Merck Kgaa

Dear ladies and gentlemen, welcome to the Merck Investor and Analyst Conference Report on First Quarter 2024. As a reminder, all participants will be in a listen-only mode. I am now handing over to Constantine Vest, Head of Investor Relations, who will lead you through this conference. Please go ahead, sir.

Thank you very much, Heidi, and a very warm welcome to this Merck Q1 2024 results call. My name is Konstantin Fest. I'm Head of Investor Relations here, and I'm delighted to be joined by Belen Gariot, Group CEO, as well as Helene von Roeder, Group CFO. For the Q&A part of this call, we will also be joined by Matthias Heinze, CEO of LifeScience, by Peter Günther, CEO of Healthcare, as well as Kai Beckmann, CEO of Electronics. In the first couple of minutes of this call, we'd like to run you through the key slides of this presentation, which will then be followed by Q&A. With this, I'd like to hand over now to Belen to start. Over to you, Belen.

Thanks, Konstantin, and welcome everybody to our Q1 earnings call. I am now on slide number five of the presentation, and we'll start with the highlights. So as you have seen earlier today, we delivered a very solid quarter despite the observed slight organic revenue decline, and we are trending in the right direction with two of our three business sectors having shown a very strong performance in Q1. And we expect growth to continues to improve from here. Organically, group sales declined by 1%, and EBITDA pre went down by 5%. This, paired with a two percentage point currency headwind, leads to reported sales of 5.120 billion, which is a decline of 3%. The currency had a slightly diluted effect on EBITDA pre, which was down by 8% to 1.454 billion. EPS pre of 2.06 decreased 13% year-on-year. Healthcare was the top performer with 10% organic sales growth driven by Herbitux, by Mavenclad, and Babensio. Electronics also showed a positive organic sales development in Q1 of 6%, and this was driven by semiconductor solutions, which returned to growth year on year at an increase of 8%. As expected, life science showed an organic sales decline against a particularly high base, as you may remember, we have not yet seen the full impact of the customer de-stocking in our process solution business in Q1 last year. Therefore, life science was down by 13%. While we no longer segregate the effect of COVID-related sales, it still represents a headwind for life science, as well as for the group in 2024. In life science, we also saw positive signals from order intake in our process solution business in quarter one. Order intake grew both sequentially and year on year. Book to build went up to around one, reflecting the sequential increase in order intake. With the presentation of our financial results last year, we confirmed our goal of returning to growth in 2024. Q1 shows an overall positive business momentum and confirms our previously anticipated trajectory for the remainder of the year and the guidance. And talking about the guidance, and as usual at this time of the year, we are further specifying that. We now anticipate net sales in a range of 20.6 billion to 22.1 billion, a Beta Pre of 5.7 to 6.3 billion, an EPS Pre of 8.05 to 9.10, thereby confirming our qualitative guidance with a slightly more positive tonality on a Beta Pre. We will share more details on our assumptions later. Turning to slide number six, we will provide a bit more color on our business sector. As you can see, healthcare and electronics contributed positively to organic sales growth in Q1, largely offsetting the decline in life science. Our key growth engines in the quarter were, first, our new healthcare products, our new launches, as well as semiconductor solutions within the electronics business sector. In fact, in a still challenging operating environment in Q1, healthcare took the lead with a strong organic growth of 10%. And this was driven by 15% growth from recent launches, with Aventio up by 14% and MavenClub up 12% in Q1, and further supported by a strong performance of our established product portfolio, with a stellar performance of Herbitubs. Our established product portfolio increased by 9%. From a franchise perspective, oncology was the highlight, again with an organic growth of 19%. Life science showed the decline of 13% organically against a strong base as we flagged already in March. with all three business being down in the quarter. Process solution declined organically by 19%. Science and lab solutions was down by 7%, both against very tough comparables in Q1 2023. In electronics, our semi-business was up 8% in the quarter, driving the growth of the sector, which was up 6% organically in Q1. Display solutions and surface also showed positive organic growth in Q1. FX was a headwind across the board on sales with a minus 2% impact on sales at group level in line with the guidance that we provided in March. On earnings, EBITDA pre came in at 1.45 billion, down organically by 5%, or minus 82 million in absolute values. And this was due to life science, where organic EBITDA pre was down by minus 30% in Q1 against high comparables. EBITDA pre in healthcare was up strongly by more than 28% organically, in quarter one, driven by a strongly leveraged growth, as well as the positive impact of the Babensia repatriation. Evita-3 in electronics was up by 4% organically due to positive mix in advanced nodes in semi-materials and in DS&S, combined with volume effects. FX was a stronger headwind on EBITDA pre than on sales, and this is mainly due to healthcare. And with this, let me hand it over to Helene for a more detailed review of our financials.