Merck Kgaa

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

Thank you very much, Heidi, and a warm welcome to everyone joining us for this Q4 and Folio24 earnings talk. My name is Florian Schroeder. I'm Head of Investor Relations at Merck. I am delighted to be joined by Wilhelm Garrigio, Group CEO, as well as Helene von Ruller, Group CFO. For the Q&A part of the call, we will also have with us here in the room Matthias Heinzel, CEO of LifeScience, Peter Günther, CEO of Healthcare, and Kai Beckmann, CEO of Electronics. As you surely have noticed, we recently announced upcoming changes to the Executive Board. I am pleased to share that both Jean-Charles Wirth, appointed CEO of LifeScience as of June 1st, as well as Danny Barzohar, appointed CEO of Healthcare as of June 1st, will join us later today for a brief introduction. With this introduction, I believe we are ready to begin. Over to you, Willem, to kick us off.

Thank you, Florian. and welcome everybody to our full year 2024 earnings call. I am starting on slide number five of the presentation, and my main message on the slide is very clear. We delivered on our guidance and our ambition to return to profitable growth in 2024. Life science returned to organic growth during 2024 with a continuous sequential improvement quarter on quarter in the second half of the year. Healthcare continued to show a strong organic performance and electronics grew thanks to AI-driven demand in semiconductor solutions. As we mentioned during our Q3 earnings goal, we expected the group to trend in the lower half of the sales corridor and around the midpoint of the earnings corridors. And we have delivered on our expectations for net sales, EBITDA-free and EPS-free, both for the group and for the business sectors. Let's move to the highlights for the Q4 2024 on slide number six. We had a very solid Q4 with organic sales growth of plus 4% for the group. And we deliver strong profitable growth supported by all three sectors. Healthcare was once again the best performer with 7% organic sales growth. Life science confirmed return to growth in Q4 with plus two organic sales growth. I am particularly pleased with the very strong order intake in process solution. which registered low teams growth sequentially in Q4 and even higher growth year on year. Electronics showed organic sales growth of 2% in Q4, driven once again by semiconductor solutions as the semi-market for AI and advanced nodes continues to perform very well. Back to the group. While sales increased by 4% organically in Q4, EBITDA pre-achieved very strong growth of plus 20% organically in the fourth quarter. Given our strong cash generation, we have improved our net leverage despite having made significant investment in both CapEx and M&A during 2024. As communicated in our press release this morning, we will propose a stable dividend of 2.20 per share to the annual general meeting on April 25th. As a reminder, for the dividend, we aim for the target corridor of 20 to 25% of EPS pre, and the proposed dividend of 2.20 per share is marginally above that corridor. As you also see on the slide, we are moving for the first time from guiding on a qualitative basis towards quantitative guidance already with our full year results and expect sales in a range of 21.5 to 22.9 billion and EBITDA-free in a range of 6.1 to 6.5 billion. More details will follow on the guidance later on the presentation. Let me now provide a more detailed review of 2024, starting with life science on slide eight. The positive news is that we saw growth inflecting in the second half of the year, both for process solutions and for life science as a whole, as we move past the period of customer destocking. In fact, growth in process solutions inflected already in Q3 and kept growing in Q4. Non-repeat COVID-19-related sales fell to negligible levels, and as a result, we saw a headwind in 2024 as sales declined by 3% organically. While sales in SLS, science, and lab solutions were flat organically in 2024, process solutions declined by minus 6% because of the soft H1 2024. As customers the stocking in life science has gradually phased out, the EBITDA pre-margin improved quarter on quarter throughout 2024, reaching 29.4% in Q4. Our focus in life science is clear. We aim to re-accelerate growth towards our mid-term growth ambition in 2025. This is going to be driven by PS, process solutions, as we expect the recovery to continue in 2025. We have strong confidence in our mid-term growth ambition, driven by our innovative portfolio across our businesses and across various growth drivers in the industry. Process solutions continues to innovate, innovate, monoclonal antibodies manufacturing with breakthrough products and technologies, especially in the areas of intensification, perfusion, digital solutions, and novel modalities. We drive innovation through our own internal capabilities and at the same time continue to look at external opportunities. The acquisition of MyosBio is an excellent example in this context. It is an important step for us was completing our portfolio in process solutions for vector-based cell and gene therapy applications, and it very well complements our existing commercialized portfolio. Turning to healthcare, on slide number nine, organically sales were up 7%. Growth was driven by our oncology portfolio once again, which delivered organic growth of plus 13%, fueled by herbitubs and supported by Tepmeco. Baventio also grew in 2024, despite growing competitive reserve. Our CMA portfolio delivered strong 8% organic growth, supported by contributions across all regions and all segments. Our NNI portfolio, neurology and immunology, showed plus 2% organic growth with a strong performance of Mavenclad growing by 12% organically, being offset by the expected decline of Rebif. Capability sales increased 1% organically against very tough comps related to former competitor stockouts. we achieved a strong profitable growth in 2024. Our EBITDA margin, our EBITDA pre-margin increased by 380 BPS to 35.4%, mainly driven by revenue growth and temporarily lower R&D expenses coupled with a strict cost control. From a strategic perspective, we have strong confidence in our ability to drive long-term growth through internal and external innovation with around 50% of launches to be sourced for external innovation. And as you have seen, we have a very resilient base to build on with our very well-established franchises. expected to be the backbone of the slight growth in the mid-term. Moving on to electronics on slide number 10. Organically, sales grew by 5% in 2024. This was mainly driven by semiconductor solutions, which was up 8% organically as semi-materials saw low things growth field once again, by AI-related demand. We have grown faster than MSI yet again. MSI is less meaningful this year due to undershipping of wafers. Yet, our internal estimates show mid- to high single-digit growth in wafer starts, which we outperformed. demonstrating the strength of our semiconductor materials portfolio. Display Solutions saw a sales decline of 3% organically, as our growth areas in premium liquid crystals and OLED only partially upset the decline in general liquid crystals applications. The EBITDA pre-margin was 25.6%, which represents an increase of plus 60 basic points compared with last year. This was mainly driven by revenue growth and supported by our 2024 efficiency program. Remember, EBITDA Pre in 2023 was helped by a patent agreement with UDC. We continue to see excellent mid to long-term growth prospects of this business, having tech leadership in key high-value materials. On the short-term basis, while we continue to see growth in demand for semi-materials needed for AI and advanced nodes, the broader market still has to rebound. And with that, let me hand it over to Helena for a more detailed review of our financials.