S&P upgrades Germany’s Merck KGaA on cash flow, restructuring

30 November 2012 14:37  [Source: ICIS news]

LONDON (ICIS)--Standard & Poor’s (S&P) has upgraded its ratings for Germany-based Merck KGaA on expectations that the specialty chemicals and pharmaceuticals firm will continue to generate strong cash flows, reduce debt, and complete its restructuring programme, the credit watchdog said on Friday.

S&P raised its our long-term corporate credit and issue ratings for Merck to "A-", from "BBB+", and it affirmed its short-term corporate credit rating at “A-2”.

“We anticipate that Merck's significant free operating cash flow is likely to continue to increase gradually over the next few years, in line with increasing sales and profit margins on the back of the group's efficiency plan,” S&P said.

S&P's ratings assume that Merck will see stable demand for its liquid crystals, despite increasing competition to some of the group's older liquid crystal technologies.

Meanwhile, sales at Merck’s Serono pharmaceuticals business are expected to remain flat in 2013 and 2014, the agency said.

S&P added that it may downgrade Merck if the company’s restructuring programme fails to deliver targeted cost savings, or if the company were to undertake a larger debt-funded acquisition.

“That said, we do not anticipate any such acquisition in the near term,” S&P said.

By: Stefan Baumgarten
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