March 6, 2014 / 7:31 AM / 4 years ago

UPDATE 1-Merck KGaA's profit up as cutbacks cancel out forex pain

* Q4 adjusted EBITDA 795 mln euros vs average forecast of 784 mln

* Sees flat adjusted EBITDA and revenue in 2014

* Expects negative forex effects to offset organic growth

By Ludwig Burger

FRANKFURT, March 6 (Reuters) - Germany’s Merck KGaA , the worlds largest maker of liquid crystals for display screens, reported an unexpected rise in underlying profits on Thursday as the benefits of its cost cutting campaign more than offset the impact of weaker foreign currency exchange rates.

After a slew of setbacks in drug development, the group is in the final phase of a restructuring effort, cutting more than 2,000 jobs.

Fourth-quarter earnings before interest, taxes, depreciation, amortisation and one-off items edged 0.7 percent higher to 795.2 million euros ($1.1 billion), above the 784 million euros expected on average by analysts in a Reuters poll.

Merck said it expected adjusted EBITDA and revenues to be flat this year as the effect of weaker currencies is likely to cancel out slight comparable sales growth. This year will also see another 100 million euros in charges related to its restructuring programme, the group said.

It has been hit in particular by a weaker U.S. dollar, Japanese yen and Latin American currencies.

Shares in Merck were indicated 1.2 percent lower in pre-market trade, while Germany’s blue-chip index DAX was seen 0.3 percent higher.

While Merck’s best-selling drug, Rebif, is gradually being replaced by new orally administered treatments for multiple sclerosis, the family-controlled company is defending its dominant position in the liquid crystals market.

“The Liquid Crystals business unit benefited from the shift in demand toward technically more complex liquid crystals that are primarily used in large-sized, high-quality television displays,” the company said.

Meanwhile revenues from Rebif, which is injected, fell 1.5 percent to 1.86 billion euros ($2.56 billion) in 2013. Analysts polled by Thomson Reuters expect Rebif sales to slide further to $1.45 billion by 2019, while new oral treatments, such as Biogen Idec Inc’s Tecfidera take market share.

The group is in the process of taking over Britain’s AZ Electronic Materials for $2.6 billion to expand its range of specialist chemicals for electronic gadgets and it has signalled it is ready for more deals, possibly to strengthen the weak development pipeline of its pharma business.

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