Merck Millipore

In the first quarter of 2013, Merck Millipore’s sales increased 2.5% to € 669 million (Q1 2012: € 653 million). While organically sales were up 3.6%, changes in foreign exchange rates had an adverse impact of 1.6%. Last year’s acquisition of Biochrom had a positive impact of 0.5%. Royalty, licence and commission income more than doubled to € 6 million (Q1 2012: € 3 million), driven by royalties for the Process Solutions’ pharmaceutical-chemical products.

The division’s primary growth contributor once again was the Process Solutions business unit, which markets products that are used in drug production, generating an organic increase in sales of 6.9% to € 289 million (Q1 2012: € 270 million) due to higher volumes and now representing 43% of the division’s sales (Q1 2012: 41%). In particular, higher demand for products used in the production of biologic drugs as well as the business unit’s recently launched biodevelopment services that promote single-use manufacturing drove most of the increase. With an increasing number of projects between pre-clinical and Phase II development in the pharmaceutical industry, Merck Millipore continues to expect that the business unit Process Solutions will remain a major growth driver for the division.

In the Lab Solutions business unit, where Merck Millipore markets a broad portfolio of products that are used by researchers and in a wide range of scientific laboratories, an organic increase of 1.9% yielded sales of € 269 million (Q1 2012: € 269 million). This was driven by elevated demand for biomonitoring solutions, particularly from food and beverage customers, and lab water consumables as well as higher prices.

The Bioscience business unit, serving primarily the needs of researchers in biotech laboratories, saw a slight organic decline in sales of -0.5% to € 110 million (Q1 2012: € 113 million). Here, good momentum from recently launched instruments of the Amnis^®, Muse^® and Direct Detect^® families was more than offset by softer sales mainly related to drug discovery services and budget constraints in the U.S. academia market.

During the first quarter of 2013, the division’s production costs increased 5.2% to € 280 million (Q1 2012: € 266 million), yielding a gross profit of € 395 million (Q1 2012: € 390 million) or 59.1% of sales (Q1 2012: 59.7%). Changes in product mix contributed to this development, as organic sales growth for hardware and services, which bear lower gross margins, was stronger than for the higher-margin consumable products.

The division increased its marketing and selling expenses by 1.4% to € 169 million (Q1 2012: € 167 million) primarily to fuel the expansion of field force in the strongly growing Emerging Markets region. Other operating expenses increased 38.7% to € 31 million (Q1 2012: € 22 million), including € 6 million in one-time costs related to the efficiency program. As a consequence, total SG&A costs were up 5.4% to € 231 million (Q1 2012: € 219 million).

In order to appropriately capture the opportunities of a growing Life Science tools market, Merck Millipore is strengthening its investments in research and development. Consequently, R&D costs increased by 9.8% to € 41 million (Q1 2012: € 38 million). During the first quarter 2013, more than one-third of the division’s organic growth was generated with new products across all business units, illustrating the importance of innovation in Life Science tools.

As a result of higher operational spending, the division’s EBIT was 12.7% softer to yield € 72 million (Q1 2012: € 83 million). EBITDA declined as well by 4.4% to € 151 million (Q1 2012: € 159 million). Adjusted for one-time charges of € 10 million, EBITDA pre was 2.5% lower, yielding € 162 million, or 24.2% of sales (Q1 2012: € 166 million, 25.4% of sales).

Merck Millipore | Sales by region – Q1 2013

Sales development by region

From a regional perspective, Merck Millipore’s sales development saw mixed contributions. The division’s largest market Europe, which generated 38% of divisional sales (Q1 2012: 39%), reported an organic sales contraction of 0.9% to € 254 million (Q1 2012: € 253 million) as a result of a challenging business environment particularly in the southern European countries, which primarily affected Lab Solutions. In North America, healthy demand for drug manufacturing products clearly offset softer conditions in Bioscience where U.S. sequestration started to weigh on public spending. Consequently, sales grew 8.0% organically to € 189 million (Q1 2012: € 174 million), representing 28% of sales of Merck Millipore (Q1 2012: 27%). In the Emerging Markets region, an organic increase of 10.9% led to sales of € 154 million (Q1 2012: € 141 million), driven primarily by strong growth in China and South Korea that increased this region’s contribution to the division’s sales to 23.0% (Q1 2012: 22%). Lastly, sales in the Rest of World contracted by 4.5% organically to € 72 million (Q1 2012: € 84 million) to contribute 11% to divisional sales (Q1 2012: 13%). A key driver of this decline was Japan, where typically higher spending at the end of the first quarter did not happen as budget owners were allowed to roll over their budgets to the next quarter, affecting all of Merck Millipore’s business units.