Merck KGaA's Profit Up on Cost Cuts, Liquid Crystals

German drugs and chemicals maker Merck KGaA surpassed expectations for quarterly earnings, helped by job cuts and strong demand from China for its liquid crystals for televisions.

Fourth-quarter net income of €272 million exceeded a consensus forecast for 208 million in a Reuters poll. Adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) rose 16% to €790 million ($1.03 billion), above a poll forecast for 785 million.

Merck, the world's largest maker of liquid crystals for flat panel TV displays, said it benefited from China's emerging television manufacturing industry, which has grown to become a bigger market for Merck than Japan.

An industry oversupply of TV panels eased late last year and Corning, the largest maker of specialty glass for liquid-crystal displays said in January it expects growth in the number of TVs sold in 2013 and a trend to even larger TVs.

The company predicted a significant increase in net income in 2013 and 2014 as it continues to benefit from cost cuts, but it cautioned that there would be no major technology launches at its chemicals business over the next two years.

A significant product upgrade helped Merck shore up its position as the industry leader in liquid crystals over the last two years and analysts have been eager to learn about new technologies under development at the unit.

But family-controlled Merck, which traces its roots to a 17th century pharmacy, is also slashing jobs and is looking to buy rights to experimental medicine in early stages of development to gradually rebuild its eviscerated drugs pipeline.

Capping a string of painful setbacks, Merck's Stimuvax cancer vaccine and brain tumour treatment Cilengitide failed in recent drug trials.