The Group reported a decline in the operating result (EBIT) of 14.9% to € 964 million (2011: € 1,132 million) while the operating result excluding depreciation and amortization (EBITDA) was down 13.6% to € 2,360 million (2011: € 2,731 million) primarily due to the one-time restructuring costs. Adjusted for one-time items, however, EBITDA pre one-time items increased 8.9% to € 2,965 million, or 27.6% of sales (2011: € 2,724 million, or 27.5% of sales).
Merck Group | EBITDA pre one-time items by division – 2012
All divisions contributed to the increase in EBITDA pre one-time items, more than offsetting the higher costs reported by Corporate and Other, which mainly resulted from currency hedging losses. Merck Serono was by far the largest contributor to the EBITDA pre increase based on growing sales as well as improved profitability. In addition, Performance Materials contributed strongly thanks to an exceptionally strong business momentum. The EBITDA pre contribution of Merck Millipore of 19% slightly declined (2011: 20%, excluding Corporate and Other) as the division invested in both R&D and marketing and selling to ensure future growth.
During 2012, the Group already realized around € 115 million in net savings as a result of the restructuring. The majority of savings were achieved in Merck Serono followed by Consumer Health, which delivered substantial savings relative to its size. Two-thirds of the restructuring costs incurred were reported in the Merck Serono division. The restructuring costs booked in Corporate and Other mainly related to several divisions at the same time and cannot be directly allocated.
The Group’s financial result improved by 13.2% to € –255 million (2011: –293 million). Lower interest expenses on debt following the repayment of € 500 million worth of bonds in March 2012 (followed by another € 500 million repaid in December 2012) as well as lower interest expenses on pension provisions more than offset reduced interest income due to low interest rate yields. In addition, gains related to the fair value of foreign exchange options benefited the financial result. Merck began using foreign exchange options as hedging instruments in the fourth quarter of 2011 and books fluctuations of corresponding fair values under the financial result. As a consequence, this line may continue to be impacted by the volatility of foreign exchange rates.
Income tax amounted to € –130 million (2011: € –221 million). One-time items substantially distorted the reported income tax ratio in 2012. The adjusted income tax ratio of 25.5% continues to be at the midpoint of the company’s underlying tax ratio of 25% to 26%.
Profit after tax amounted to € 579 million (2011: € 618 million), a decrease of 6.3% mainly due to the one-time items which were incurred in 2012. One-time items (including impairments) of € 664 million also weighed on reported net income (profit after tax attributable to Merck KGaA shareholders) of € 567 million (2011: € 607 million) or earnings per share (EPS) of € 2.61 (2011: € 2.79). However, adjusted for one-time items, EPS pre one-time items (EPS adjusted by net of tax effect of one-time items and amortization of purchased intangible assets) increased 12.1% to € 7.61 (2011: € 6.79).
We will propose to the Annual General Meeting on April 26, 2013 to raise the dividend from € 1.50 to € 1.70 per share.
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