Merck KGaA says dominance in liquid crystals could be at risk (updated)

DIC

28/04/2017 12:11

* Liquid crystals lifted by recovery in display market 
    * OLEDs seen being used in TVs in future 
    * Merck says OLEDs will not offer liquid crystals margins 
 
 (Adds profitability of liquid crystals, background on 
technology) 
    By Ludwig Burger 
    FRANKFURT, April 28 (Reuters) - Germany's Merck KGaA 
 MRCG.DE , the world's largest maker of liquid crystals for flat 
screens, said on Friday its dominance of the market could erode 
in future, making the case for more investment into newer OLED 
technologies. 
    Merck commands about 60 percent of the liquid crystals 
market, ahead of Japan's JNC Corp. and DIC Corp  4631.T . It is 
a major profit driver for the German group, which also makes 
pharmaceuticals and supplies for labs and bioreactors. 
    "We know ... that our market shares in recent years were 
very high. At the present time we cannot rule out a further 
normalization," Chief Executive Stefan Oschmann told 
shareholders at the annual general meeting. 
    "We will therefore forge ahead with new technologies in all 
four business units, for instance OLED," he said, referring to 
organic light emitting diodes (OLEDs) that are mainly used in 
mobile devices. 
    For now, a recovery in the display market that began late 
last year should have a positive effect on the liquid crystals 
business, the CEO added. 
    He reiterated that group core earnings would be flat this 
year, saying more detailed guidance would be provided on May 18. 
    
    Mainly thanks to liquid crystals, Merck's performance 
materials division turned a profit before interest, taxes, 
depreciation and amortisation (EBITDA) of more than 40 percent 
of the 2.5 billion euros in revenues last year. 
    That is above the average for the European speciality 
chemical industry, which usually has margins of 10-25 percent. 
    Merck does not separately disclose the margin for liquid 
crystals, which account for about half of sales at the 
performance materials division.  
    Family-controlled Merck saw liquid crystals revenues surge 
in the year 2000 with the advent of flat screens, having failed 
for decades to find a commercial use for the substances. 
    They go mainly into TV screens but Merck is exploring their 
use in dimmable window panes or flat antennas on car roofs that 
electronically home in on satellites. 
    More expensive OLEDs allow for thinner and more energy 
efficient screens for portable devices. But Merck has said they 
would likely take hold in TV screens over the next few years, 
chipping away at its liquid crystals business. 
    Merck has invested in OLED chemical production since 2009, 
surviving an industry shakeout that has reduced the field of 
contenders to just a handful. It has also warned that OLED 
profit margins would not reach those at liquid crystals. 
 
 (Reporting by Ludwig Burger; Editing by Arno Schuetze and 
Edmund Blair) 
 ((ludwig.burger@thomsonreuters.com; +49 69 7565 1311; Reuters 
Messaging: ludwig.burger.thomsonreuters.com@reuters.net)) 
 
Keywords: MERCKKGAA LIQUIDCRYSTALS/