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Merck KgaA Plans Cost Reduction, Job Cuts - Update

German drugs and chemicals firm Merck KgaA (MKGAY.PK) CEO Karl-Ludwig Kley said Friday that the company will not engage with any major takeovers until the end of next year, and intends to focus on cost reduction and job cuts.

Kley also stated that the company aims to reduce costs across the board to raise funds. The company will cut costs through 2018, with a first phase till the end of 2013, but it has not specified the amount.

Merck KgaA said it finds no other alternative, but to reduce staff. It plans to axe jobs in Germany on a voluntary basis and had conversation with employee representatives in Germany.

For full-year 2011, the company had reported an 11 percent increase in revenues to 10.28 billion euros, helped mainly by the acquisition of Millipore Corp., which was closed in July 2010. For 2012, the company forecast a slight increase in revenues and adjusted earnings. However, the company cautioned that the competitive and market pressures it faces in its businesses are likely to increase over the next few years.

Net profit for the year declined 2 percent to 617 million euros, hurt by one-time charges. Underlying core earnings per share, which excluded one-time charges, grew 12 percent to 7.53 euros.

The company had projected total revenues of the Merck Group to increase slightly in 2012 and 2013. At Group level, EBITDA before exceptional items was expected to rise slightly in 2012 and then improve further in 2013.

On Frankfurt's Xetra, Merck KgaA shares are currently trading at 85.08 euros, up 1.39 euros or 1.66 percent, on a volume of 300 thousand shares.

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