Merck Kgaa

Ladies and gentlemen, welcome to the Merck investor and analyst conference call on third quarter 2024. As a reminder, all participants will be in a listen only mode. I am now handing over to Konstantin Vest, head of investor relations, who will lead you through the conference. Please go ahead, sir.

Thank you very much, Heidi. A very warm welcome to this Merck Q3 2024 results call. My name is Konstantin Fest. I'm Head of Investor Relations here at Merck. Today, I'm delighted to be joined by Belen Garrillo, Group CEO, as well as Helene von Roeder, Group CFO. For the Q&A part of this call, Matthias Koldensick and Sebastian Arana, Head of Process Solutions, was in Germany and could join on short notice. We're delighted to have him with us covering process solutions questions. Science and Lab Solutions and Lifesense Services will be covered by Belen and Helene. Also joining for the Q&A of this call, we have Peter Günther, CEO of Healthcare, as well as Kai Beckmann, CEO of Electronics. We would now like to guide you through the key slides of this presentation, and after that, we'll be happy to take all of your questions. And with this, over to you, Belén.

Thank you very much, Konstantin, and welcome everybody from my side to our Q3 earnings call. Please go to slide number five on the deck where I will be starting with the highlights. As you saw, we had a strong Q3 in which we further accelerated organic growth to 4% at the group level. And I am delighted to say that we also generated strong profitable growth in the third quarter supported by all three sectors. Life science delivered organic growth for the first time since Q1 last year. Healthcare continues to show strong performance across the whole portfolio. And the semi-market for AI and advanced nodes continues to perform very well, driving semiconductor solution sales and supporting electronics in achieving organic growth in the quarters. Back to the group, sales increased by 4% organically, while EBITDA pre-achieved an outstanding organic growth of 17% in Q3. Life science delivered 2% organic sales growth in the quarter. And this is a great achievement in a very highly demanding market environment, which, however, is steadily improving. And, as I have said multiple times already, while we no longer distinguish the impact of COVID-related sales, it still represents a headwind in 2024. Healthcare was the best performing sector in Q3, with 6% organic sales growth driven by our innovative franchises, that means Oncology and NNI, as well as by our CM&E portfolio. Electronics showed organic sales growth of 2%, mostly driven by semiconductor solutions, which now showed year-on-year growth for the third quarter in a row at 7% organically. Now, on reported sales, we reached 5.266 billion, which is an increase of 2%, as currency was a 2 percentage point headwind. Reported EBITDA pre of 1.618 billion was strongly up at 12%, including a 5 percentage point headwind from currency. On EPS pre, we delivered 2.30 in the quarter, which is a robust increase of 11%. Therefore, we are happy to confirm our absolute sales and earnings target corridors for 2024, which, as you may remember, we raised with our Q2 results. And I will come back with more assumptions on the guidance later on. Moving into slide number six, we have a bit more color on the performance by business sector. All our business sectors contributed to the 4% organic growth of the group in Q3. In life science, process solutions return to organic sales growth while delivering sequential sales growth in a gradually improving market environment. The sequential increase and the year-on-year growth of our order intake, now for three quarters in a row, raises confidence about the further evolution of our process solution business. Book to build was solid again, staying at a wrong one. SLS, science and lab solutions, achieve organic sales growth in what is still a cautious spending environment for pharma research. Turning to healthcare, Oncology was supported by strong Herbitux sales and all across regions and indications, while Bavencio has slowed on the back of increasing competition in the U.S. market. Our NNI franchise got the benefit from Maven Cloud in Q3 as the product confirmed its record sales performance from Q2 in Q3, now against easier comparables. Electronics showed slight organic sales growth driven by our semi-material business, which grew in the double-digit percentages due to AI-driven demand growth and growth in mature nodes in the Asian markets in particular. Regarding earnings, EBITDA pre came in at $1.618 billion, which represents a strong increase of 12% or 172 million euros. While all business sectors contributed, this was mainly due, in the case of EBITDA pre, mainly due to healthcare, where we saw an EBITDA increase of 151 million in the quarter, driven by robust sales performance, and a temporarily lower R&D spending. In Q3, life science and electronics showed a positive EBITDA growth contribution to the group for the first time in 2024. Now let's move on to slide number seven for a few remarks on our sales by region. Q3 once again demonstrated the advantages of our globally diversified business. with the right mix of business sectors in the different regions supporting our growth trajectory. In Q3, two of the three larger regions, that is Asia Pacific and Europe, were up organically while North America was still slightly down. Europe grew the strongest and was up 6% organically with a strong growth in healthcare, across all franchises, as well as process solutions driving life science sales in the region. Asia Pacific was up 3% organically in Q3, which was mainly driven by the strong growth of electronics and further supported by healthcare. North America was slightly down by 0.6% organically, as The slight growth in healthcare was offset by a slightly lower sales in life science. Looking at the two smallest regions, Middle East and Africa was up 14%, while LATAM also grew strongly at 12%. Both regions were mainly boosted by healthcare, while life science also showed strong growth in Latin America. And with this, let me hand it over to Helene for a more detailed view of our financials.