my analysis: MERCK INDONESI

5.8 % target of economic growth and 7.75 % BI Rate

In the early January of 2015 government announced target of economic growth in to 5.8 %. They seem very careful and they decided to not increase the target. On other hand, government reduce fuel price with fixed subsidy to reduce inflation rate which was advanced after they allocated the subsidy.

Infrastructure project may need several processes such as opening the tender of the projects, project financing for the contractor, land acquisition, feasibility study and etc. These processes may need more time and more costs. As a result of this, the infrastructure project will be started in second semester, the impact of infrastructure project to economic growth may not optimize in 2015. Based on local news, Government provides budget for the projects amounting to IDR 48 trillion in 2015. The budget for fuel subsidy was over than 200 trillions rupiah, it means government is able to develop other sectors with the allocated fund.

In addition, central bank announced BI rate is still at 7.75 % which means the interest rate of bank loan will not decline. According to world bank, there is a decline in bank credit amount in septemper 2014 compared to september 2013.

Industry Analysis

Chemical and chemical product grows steady

In second quarter of 2014, the industry increased slightly in 2.11 % q to q, it was decline compared to industry growth of first quarter which was at 4.9 % q to q. In addition, industry growth in 2013 was 6.65 % up than 2012.

Pharmaceutical, Medicinal chemical, Botanical Product industry: production falls in 2^nd quarter in 2014

Based on BPS the production of the industry in second quarter of 2014 is falling -6.65 % down q to q. The demand of pharmaceutical product such as drugs is difficult to forecast.

Accordance to International Pharmaceuticals Manufacturers group (IPMG) indonesia is one of fastest growing pharmaceutical market in Asia. Pharmaceutical industry increase 12 % in 2013 in spite of decrease in gross domestic product of indonesia.

In conclusion, both industries are still growing steady although there is a decline in economic growth.

Merck Indonesia: Prescripton drugs as key success factor to advance growth

The company is subsidiary of Merck Holding GmbH, Germany. It has 74 % of total shares; the second biggest share holder is Emedia Export, a German company.

Merck Indonesia runs it business in pharmaceutical product such as consumer health and prescription drugs. The company also has chemical product division for pharmaceutical industry and Chemical industry.

The key driver of revenue in 2013 is Merck Serono segment, a prescription drugs product. It is 46 % of total revenue in 2013, the second biggest contribution is Chemical product division. Merck serono is the market leader in indonesia.

The highest growth of revenue in between 2012 – 2013 is Merck Serono segment which increases 35 % up. One of new products in merck serono division which was launched in 2013, it is called Glucophage, drug for diabetes therapy.

Total revenue in 2013 increases about 28 % up than revenue in 2012. The company has cash to sales ratio at 15.4 % in 2013 due to surplus in cash flow from operating. It also has stable gross profit margin in 2012 and 2013, consecutively 46.3 % and 46.1 %.

The company seems changing its credit policy for clients, days receivable is longer, it is 42 days in 2013 compared to 2012 which was 27 days.

In conclusion, the company seems capable in advancing its growth in the future, mostly its prescription drugs which is having good reputable brand for therapy such as diabetes, cardiovascular and etc.

Forecasting

I used same growth of 2013 for revenue growth in the next three years which is 28 % up as Merck serono division is a market leader and based on IPMG, indonesia’s market is one of fastest pharmaceutical industry growth in asia.