business summarised in Delivery Systems & Services, which benefited from continued investment by key customers in long-term capacity expansion.

Ongoing price pressure and low production capacity utilisation at customers in the liquid crystals segment, particularly in the first half of 2023, were the main reasons for the 9.2% organic decline in sales in the Display Solutions business unit.

EBITDA pre from Electronics amounted to € 913 million. In addition to the organic decline of 17.1%, negative exchange rate effects of 5.6% had an impact on earnings development. The EBITDA pre margin was 25.0%.

Forecast for financial year 2024: return to growth

Merck expects a gradual return to organic growth during the 2024 financial year. The year is expected to be characterised by the following developments:

• In the Life Science business sector, incoming orders in Process Solutions will gradually improve.
• Merck expects the turning point during the first half of 2024, followed by a recovery in sales development in the second half of 2024.
• Merck no longer expects any significant Covid-19-related sales for the 2024 financial year.
• Sales in the Healthcare business sector are expected to grow in line with medium-term expectations, while additional business will decline due to supply bottlenecks for competitor products.
• The market for semiconductor materials in the Electronics division should also gradually recover in 2024 compared to 2023. The turning point is expected to occur at the beginning of the second half of the year.

Overall, Merck expects the following qualitative development. As in previous years, the company will announce a quantitative forecast with the publication of the figures for the first quarter of 2024 on 15 May 2024.

• Merck expects slight to moderate organic growth in sales in the 2024 financial year. Healthcare in particular will contribute to this. Exchange rate effects are expected to have an impact of -3% to 0% on sales development.
• Merck also anticipates slight to moderate organic growth for EBITDA pre. Earnings growth in the 2024 financial year will be driven by the Healthcare business sector.
• Merck expects exchange rate effects to have an impact of -4% to -1% on earnings development.
• Merck expects slight to moderate organic growth in sales in the 2024 financial year. Healthcare in particular will contribute to this. Exchange rate effects are expected to have an impact of -3% to 0% on sales development.
• Merck also anticipates slight to moderate organic growth for EBITDA pre. Earnings growth in the 2024 financial year will be driven by the Healthcare business sector. Merck expects exchange rate effects to have an impact of -4% to -1% on earnings development.