In 2016, we again achieved profitable growth. Compared with 2015, our sales increased by 17%, setting a new record at € 15 billion. EBITDA pre exceptionals, the key financial indicator used to steer our operating business, grew by 23.7% to € 4.5 billion. Profit after tax in 2016 came in at € 1.6 billion, an increase of 45.3%. At the same time, we lowered our net financial debt by over € 1 billion to € 11.5 billion. As shareholders, you benefit from this good business performance. In 2016, our share price developed well, advancing from € 89.57 at the beginning of the year to € 99.15 at year-end, equivalent to an 11% increase in value, nearly four percentage points better than that of the DAX, Germany’s blue-chip index. For 2016, we will propose to the Annual General Meeting a dividend of € 1.20.
The excellent performance of our business shows that we are on the right track. Our strategy is working. First and foremost, this is due to the accomplishments of the more than 50,000 men and women who work for Merck worldwide. I would like to sincerely thank all of them for their strong engagement and passion, with which they have moved our company forward.
For Merck management, 2016 was a year of change. On April 30, 2016, I took over the chairmanship of the Executive Board. Two new members, Udit Batra and Walter Galinat, were appointed to the Executive Board, assuming responsibility for the Life Science and Performance Materials business sectors, respectively.
Chairman of the Executive Board and CEO
Merck is a vibrant science and technology company. We perform research and manufacture products in a wide variety of fields – from cancer therapy and laboratory technology to liquid crystals in smartphones. Yet all of our business activities have a common driving force: scientific curiosity. Our work on new technologies for a better life reflects our tremendous passion for discovery. And that is where we are investing. In 2016, we spent € 2 billion on research and development.
Our efforts are paying off. We made significant progress in all three business sectors last year.
Healthcare reached important milestones on its journey towards launching new medicines. We submitted cladribine tablets for approval in Europe to treat relapsing-remitting multiple sclerosis. We are also making progress in immuno-oncology. We submitted avelumab, our active ingredient that we are co-developing with the U.S. company Pfizer, for approval in the United States and Europe for the treatment of Merkel cell carcinoma, a rare and aggressive form of skin cancer. In China, our business developed extremely well. In 2016, we were the fastest-growing international pharmaceutical company in this highly promising market.
For patients, we develop more than medicines. Fertility is one such example. Worldwide, around 2.5 million “Merck babies” have been born to date with the help of our fertility drugs. We are proud of this. To help more couples who wish to become parents, we are expanding our offerings. Not only medicines, but also technologies play a crucial role in successful fertility treatment. In cooperation with Genea Biomedx of Australia, we therefore offer solutions that support all important treatment steps undertaken by in vitro fertilization laboratories – for better treatment outcomes and even more happy families.
Our Life Science business sector benefited from strong demand in the biopharmaceutical industry and grew faster than the market. The integration of Sigma-Aldrich, which we acquired in 2015, is progressing better than expected. At the end of 2016, we had already achieved € 105 million in annually recurring cost synergies as compared with the originally planned amount of € 90 million. Moreover, we are expecting additional, previously unplanned top-line synergies. Overall, we now assume that total annual synergies from the acquisition will total € 280 million in 2018 instead of € 260 million.
Performance Materials once again maintained its global market and technology leadership in liquid crystals – even during a period of overstocking of LC displays. At the same time, we are further diversifying our business. One technology that holds great promise and potential for high growth is OLED, or organic light-emitting diodes. It is already one of our fastest-growing businesses today. And we are strengthening our market position, for instance through a new production plant, which we inaugurated in Darmstadt in September. We aim to be a leading global supplier of OLED materials in the future. In addition, our semiconductor materials business delivered growth rates in 2016 that were far above-average.
Technological progress is fundamentally changing our markets. New suppliers with innovative business models are shaking things up. This means that remaining idle is an easy way to fall behind. We want to cooperate with leading tech companies and start-ups. Just recently we formed a close partnership with Palantir, a leading U.S. company for complex data analytics. Our Accelerator program offers emerging companies with highly promising business models financial support and access to our experts. Additionally, we are taking financial stakes in the most promising start-ups in healthcare, life science, performance materials, and beyond. For this purpose, we doubled the volume of Merck Ventures, our venture capital fund for these types of investment, to € 300 million.
Yet we also have a lot of plans for our existing business. In Healthcare, we want to launch a new medicine or new indication per year. We
hope to be able to register avelumab in further cancer indications. At the same time, we have other highly promising active ingredients in oncology, immuno-oncology and immunology that are currently being investigated in clinical trials.
In Life Science, our work to realize the full synergy potential of the Sigma-Aldrich acquisition will continue through 2018. At the same time, we’re aiming for our business to continue to grow faster than the market. To this end, we are focusing on promising new offerings, such as gene editing tools and services. This exciting technology is now more accessible and easier to use, enabling scientists to study how a specific gene or variation of a gene can affect a disease or certain types of cancer. We want to rank among the leading technology suppliers in this growing and important market.
Specialty chemicals from Performance Materials offer great potential for future mobility. Our Automotive Platform developed specifically for this purpose illustrates this well. Our products include liquid crystals for free-form displays, antennas with high data transmission power, OLEDs and LEDs for headlights, semiconductor materials for sensors, as well as functional pigments. It’s already certain today that a lot of Merck will be inside the cars of tomorrow.
Ladies and gentlemen,
Our business prospects are good. We have a clear strategy. But as
a company with an international presence, we are concerned about political developments that could restrict global trade. Reliable international framework conditions and open markets are essential – for both our company and for overall economic development.
At the same time, technological progress pays little heed to political uncertainty and is advancing at lightning speed. We want to help shape this change. Scientific curiosity is our driving force. That’s because we know breakthroughs begin with curiosity. And breakthroughs are what we want to achieve in the coming years. For patients, for our customers, and of course for you, our shareholders.
It is a special honor for me to lead this unique company. Merck is well-positioned for sustainable and profitable growth. We have a lot planned. We are curious about the future. I hope that you share our curiosity – and that you will continue to support us as shareholders.
Chairman of the Executive Board and CEO