November 14, 2019 / 6:27 AM / a month ago

Merck KGaA raises 2019 guidance after Versum takeover

BERLIN (Reuters) - German science and technology company Merck KGaA (MRCG.DE) raised its full-year forecast for sales and adjusted earnings on Thursday after completing the takeover of semiconductor materials maker Versum Materials VSM.N in October.

FILE PHOTO: A logo of drugs and chemicals group Merck KGaA is pictured in Darmstadt, Germany January 28, 2016. REUTERS/Ralph Orlowski/File Photo

Merck said 2019 earnings before interest, taxes, depreciation and amortisation (EBITDA), adjusted for special items, would come in between 4.23 billion euros and 4.43 billion euros ($4.7-$4.9 billion), up from a previous prediction of between 4.15 billion euros and 4.35 billion euros.

It said 2019 net sales would come in between 15.7 billion euros and 16.3 billion euros, compared with a previous estimate of 15.3 billion euros to 15.9 billion euros.

Shares in Merck were down 1.55% at 0828 GMT.

The takeover of Versum was a bet on a recovery in electronic materials markets for semiconductor makers.

Merck kept its guidance for the acquired business to contribute around 270 million euros to group sales in fiscal 2019 and add around 80-90 million euros to adjusted EBITDA.

Merck’s third-quarter adjusted EBITDA rose 15.4% to 1.11 billion euros, ahead of analysts’ average estimate of 1.06 billion euros in a poll posted on the company’s website, underpinned by its healthcare and lab supplies units, while foreign currencies also had a positive impact.

Its pharmaceuticals business, known as Healthcare, saw adjusted EBITDA rise by 31.3% to 501 million euros, helped by strong demand for its multiple sclerosis pill Mavenclad and cancer immunotherapy Bavencio, while demand for general medicine, particularly in China, also provided support.

It said income from an alliance with GlaxoSmithKline (GSK.L) on developing cancer immunotherapy bintrafusp alfa also helped.

Merck’s Life Science unit, which makes supplies and gear for the biotech industry, saw adjusted EBITDA climb 15.4% to 531 million euros. The unit is benefiting from a race in the drug industry to develop new treatments.

The Performance Materials unit, which makes speciality chemicals like liquid crystals for electronic displays, saw adjusted EBITDA drop by 12.7% to 177 million euros - roughly in line with forecasts - but said it was reaching a trough due to an expected downturn in its liquid crystals business in the second half of the year.

It warned the economic environment could result in a moderate decline in semiconductors but said it expected the division to start growing again in 2020.

Additional reporting by Ludwig Burger; Editing by Mark Potter

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