German drug major Merck KgaA (MKGAY.PK) reported Thursday lower net profit in its first quarter, while adjusted EBITDA, a key earnings metric, increased with higher sales. For fiscal 2017, the company continues to expect higher sales, while adjusted earnings would be below or above last year.
For the first quarter, net income declined 11.8 percent to 521 million euros from 591 million euros a year ago. Earnings per share were 1.20 euros, down from 1.36 euros last year. Adjusted earnings per share were 1.80 euros, compared to 1.54 euros in 2016.
In the quarter, operating result or EBIT fell 11.1 percent to 755 million euros, and EBIT margin dropped to 19.5 percent from 23.2 percent last year.
EBITDA fell 6.2 percent to 1.20 billion euros, and EBITDA margin dropped to 31.2 percent from 35 percent a year ago.
However, adjusted EBITDA grew 14.5 percent to 1.24 billion euros, and adjusted EBITDA margin improved to 32.1 percent from 29.6 percent a year ago.
Net sales increased 5.3 percent to 3.86 billion euros from 3.67 billion euros a year ago, with contribution from all three business sectors.
The results reflected moderate organic growth and positive exchange rate effects. Organic growth amounted to 3.1 percent, generated mainly by Healthcare and Life Science.
Sales in Asia-Pacific rose 9.9 percent due in particular to the Healthcare business sector, which generated an organic growth rate of 22.1 percent in this region. Sales grew 3.5 percent in North America, and 18.7 percent in Latin America. In the Middle East and Africa region, sales climbed 14.6 percent.
Meanwhile, sales generated in Europe declined 1.3 percent with lower Healthcare sales.
Looking ahead, for 2017, the company projects earnings per share pre exceptionals of 6.15 euros to 6.50 euros, compared to last year’s 6.21 euros.
The company now projects EBITDA pre exceptionals in a range of between 4.4 billion euros and 4.6 billion euros, and net sales to increase to between 15.5 billion euros and 16.0 billion euros. The company previously said it expects stable adjusted EBITDA, comprising a slightly positive or negative percentage fluctuation around the previous year’s level.
Organically, the company continues to expect a slight to moderate increase in comparison with the previous year.
In the year 2016, the company’s adjusted EBITDA was 4.49 billion euros and net sales were 15.02 billion euros.
For the Healthcare business sector, the company still sees a slight organic increase in net sales in 2017. Adjusted EBITDA would be between 1.9 billion euros and 2.0 billion euros, down from last year due to higher research and development expenses for pipeline.
For Life Science business, the company continues to forecast solid organic sales growth that should be slightly above the expected market growth of approximately 4 percent p.a. EBITDA pre exceptionals should be between 1.78 billion euros and 1.85 billion euros.
For Performance Materials, the company projects slight organic sales decline.