Merck Kgaa

Ladies and gentlemen, welcome to the Merck Investor and Analyst Conference call on second quarter 2025. 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 heartfelt welcome to the Merck Q2 2025 results call. I am Florian Schreder, the Head of Investor Relations at Merck. It is my pleasure to be joined today by Belen Garrigio, our Group CEO, and Helene von Röder, our Group CFO. For the Q&A segment of this call, we will also have Jean-Charles Wirth, CEO Life Science, Denny Basohar, CEO Healthcare, and Kai Beckmann, CEO Electronics, with us. In the initial minutes of this call, we will guide you through the key slides of the presentation. Following that, we will be glad to address your questions. With that, I would like to hand it over to Belen to begin.

Thank you, Florian. Welcome, everybody, to our Q2 earnings call. And before starting with the highlights of the quarter, I'm happy to remind everybody that we just announced the closing of the diversity of surface solutions last week. The closure of this transaction will allow us to sharpen our focus on high-tech application within electronics, so that is an important milestone achieved recently. And this comes just one month after we closed the acquisition of Springworks in a record time, immediately accelerating the growth of healthcare and securing the sustainability of our healthcare pillar in the mid to long term. So we are actively working on and executing our portfolio composition to enhance Merck's position as a globally diversified science and technology company with attractive growth. Returning to the quarter, I'm now on slide five of the presentation to go through the highlights. The global economic landscape continued to change very rapidly this quarter, generating some volatility across various business sectors and regions. We continued to sustain our organic sales growth momentum in this challenging environment, even though these economic conditions are also affecting, to a certain extent, some of our business sectors. Organically, our group sales increased by 2%, and EBITDA pre went up by 5%. We, therefore, continued to grow profitably on an organic basis. Healthcare and life science showed the strongest organic sales growth at 4% each, while electronic sales were down organically by minus 6%, driven mostly by the DS&S business. The highlight of the quarter was the acceleration of the organic sales growth momentum in life science. And this is driven by process solutions, which once again delivered 11% against rising comparables. A very strong order intake growth continued, and the book-to-bill ratio was again comfortably above 1%. Sales in healthcare grew organically by 4%, driven by double-digit growth of Mavenclat, solid growth of 5% in our CM&E portfolio, as well as double-digit growth of Herbitux, respectively. Moving into electronics, we observed an organic decline of 6%, and this is primarily attributable to our DS&S, delivery systems and service business within semiconductor solutions, which experienced a decline in the low-to-mid double digits in relation to big project facing. Semiconductor materials continue to grow this quarter, driven by our strength in artificial intelligence and advanced nodes. Turning to our guidance. We are now narrowing our organic sales growth range to plus 2% to plus 5%, staying within our previously communicated range. Reported sales have been adjusted to mostly reflect the currency impact. We are also maintaining the midpoint of our absolute EBITDA pre-guidance range, despite increasing sequins from FX and EBITDA. despite negative portfolio effects from the SpringWorks acquisition, as well as the diverse picture of surface solutions, as we have lifted our organic growth guidance on EBITDA pre to plus 4% to plus 8%. Therefore, we now anticipate net sales in a range of $20.5 billion to $21.7 billion, and EBITDA pre of $5.9 billion to $6.3 billion. Hence, we are committed to growing even more profitably than we have forecasted previously. I will provide more details on our assumptions for the guidance at the end of this call. So let's now turn to slide six for an overview of our performance by business sectors. Organic sales growth in the second quarter was 2%, plus 2%. With organic sales growth of 3.7%, life science was the largest contributor this quarter, driven once again by the stellar performance of process solutions. Healthcare delivered 3.6% organically, organic growth, with Mavenclad, our CME portfolio, and Herbitux, having been the key drivers. Electronics was down by minus 5.6% organically, as the growth of semi-materials was not able to offset the decline in our DS&S business. For the group, and as we predicted, FX now turned into an effect wind of minus 4.2% in Q2 after having been a slight tailwind in Q1 2025. FX was a mid single digit percentage headwind for all business sectors during the quarter. Together with a portfolio effect of plus 0.4% for the group in Q2, driven mainly by the acquisition of Unity FC, Group sales, reported group sales declined by minus 1.8% in Q2. It is important to note that we closed the spring works acquisition on July 1st. Hence, there is no spring work revenues in Q2. Regarding earnings, EBITDA pre amounted to $1.462 billion growing organically more than twice as fast as sales and delivering plus 4.6% organic growth compared to the year earlier period. Currency also had a negative effect on EBITDA pre, which was more pronounced than on sales at minus 7.2%. The portfolio effect was slightly dilutive on EBITDA pre. And with this, Let me hand it over to Helene for a more detailed review of the financials of Q2.