At the Darmstadt DAX group, the special boom caused by the pandemic is over, and things are no longer going smoothly for semiconductor materials either. Now management is hoping for better times this year.
Corona boom over, headwind in the business with semiconductor materials for electrical devices: After a significant decline in profits in 2023, the Darmstadt pharmaceutical and specialty chemicals group Merck is counting on a turnaround this year. The DAX company is focusing on the “gradual return to growth over the course of the 2024 financial year,” said CEO Belen Garijo when presenting the balance sheet on Thursday.
She described 2023 as a year of transition: Merck struggled with a slump in demand in the laboratory business, which had flourished during the corona pandemic thanks to great demand from vaccine manufacturers. Recently, however, many customers reduced inventory that had been increased during the pandemic. Corona-related sales fell from around 800 million euros in 2022 to 250 million euros last year.
Pharmaceutical division cannot compensate for declines
In addition, the electronics division also weakened for longer than expected, where the group produces, among other things, semiconductor materials for electronic devices and liquid crystals – a downturn in the electronics industry is having an impact here. In addition, Merck has long been suffering from tough competition from Asia when it comes to liquid crystals, for example for smartphone and TV screens.
Only the pharmaceutical division increased in 2023 because blockbusters against cancer and multiple sclerosis sold well. However, important hopefuls recently flopped. The development of the drug evobrutinib against multiple sclerosis, which Merck had hoped would generate billions in sales, was stopped.
Overall, sales in 2023 fell by almost six percent compared to the previous year to almost 21 billion euros. The adjusted operating result fell by a good 14 percent to just under 5.9 billion euros. Merck thus met its previously lowered forecasts. The bottom line is that the people of Darmstadt earned around 2.8 billion euros, a good 15 percent less than in the previous year.
Job cuts also in Darmstadt
This year, things are expected to go up again: sales and earnings before taxes, interest, depreciation and amortization adjusted for special effects are expected to increase “slightly to moderately” on their own. Among other things, Merck is counting on orders in the laboratory business to gradually pick up again. The board is sticking to its goal of 25 billion euros in sales by 2025 – but that will be a “fight,” said CFO Helene von Roeder.
Merck employees are feeling the effects of the harsher times. 200 jobs were cut in the pharmaceutical division, and around 550 jobs in central functions such as IT, purchasing, human resources and legal services will be eliminated by the end of the year. A savings package from the fall also calls for the reduction of up to 230 jobs in the electronics division.
Redundancies for operational reasons at the Darmstadt headquarters, where Merck employs around 12,500 of the more than 64,000 employees, are excluded by an employment guarantee until the end of 2025. Garijo confirmed that he would continue to invest in the main plant. In 2025, employment there will be greater than before the corona pandemic.
Source: Stern
