Our Consumer Health division is committed to enhancing the quality of people’s lives around the world with innovative over-the-counter health care solutions. According to the market research firm Nicholas Hall, the global volume of the over-the-counter drugs market is expected to rise by 4.6% to a volume of nearly US$ 92 billion worldwide in 2013. For the year thereafter, further growth of 5.1% is expected to yield a market volume of approximately US$ 97 billion.
Asia-Pacific (excluding Japan) is forecast to be the biggest growth contributor with a growth rate of 7.7% in 2013 and 7.5% in 2014. Good growth is also expected in Latin America with an increase of 6.4% in 2013 and about 6.8% in 2014. The market researchers forecast a growth rate for Europe of 3.6% in 2013 and 4.1% in 2014. The market for over-the-counter drugs in North America is projected to increase by 2.6% in 2013 and by a further 4.1% the following year.
Merck assumes that the sales of its Consumer Health division will be stable in 2013 and return to growth in 2014. The sales development reflects Merck’s decision to deprioritize brands, stock keeping units (SKUs) and markets with low or negative profitability and the announced closure of its UK manufacturing site, as well as the discontinuation of a portion of its UK-sourced portfolio of products. This lowers the sales base of the business especially in Europe – which over time will be rebuilt with growth of strategic brands in top markets. In both 2013 and 2014, the focus will continue to be on raising profitability of the division. Therefore, EBITDA pre is expected to slightly increase in 2013 and 2014 and the business expects an improved EBITDA pre margin (as % of sales) of 15% – 17%. This will be achieved by strict cost control in all operating areas as well as by focusing on the growth of profitable elements of the portfolio of brands and markets. Most of the related one-time costs were already taken in 2012, approximately € 10 million to € 15 million should still be incurred in 2013. In parallel to the increase in EBITDA pre, free cash flow is expected to develop positively in 2013 and 2014.
In 2013 and 2014, the opportunities and risks of the Consumer Health division will be closely linked to the successful marketing of the existing product portfolio and a strengthening of faster growing geographies. The focus here will be placed equally on the strategic brands that have a global and regional presence, as well as some strong local brands. Increasing the profitability of existing products and the overall portfolio remains one of the main priorities. Geographically, Consumer Health remains committed to Europe – its core market – while allocating more resources towards strengthening its presence in growth markets in Asia, Latin America and eastern Europe. In doing this, the Consumer Health division faces risks especially from changes in health care policy framework for food supplements, risks associated with key emerging markets like Venezuela, Mexico and Brazil and consumer purchasing behavior, factors that could negatively impact the business.
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