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Stefan Oschmann, CEOMarcus Kuhnert, CFO
March 8, 2018
PERFORMANCE AMID
HEADWINDS
We have met all financial targets for 2017
Totals may not add up due to rounding.
€ 15.3 bn – 15.7 bn
€ 4,400 m– 4,600 m
€ 6.15 – 6.50
€ 15,327 m
€ 4,414 m
€ 6.16
Totals may not add up due to rounding.
Merck grew organically in all regions
FY 2017Net sales:
€ 15,327 m
Dividend growth sustained
Development1 2011-2017
1 Adjusted for share split, which has been effective since June 30, 2014.2 Final decision subject to Annual General Meeting approval.
Healthcare: Solid core business and first launches
Business highlights
• First successful launches ofBavencio® and Mavenclad®
• Safeguarding Rebif® and Erbitux® in a competitiveenvironment
• Expanding Fertility and General Medicine in growth markets
• Operational excellence in Consumer Health
• Further pipeline progress: e.g. three Phase II studies for BTK-i
+2.1%
31.0% 27.9%
€ 6.9 bn € 7.0 bn
+4.7% org.
Sales & EBITDA pre margin
Life Science: Profitable growth amid ongoing integration
Business highlights
• Above-market quality growth
• All businesses contributing
• Strong performance of e-Commerce platform
• Execution of three bolt-on deals
+4.0%
29.2% 30.4%
€ 5.7 bn € 5.9 bn
+5.3% org.
Sales & EBITDA pre margin
Performance Materials: Fostering innovation in a challengingdisplay market
• Leadership position in LC maintained, but at lowerprofitability
• Above-market growth ofintegrated circuit materials
• Pigments show healthy growth• New leadership aiming for future
growth
-2.6%
44.1% 40.1%
€ 2.5 bn € 2.4 bn
-1.7% org.
Sales & EBITDA pre marginBusiness highlights Sales & EBITDA pre margin
*Net financial debt (without pensions)
Our focus on cash generation ensures swift deleveraging
Net financial debt*/EBITDA pre
We are strengthening our footprint in a global tech hotspot
85 years in China
3,300 employees
Strong portfoliofor Chinese
patients
Enabling theChinese high-tech industry
FINANCIAL OVERVIEW
Key figures
15,0244,490
6.212,518
29.9 %
15,3274,414
6.162,696
28.8 %
10,1443,387
52,941
11,5133,488
50,414
2.0%
-1.7%
-0.8%7.1%
5.0%-2,9%
-11.9%
FY 2017 Financials: A year well managed
Totals may not add up due to rounding.
Totals may not add up due to rounding.
FY 2017 YoY net sales
FY 2017 YoY EBITDA pre contributors [€ m]
Solid organic growth and Life Science synergies offset byHC investments and softness in LC
4.7%
5.3%-1.7%3.8%
-1.6%-1.7%-0.9%-1.5%
-1.0%
-0.3%-2.6%2.0%
2.1%4.0%
0.0%0.4%
¹Without effects from US tax reform, effective tax rate is at 23.4%; Totals may not add up due to rounding.
2,481-326
2,154-521
1,6293.75
24.2 %
1.8%
-8.0%3.2%
59.7%59.5%
n.m.
2,525
-3002,224
386
2,6005.98
-17.4 %¹
Reported figures reflect solid business performance & U.S. tax reform effects
Reported results
Healthcare P&L
Net sales bridge
FY 2017 share ofgroup net sales
Totals may not add up due to rounding.
Healthcare: Good organic growth and product mix drive profitability
46%Healthcare
6,855-2,587
-270-1,4961,5932,4252,128
31.0 % 27.9 %
6,999-2,722
-299-1,6321,4472,1551.949
38%Life Science
FY 2017 share ofgroup net sales
Totals may not add up due to rounding.
Life Science P&L
Net sales bridge
Life Science: Strong top-line growth and fast synergy realization
5,658
-1,706-248-260556
1,3781,652
29.2 % 30.4 %
5,882-1,734
-261-241834
1,5801,786
16%Performance
Materials
FY 2017 share ofgroup net sales
Totals may not add up due to rounding.
Net sales bridge
Performance Materials P&L
Performance Materials: Topline affected by LC softness but profitability intact
980
947689
-225-72
-2422,4462,511
-233-61
-213
8231,077
1,10644.1 % 40.1 %
Totals may not add up due to rounding.
Balance sheet – Continued focus on rapid deleveraging
Cash & marketable securities
ReceivablesInventories
Intangible assets
Property, plant & equipment
Other assets
Net equity
Financial debt
PayablesProvisions for pensions
Other liabilities
Assets [€ bn] Liabilities [€ bn]
38.3 35.6 35.6 38.3
OUTLOOK
Net sales: Moderate organic growth; moderate FX headwinds*EBITDA pre: Slight organic decline; -4 to -6% YoY headwinds from FX
*Constant portfolio
EBITDA-supporting factors EBITDA-reducing factors
Merck‘s qualitative full-year 2018 guidance
Organic net sales growth by Healthcare and Life Science
Sigma-Aldrich incremental cost and revenue synergies ~+€95 m YoY
Biosimilars divestment frees up R&D budget (2017: mid to high double-digit million R&D costs)
First full-year sales contribution from newly launched pipelineproducts Mavenclad® and Bavencio®
Underlying R&D costs in Healthcare are budgeted above 2017, but actual development will be subject to clinical data outcome of priority projects and prioritization decisions
Healthcare margins negatively impacted by product mix (esp. Rebif)
2017 special gains of ~€200 m will not recur
Performance Materials sales and earnings continuously affected by decline in Liquid Crystals
First launch preparations for Mavenclad® U.S., driving M&S costs
At current rates, FX remains a strong headwind, esp. in H1 2018
20
HC
LS
PM
EBITDA pre growth from accelerated top line growth and disciplined cost management
EBITDA pre growth driven by above-market growth and further margin expansion
Trough year for profitability and focus on strategic execution
Group High confidence to deliver sales and EBITDA pre growth as well asEBITDA pre margin improvements
Our expectations for 2019
Media Relations
MARKUS TALANOWFinancial Communications/Performance Materials+49 6151 72-7144 [email protected]
Life Science+49 6151 [email protected]
GANGOLF SCHRIMPF
SILKE KLOTZ
Administrator, External Comms.+49 6151 72-4342 [email protected]
EMAIL: [email protected]: http://www.merckgroup.com/en/media/media.html
THOMAS MOELLER
Head of External Communications+49 6151 [email protected]
Head of Group Communications +49 6151 [email protected]
CONSTANTIN BIRNSTIEL
FRIEDERIKE SEGEBERG
Healthcare+49 6151 [email protected]
