Merck 2008 Annual Report Download - page 25

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20 | Merck Annual Report 2008
The Performance & Life Science Chemicals division also suffered from negative cur-
rency effects as well as from the economic downturn in its effect pigments business.
Total revenues were unchanged at € 1,246 million. However, on a currency-adjusted
basis, growth amounted to 4.0%. The operating result rose by 15% to € 167 million.
This is primarily due to the low level of 2007, which included one-time expenses for
write-downs and restructuring measures. At 13.4%, return on sales was markedly
higher than 2007, when it amounted to 11.7%.
Sharp increase in profit after tax
Profit after tax from continuing operations was € 379 million. This was considerably
better than the negative value of € – 88 million in 2007, which stemmed from high
exceptional items due to the Serono acquisition. Adjusted for exceptional items, the
tax rate was 25.8%, compared to 28.2% in 2007. In 2007, profit after tax including
discontinued operations included the earnings contribution as well as the gain on the
disposal of the Generics business.
Dividend proposal
The objective of our dividend policy is to distribute, on a long-term average, a total
dividend equivalent to 30 – 40% of the Group profit after tax. We plan to propose to the
Annual General Meeting of Merck KGaA on April 3, 2009 a dividend of € 1.50 per share.
Free cash flow affected by higher business volume
In addition to return on sales (ROS), we consider free cash flow an important indicator
to assess the financial position of the company. In 2008, free cash flow amounted to
€ 438 million. In 2007, at € –1,473 million, this indicator reflected the acquisition of
Serono and the sale of the Generics business. Free cash flow adjusted for acquisitions
and disposals amounted to € 601 million in 2008, compared to € 978 million in 2007.
This decline is due mainly to an increase of € 112 million in working capital. Aside from
a higher business volume, the increase in receivables is due mainly also to the fact that
we terminated a program to sell receivables in Italy and now disclose the financing in
Free cash flow
€ million
2004 2005 2006 2007 2008
2,000
1,000
0
–1,000
Profit before tax
Profit after tax
0
3,600
2,400
1,200
0
Profit before and after tax
€ million
2004 2005 2006 2007 2008
Merck to propose a dividend
of € 1.50 per share to the
Annual General Meeting.