Shares of Merck KGaA (MKGAY.PK) were losing around 2 percent in the morning trading in Germany after the science and technology company on Thursday lowered its forecast for fiscal 2020 hurt by Covid-19 crisis, despite reporting strong first-quarter results.
Merck said the Covid-19 crisis only had a moderate impact in the first quarter, but the effects would amplify in the coming months. The coronavirus pandemic is expected to mainly impact Healthcare and Performance Materials.
For fiscal 2020, the company now expects EBITDA pre, its most important earnings indicator, of approximately 4.35 billion euros to 4.85 billion euros with a merely stable organic development. Net sales is projected to be around 16.8 billion euros to 17.8 billion euros with slight to moderate organic growth.
Previously, the company projected solid organic sales growth and strong organic growth of EBITDA pre. In fiscal 2019, the company generated EBITDA pre of 4.4 billion euros and sales of 16.2 billion euros.
Merck now assumes the pandemic to create a significant burden on global economic growth, which will affect all business sectors, particularly Healthcare and Performance Materials.
The new outlook assumes that the Covid-19 pandemic reached its peak in China at the end of the first quarter and that a significant easing of the situation will set in as of the second quarter. For Europe and the United States, the company does not expect the pandemic to peak until the second quarter, and will normalize by the end of the third quarter.
As a science and technology company, Merck said it is supporting the fight against the Covid-19 pandemic in many different ways. The company is supporting the Jenner Institute at the University of Oxford in preparing for manufacturing of its Covid-19 vaccine at commercial scale.
Merck has also joined a consortium of international pharmaceutical companies and the Bill & Melinda Gates Foundation aiming to accelerate the development and production of Covid-19 vaccines.
The company is donating two million FFP2 protective face masks to Germany, France and the United States, among others. It is also providing 290,000 units of its active ingredient interferon beta-1a (Rebif) free of charge to the World Health Organization for a clinical study.
For the first quarter, net income to shareholders surged to 456 million euros from 189 million euros. Earnings per share were 1.05 euros, up from 0.43 euros last year. Earnings per share pre were 1.50 euros, an increase of 32.7 percent over the prior year.
The operating result EBIT advanced 89.0 percent to 716 million euros. EBITDA pre increased 27.2 percent to 1.2 billion euros.
Group net sales increased 16.7 percent to 4.37 billion euros from 3.75 billion euros last year. Organically, Group sales grew 7.6 percent, driven by the Healthcare and Life Science business sectors.
The company saw higher demand in the General Medicine & Endocrinology franchise of the Healthcare business sector, also as a consequence of the Covid-19 pandemic.
Meanwhile, sales of the Fertility franchise declined organically by 3.5 percent.
In Germany, Merck KgaA shares were trading at 104.20 euros, down 1.70 percent.
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