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UPDATE 1-Merck KGaA says dominance in liquid crystals could be at risk
April 28, 2017 / 11:13 AM / 8 months ago

UPDATE 1-Merck KGaA says dominance in liquid crystals could be at risk

* Liquid crystals lifted by recovery in display market

* OLEDs seen being used in TVs in future

* Merck says OLEDs will not offer liquid crystals margins (Adds profitability of liquid crystals, background on technology)

By Ludwig Burger

FRANKFURT, April 28 (Reuters) - Germany’s Merck KGaA , the world’s largest maker of liquid crystals for flat screens, said on Friday its dominance of the market could erode in future, making the case for more investment into newer OLED technologies.

Merck commands about 60 percent of the liquid crystals market, ahead of Japan’s JNC Corp. and DIC Corp. It is a major profit driver for the German group, which also makes pharmaceuticals and supplies for labs and bioreactors.

“We know ... that our market shares in recent years were very high. At the present time we cannot rule out a further normalization,” Chief Executive Stefan Oschmann told shareholders at the annual general meeting.

“We will therefore forge ahead with new technologies in all four business units, for instance OLED,” he said, referring to organic light emitting diodes (OLEDs) that are mainly used in mobile devices.

For now, a recovery in the display market that began late last year should have a positive effect on the liquid crystals business, the CEO added.

He reiterated that group core earnings would be flat this year, saying more detailed guidance would be provided on May 18.

Mainly thanks to liquid crystals, Merck’s performance materials division turned a profit before interest, taxes, depreciation and amortisation (EBITDA) of more than 40 percent of the 2.5 billion euros in revenues last year.

That is above the average for the European speciality chemical industry, which usually has margins of 10-25 percent.

Merck does not separately disclose the margin for liquid crystals, which account for about half of sales at the performance materials division.

Family-controlled Merck saw liquid crystals revenues surge in the year 2000 with the advent of flat screens, having failed for decades to find a commercial use for the substances.

They go mainly into TV screens but Merck is exploring their use in dimmable window panes or flat antennas on car roofs that electronically home in on satellites.

More expensive OLEDs allow for thinner and more energy efficient screens for portable devices. But Merck has said they would likely take hold in TV screens over the next few years, chipping away at its liquid crystals business.

Merck has invested in OLED chemical production since 2009, surviving an industry shakeout that has reduced the field of contenders to just a handful. It has also warned that OLED profit margins would not reach those at liquid crystals. (Reporting by Ludwig Burger; Editing by Arno Schuetze and Edmund Blair)

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