Q2/2010: Merck Profit After Tax Jumps 70% to EUR 187 Million
All four divisions of the Merck Group, especially the chemicals divisions, recorded increases in second-quarter 2010 revenues, leading to a record EUR 2,208 million in total revenues for the Group. This was a 16% increase compared to the year-ago amount of EUR 1,910 million. In the first half of 2010, total revenues rose 14% to EUR 4,307 million.
With revenues increasing at a faster rate than cost of sales, the gross margin rose 22% in the second quarter to EUR 1,691 million.
Research and development costs declined slightly to EUR 339 million in the second quarter. More than 87% of this amount was used by the Merck Serono division, which has a large number of expensive late-stage clinical trials underway. R&D costs in the first half of the year amounted to EUR 686 million, a 5.0% increase. Amortization of intangible assets in the second quarter, mainly stemming from the purchase of Serono in 2007, was little changed at EUR –146 million.
Thus, with improved revenues and an improved gross margin, the operating result jumped 77% in the second quarter to EUR 326 million from EUR 184 million in the year-ago quarter. The first-half operating result improved 62% to EUR 621 million. The Group’s second-quarter core operating result, i.e. operating result excluding amortization of intangible assets from the Serono purchase, was EUR 469 million, an increase of 42% compared to the year-ago quarter.
The Group return on sales (ROS: operating result/total revenues) increased to 14.8% in the second quarter of 2010 compared to 9.7% in the year-ago quarter. Group core ROS (operating result excluding Serono-related amortization of intangible assets/total revenues) in the second quarter of 2010 was 21.3% compared to 17.3% in the year-ago quarter.
Exceptional items during the second quarter of 2010 amounted to EUR –1.2 million due to a reimbursement from the 2005 divestment of the Electronic Chemicals business. There were no exceptional items in the year-ago quarter. Therefore, earnings before interest and tax (EBIT) jumped 76% to EUR 325 million in the second quarter of 2010 compared to EUR 184 million in the year-ago quarter. First-half EBIT nearly doubled to EUR 620 million in 2010 compared to EUR 314 million in 2009.
Due to interest payments on the financing for Millipore, Merck’s financial result more than doubled to EUR –78 million in the second quarter. For the half year, the financial result was EUR –117 million compared to EUR –71 million in the first half of 2009.
The Merck Group’s second-quarter profit before tax increased 67% to EUR 247 million from EUR 148 million in the year-ago quarter. In the first half of 2010, profit before tax more than doubled to EUR 503 million. Merck’s underlying tax rate was 24.2% for the second quarter of 2010 compared to 25.9% in the year-ago quarter. Profit after tax in the second quarter of 2010 increased by 70% to EUR 187 million from EUR 110 million in the second quarter of 2009. For the first half of 2010, profit after tax more than doubled to EUR 381 million from EUR 170 million in the year-ago period.
The Merck Group’s free cash flow increased in the second quarter of 2010 to EUR 356 million compared to EUR 79 million. This is mainly due to better results and lower tax payments compared to the year-ago period. For the half year, free cash flow was EUR 551 million in 2010 and EUR 243 million in 2009.
Merck had 34,003 employees worldwide on June 30, 2010, an increase of 941 compared to 33,062 on December 31, 2009. A large portion of this increase was due to expansion in China.
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