Profits after tax nearly halved (-48.7%) at Merck despite sales at Merck Serono and Merck Millipore divisions witnessing growth.

Total group revenues increased by 3.2% to €2.6 billion as overall sales improved by 3.5% to €2.5 billion.

However, profits fell to €177m in the first three months of the year compared with €344m in the same period a year ago.

Karl-Ludwig Kley, Chairman of the Executive Board at Merck, admitted the company had delivered only “a reasonable operating performance” in the first quarter of 2012.

Merck revealed at the end of last month it planned drastic cutbacks in its Serono division cutting 500 jobs and transferring another 750 as part of plans to close its Geneva headquarters.

But despite the planned cuts, the division’s Q1 sales grew by 5.4% as global demand for Rebif generated income of €430m and demand for Erbitux earned €214m.

Its Merck Millipore division also saw sales increase by 7.3% to €653, driven by solid results from its Lab Solutions and Process Solutions business units.

Merck now predicts modest increase in profits for the full year for its Serono division before the planned efficiency savings and an increase in profits in line with sales at Merck Millipore.

Merck KGaA saw record-breaking levels of revenue in 2011 as sales topped €10 billion for the first time.

Revenue was up 10.6% to €10.2 billion following the 2010 acquisition of the Millipore Corporation and growth in the Group’s four divisions – Merck Serono, Merck Millipore, Consumer Healthcare and Performance Materials.

Karl-Ludwig Kley, Chairman of Merck’s Executive Board, said the Group delivered a “good operational result in a challenging year” but confirmed that despite topping €10bn in revenue job cuts would still be made.

The company revealed last month it plans to cut jobs across all businesses and regions under new efficiency plans it aims will reduce costs and exploit new growth opportunities. (Read here)

Mr Kley says that the efficiency plans recognise the “competitive and market pressures” Merck faces in the future.

Despite the record breaking levels of revenue, overall operating result was down 11.5% to €985 million and net profits decreased 2.3% to 617 million Euros.

Sales increased by 17% to €2.78 billion and gross margin rose by 8.4% to €7.4bn. However, marketing and selling expenses were up 7.1% to €2.39bn and royalty, licence and commissioning expenses increased after increased sales of Rebif and Erbitux. R&D costs also jumped to €1.5bn after expensive late-stage clinical trials by Merck Serono.

Total revenues of Merck Serono increased 2.9% to €5.92bn compared to €5.75bn in 2010, which was described as a “solid performance” by the Group. Global sales of Rebif topped €1.69bn after increased demand in the US. Targeted cancer treatment Erbitux recorded sales of €855 million due to strong growth in emerging markets.

In Merck’s other divisions, Merck Millipore almost increased sales by half (48%) to €2.39 billion after growth in North America, Latin America and Asia. Its consumer health care arm saw revenue increase 5.1% to €484 million in 2011, and its Performance Materials division increased revenue slightly by 1% to €1.46bn.

The Group’s Executive Board now expects total revenues to increase slightly in 2012 and 2013.

Merck is set to cut jobs under new efficiency plans it aims will reduce costs and exploit new growth opportunities.

The measures are part of the Group’s comprehensive transformation programme which it says is needed to tackle unprecedented market shifts, competition and its own existing inefficiencies.

The number of jobs losses has not yet been decided, but Karl-Ludwig Kley, Merck’s Chairman, says that initial analysis may lead to “workforce reductions across all businesses and regions”.

A consultation process will now be conducted by the Group with employee representatives in different countries to seek solutions where possible.

Mr Kley says the approach reflects the company’s strong tradition it has with its employees at Merck. “We have specifically not published potential figures related to the efficiency programme as we are committed to engaging constructively with the relevant stakeholders to achieve a mutually acceptable solution,” he said.

The Group’s Executive Board plans to focus on all businesses and regions and consists of two phases.

The first phase, carried out in the next two years, plans to establish a new leadership organisation and install cost-cutting measures to develop long-term growth. The implementation of a new leadership committee began at the start of the year with the objective to increase decision making processes.

The second phase aims to exploit new growth opportunities. The company says that initial exploration of areas for future growth based on broader industry and macroeconomic trends has also commenced.

“Over the next two years, Merck needs to address unprecedented market shifts, increasing competition in key product areas and existing inefficiencies in its own organisation to ensure the long-term success of its business model,” said Mr Kley. “We will therefore progress with our planned efficiency program in order to deliver recurring cost reductions and free up resources for investment in promising growth areas.”

Merck saw revenues increase by 3.8% to €2.5 billion and net profit rise 7.5% to €227 million in the third quarter after solid performances by its pharmaceuticals and Millipore divisions.

Revenues at Merck Serono increased 5.4% to €1.4bn after increased global sales of Rebif and Erbitux (pictured) whilst its Millipore division saw revenue reach €588 million compared to €559 million the same period a year ago.

Karl-Ludwig Kley, Chairman of the Executive Board of Merck KGaA, says the results leave the Group “well positioned as we head into the end of the year”.

Its Executive Board now forecasts annual Group revenues between €10-10.2 billion and the debt resulting from the 2010 acquisition of Millipore to decrease at an “excellent pace”.

Administration expenses were down 2.7% to €124 million with other operating expenses and income also declining slightly by 1.3%. R&D costs increased to €371 million in Q3 due to a combination of late-stage clinical trials and the strong Swiss franc.

Earnings before interest and tax were also down 8.4% with underlying core operating result – which excludes Merck Serono and Millipore – decreasing by 21.5% of revenues as a result of the weakening of the Performance Materials division, the Group claimed.

Generic organic revenue growth in Merck Serono increased nearly 9% after its multiple sclerosis treatment Rebif recorded global sales of €426 million and the cancer treatment Erbitux earned € 218 million, primarily as a result of growth in emerging markets.

“The Merck Group produced solid third-quarter revenue growth in a difficult environment, driven mainly by good performances from the Merck Serono and Merck Millipore divisions,” said Karl-Ludwig Kley. “We are making progress in driving our change agenda forward and we will provide important updates on this endeavour in the first half of 2012.”