UPDATE 1-Merck KGaA ekes out profit growth on cost cuts

Thu May 15, 2014 2:56am EDT

* Q1 adj EBITDA up 0.7 pct at 807 mln eur, just above poll avg

* Sees slight increase in 2014 adj EBITDA thanks to takeover

* Raised prospect of more deals to boost growth (Adds details on growth, drugs division, forex effects)

By Ludwig Burger

FRANKFURT, May 15 (Reuters) - Germany's Merck KGaA , the world's largest maker of liquid crystals for display screens, said quarterly underlying core earnings edged 0.7 percent higher as lower costs outweighed the impact of weak foreign exchange rates and sluggish growth in drugs sales.

First-quarter earnings before interest, tax, depreciation, amortisation and one-off items rose to 807 million euros ($1.11 billion), it said on Thursday, just above the 805 million euros consensus from analysts in a Reuters poll.

The results highlight the need for Merck to find new sources of growth. The family-controlled German group has said it was ready for "ambitious" takeover moves, promarily aimed at boosting a pharmaceuticals division suffering from a weak development pipeline and meagre growth prospects for its best-selling drugs.

Merck's No.1 drug Rebif, an injectible multiple sclerosis treatment, is gradually being replaced by new orally administered drugs such as Biogen Idec Inc's Tecfidera. Merck's Erbitux cancer drug, meanwhile, is close to reaching its peak sales potential.

Quarterly sales slipped 2 percent, with a weak U.S. dollar and Japanese yen crimping the euro value of overseas revenues. Without currency effects, sales would have gained 4 percent.

Merck said it expected adjusted EBITDA of 3.3-3.4 billion euros this year, up from 3.25 billion euros last year, including its recent acquisition of Britain's AZ Electronic Materials for $2.6 billion. ($1 = 0.7294 Euros) (Editing by David Goodman)

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