In the third quarter of 2012, the Merck Millipore division continued to benefit from solid demand across all its business units, increasing its sales by 9.5% to € 643 million (Q3 2011: € 587 million). Reported sales reflected 3.0% organic growth, which was driven primarily by higher volumes. Additionally, top-line results reflected a 5.8% benefit from foreign exchange rates, primarily related to the US dollar, and a 0.7% boost from acquisitions.
The primary driver of growth came from the Process Solutions business unit, which generated an increase in organic sales of 4.6% and represents 40% of the division’s sales. Higher demand for products used in the production of biologic drugs drove most of the increase. The division is also seeing strong demand for single-use manufacturing technologies. Royalty income increased to € 6 million (Q3 2011: € 2 million), driven by royalties for the Process Solutions’s pharmaceutical chemicals products.
Merck Millipore has two business units that primarily serve the needs of researchers and laboratories, Bioscience and Lab Solutions. These business units reported organic sales growth of 2.1% and 1.9%, respectively. The Bioscience business unit, which contributes approximately 18% to divisional sales, continued to grow in-line with the market, but is experiencing soft conditions in the North American, Southern European and Japanese academia markets. The Lab Solutions business unit, which represents approximately 42% of the division’s total sales, saw increasing demand for lab-water consumables and bio-monitoring products but softer sales for its laboratory chemicals business.
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Merck Millipore | Key figures | ||||||
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€ million |
Q3 2012 |
Q3 2011 |
Change |
Jan.–Sept. 2012 |
Jan.–Sept. 2011 |
Change |
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Total revenues |
648.2 |
588.3 |
10.2% |
1,958.9 |
1,783.2 |
9.9% |
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Sales |
642.7 |
586.7 |
9.5% |
1,944.7 |
1,778.2 |
9.4% |
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Operating result (EBIT) |
63.8 |
55.5 |
15.0% |
207.4 |
178.1 |
16.4% |
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Margin (% of sales) |
9.9% |
9.5% |
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10.7% |
10.0% |
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EBITDA |
140.3 |
126.5 |
10.9% |
435.4 |
391.8 |
11.1% |
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Margin (% of sales) |
21.8% |
21.6% |
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22.4% |
22.0% |
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EBITDA pre one-time items |
147.7 |
132.4 |
11.6% |
457.1 |
419.4 |
9.0% |
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Margin (% of sales) |
23.0% |
22.6% |
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23.5% |
23.6% |
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During the third quarter of 2012, the division’s cost of sales increased 8.7% to € 269 million (Q3 2011: € 247 million), yielding a gross profit of € 379 million (Q3 2011: € 341 million) or 59.0% of sales (Q3 2011: 58.1%). This gross margin expansion primarily reflects operational leverage from higher volumes and efficiency gains in manufacturing and the positive effects from changes in foreign exchange rates.
Marketing and selling expenses were up 10.5% to € 166 million (Q3 2011: € 150 million). While part of this increase was driven by the impacts of unfavorable foreign exchange rates due to the concentration of a majority of the division’s costs in the United States, it also included the new expenses from acquired businesses. These two factors also were the main contributors to the 9.3% increase in administration costs. Other operating expenses amounted to € 22 million, including € 7 million of one-time charges related to the “Fit for 2018” efficiency program.
Merck Millipore’s R&D costs grew 28.1% to € 43 million (Q3 2011: € 33 million), as the division continued to invest heavily in future growth. A meaningful portion of the increase came from Process Solutions, reflecting the division’s expectation that increasing volumes for biopharmaceuticals will remain an attractive growth driver in the future. In addition, the strong US dollar added to the growth since the majority of the division’s R&D activities are located in the United States.
The division’s EBIT improved by 15.0% to € 64 million (Q3 2011: € 55 million) while EBITDA increased by 10.9% to € 140 million (Q3 2011: € 126 million). Adjusted for one-time charges of € 7 million, EBITDA pre grew 11.6% to € 148 million, or 23.0% of sales (Q3 2011: € 132 million, 22.6% of sales), mainly due to the higher gross margin.
Merck Millipore | Sales by region – Q3 2012
In the third quarter of 2012, all regions grew organically in the range of 3%. Organic sales growth stemming from biopharmaceutical customers in Europe offset softer demand from academia. In the United States, sales to academic customers from the Bioscience and the Lab Solutions business units increased slightly, while overall growth was driven by solid demand from the biopharmaceutical industry. Sales growth in the Emerging Markets and Rest of World regions was led by Lab Solutions and Process Solutions while demand for Bioscience products was softer.
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Merck Millipore | Growth components by region – Q3 2012 | |||||
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€ million/change in % |
Sales |
Organic |
Exchange rate effects |
Acquisitions/ |
Reported |
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Europe |
232.8 |
3.0% |
1.0% |
1.4% |
5.3% |
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North America |
182.3 |
3.4% |
11.6% |
0.4% |
15.4% |
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Emerging Markets |
153.3 |
2.7% |
4.9% |
0.1% |
7.7% |
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Rest of World |
74.3 |
3.2% |
9.9% |
0.6% |
13.7% |
First Nine Months 2012 Performance
Merck Millipore’s first nine months total revenues grew 9.9% to € 1,959 million (9M 2011: € 1,783 million), including € 14 million from royalties (9M 2011: € 5 million). Sales were up 9.4% to € 1,945 million (9M 2011: € 1,778 million). While robust demand in all three business units generated organic sales growth of 3.0%, favorable foreign exchange rates added 4.6%. In addition, last year’s acquisitions of Amnis and heipha/Hycon which strengthened Merck Millipore’s product offering in the Life Science and BioMonitoring business fields contributed 1.8% to the reported top-line growth.
The division’s EBITDA pre one-time items increased 9.0% to € 457 million (9M 2011: € 419 million) during the first nine months of 2012, equivalent to 23.5% of sales, nearly unchanged from the year-ago period (9M 2011: 23.6%).