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Merck KGaA to Cut Costs, Jobs Despite Record Revenues in 2011

29.02.2012 -

German drugs and chemicals group Merck KGaA announced plans for a cost-cutting program across all its businesses that may include job cuts.

"Over the next two years Merck needs to address unprecedented market shifts, increasing competition in key product areas and existing inefficiencies in its own organization to ensure the long-term success of its business model," Chief Executive Karl-Ludwig Kley said in a statement.

The maker of drugs and liquid crystals used in flat screen televisions did not say how much it aimed to save, how it planned to cut costs or which businesses would be affected.

"We have a view on what needs to be achieved, but we will consult with the employee representatives on a country-by-country basis and we will consider any pragmatic proposals," Kley said.

The move comes after Merck pulled the plug on one of its biggest pipeline drugs last year, saying U.S. drug regulators' concerns about the risks of its cladribine pill will put an end to any development or marketing plans for the multiple sclerosis (MS) treatment.

Merck has also brought in new management, hiring Lanxess's finance chief Matthias Zachert to take over as chief financial officer and Stefan Oschmann, an executive from U.S. rival Merck & Co as the new head of its drugs division.

Merck published its full-year results on March 6. Total revenues of the Merck Group increased by 11% to € 10,276 million in 2011 from € 9,291 million in 2010. This performance was slightly above the company's guidance despite a challenging global economic environment. All four of Merck's divisions contributed to this growth. The reported revenue increase was primarily due to the acquisition of Millipore Corporation, which closed in July 2010. In the fourth quarter of 2011, total revenues rose 3.1% to € 2,626 million compared to the year-ago quarter.

"Merck delivered a good operational result in a challenging year, including surpassing € 10 billion in total revenues for the first time in the company's history," said Karl-Ludwig Kley, Chairman of the Merck Executive Board. "We managed to deliver on our profitability guidance despite facing a softening economy and significant one-time charges. However, we recognize that the competitive and market pressures we face in our businesses are likely to increase over the next few years. As a result, we recently initiated an efficiency program across all businesses and regions to enable us to address our inefficiencies and free up resources to invest in promising growth markets."

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