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Merck KgaA FY17 Net Profit Climbs, EBITDA Down; Warns On FY18; Stock Dips

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Shares of Merck KGaA (MKGAY.PK) were losing around 5 percent in the morning trading in Germany after the drug major reported Thursday that its fiscal 2017 EBITDA, a key earnings metric, and margin declined, despite higher sales. Net profit, however, climbed with positive U.S. tax reform impact. Further, the company warned about fiscal 2018.

The company said it is investing further in the development and launch of new medicines, and its expenses will be reflected in 2018 earnings.

Stefan Oschmann, Chairman of the Executive Board and CEO, said, "In business terms, 2017 was a good year. Merck again grew profitably. ...At the same time, EBITDA pre, the key performance indicator used to steer our operating business ...was at the lower end of our annual forecast, despite unfavorable exchange rate developments. The impact of higher research and development costs in our Biopharma business as well as a challenging market environment in Liquid Crystals can be seen. We will continue to address both these issues in 2018."

For the year 2017, profit after tax climbed 60 percent to 2.61 billion euros from last year's 1.63 billion euros. Earnings per share were 5.98 euros, up 59.5 percent from 3.75 euros a year ago. The company noted that U.S. tax reform resulted in significant deferred tax income and a corresponding increase in profit after tax as well as earnings per share.

Adjusted earnings per share were 6.16 euros, compared to 6.21 euros last year.

Operating result or EBIT grew 1.8 percent from last year to 2.53 billion euros. EBITDA dropped 3 percent to 4.28 billion euros and EBITDA margin fell to 27.9 percent from 29.4 percent last year. Adjusted EBITDA dropped 1.7 percent to 4.41 billion euros, and margin fell to 28.8 percent from 29.9 percent last year.

Net sales increased 2 percent to 15.33 billion euros from last year's 15.02 billion euros. The company noted that Healthcare and Life Science delivered organic sales growth.

In the fourth quarter, net sales increased slightly to 3.85 billion euros from last year's 3.83 billion euros. Adjusted EBITDA was 1.005 billion euros, down from 1.075 billion euros last year.

In the Liquid Crystals business, the market environment for liquid crystal technologies has become more difficult, above all in China, the firm noted.

Further, the company said that for 2017, it will propose to the Annual General Meeting a dividend of 1.25 euros per share, an increase of 0.05 euro.

In Germany, Merck KgaA shares were trading at 76.80 euros, down 5.30 percent.

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