All four divisions of the Merck Group, especially the chemicals divisions, recorded increases in Q2 2010 revenues, leading to a record €2,208 million in total revenues for the group. This was a 16% increase compared to the year-ago amount of €1,910 million. In the first half of 2010, total revenues rose 14% to €4,307 million.
With revenues increasing at a faster rate than cost of sales, the gross margin rose 22% in the second quarter to €1,691 million.
Research and development costs declined slightly to €339 million in the Q2. More than 87% of this amount was used by the Merck Serono division, which has a large number of expensive late-stage clinical trials underway. R&D costs in the first half of the year amounted to €686 million, a 5.0% increase. Amortization of intangible assets in the second quarter, mainly stemming from the purchase of Serono in 2007, was little changed at €-146 million.
Thus, with improved revenues and an improved gross margin, the operating result jumped 77% in the second quarter to €326 million from €184 million in the year-ago quarter. The first-half operating result improved 62% to €621 million. The group's second-quarter core operating result, i.e. operating result excluding amortization of intangible assets from the Serono purchase, was €469 million, an increase of 42% compared to the year-ago quarter.
The group return on sales (ROS: operating result/total revenues) increased to 14.8% in the second quarter of 2010 compared to 9.7% in the year-ago quarter. Group core ROS (operating result excluding Serono-related amortization of intangible assets/total revenues) in the Q2 of 2010 was 21.3% compared to 17.3% in the year-ago quarter.
Exceptional items during the second quarter of 2010 amounted to €-1.2 million due to a reimbursement from the 2005 divestment of the electronic chemicals business. There were no exceptional items in the year-ago quarter. Therefore, earnings before interest and tax (EBIT) jumped 76% to €325 million in the second quarter of 2010 compared to €184 million in the year-ago quarter. First-half EBIT nearly doubled to €620 million in 2010 compared to €314 million in 2009.
Due to interest payments on the financing for Millipore, Merck's financial result more than doubled to €-78 million in the second quarter. For the half year, the financial result was €-117 million compared to €-71 million in the first half of 2009.
The Merck group's Q2 profit before tax increased 67% to €247 million from €148 million in the year-ago quarter. In the first half of 2010, profit before tax more than doubled to €503 million. Merck's underlying tax rate was 24.2% for the second quarter of 2010 compared to 25.9% in the year-ago quarter. Profit after tax in the Q2 of 2010 increased by 70% to €187 million from €110 million in the second quarter of 2009. For the first half of 2010, profit after tax more than doubled to €381 million from €170 million in the year-ago period.
The Merck group's free cash flow increased in the second quarter of 2010 to €356 million compared to €79 million. This is mainly due to better results and lower tax payments compared to the year-ago period. For the half year, free cash flow was €551 million in 2010 and €243 million in 2009.
