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Thursday, 20 February 2020
Markets & companies, Raw materials market

Merck sets sights on 2018 and outlines future strategic roadmap

Friday, 14 October 2016

Merck has informed analysts and investors at its 2016 Capital Market Day about the progress it has made in achieving its objectives up to the year 2018.

The Modular Innovation Center in Darmstadt, Germany. Source: Merck

The Modular Innovation Center in Darmstadt, Germany. Source: Merck

"We firmly believe that we will meet the objectives we have set for 2018,” said Stefan Oschmann, Chairman of the Executive Board and CEO of Merck. "Our Performance Materials business is well-positioned to capture attractive new markets,” said Oschmann.

Performance Materials strengthens portfolio

Despite a challenging market environment characterised by cyclical destocking among display industry customers, in the course of 2016 the Performance Materials business sector has demonstrated its sound earnings resilience. Among other things, Merck is using investments to further strengthen the innovative strength of this high-margin business sector. Firstly, Merck intends to sustainably secure its leadership in display materials. To this end, the company recently commissioned a EUR 30 million OLED materials production plant in Darmstadt. In the course of 2017, Merck is planning the market launch of the innovative liquid crystal technology SA-VA for large-area displays. In August, Merck announced a collaboration with Nanoco of the United Kingdom, a leading manufacturer of quantum materials. Secondly, Merck aims to use its expertise in liquid crystals in order to succeed in areas beyond displays. In August, the company announced the construction of a production unit for liquid crystal window modules, which are to reach the market in 2018. In the automotive sector, liquid crystals are to be used for example in smart antennas with very high data processing volumes.

Strategic roadmap for 2019 to 2022

While Merck is keeping a close eye on its mid-term objectives for 2018, the company has also announced plans for growth in the following years. Here, Merck will continue to build on its core competencies of strong innovation power and successful portfolio management. "With our three strong and profitable businesses, we want to remain a leader at the forefront of scientific and technological progress,” said Merck CEO Stefan Oschmann looking at growth and innovations in the coming years. By 2022, Merck wants to generate sales of around EUR 4 billion with new products. New medicines from the pharmaceutical pipeline are to contribute around EUR 2 billion, with Life Science and Performance Materials innovations each adding around EUR 1 billion in sales.

Ruling out major acquisitions

Merck continues to rule out major acquisitions of more than EUR 500 million as long as the debt level expressed as the ratio of net financial debt to EBITDA pre exceptionals is greater than 2 unless divestments could be used to finance them. "As was the case following past major acquisitions, subsequent to the Sigma-Aldrich purchase we are working to swiftly deleverage and want to bring the ratio of our net debt to EBITDA pre down to less than 2 by 2018,” said CFO Marcus Kuhnert. "Then, major acquisitions will be on the agenda again.”

Since 2002, Merck has made acquisitions and divestments with a volume of around EUR 38 billion. All four major acquisitions were financially attractive and successfully integrated.

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