Merck 2008 Annual Report Download - page 62
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MANAGEMENT REPORT OF THE MERCK GROUP 57
24 Responsibility
26 Merck shares
30 Pharmaceuticals business sector
50 Chemicals business sector
12 Overall economic situation
14 Economic development
of Merck
15 Financial position and results
of operations
60 Corporate and Other
61 Risk report
64 Report on expected developments
64 Subsequent events
Efficient structures in place
Rise in operating result
Total revenues of the Performance & Life Science Chemicals division increased by 0.9%
to € 1,246 million in 2008. Currency effects, particularly in the United States and Asia,
impacted the division’s growth, which amounted to 4.0% on a currency-adjusted basis.
Gross margin increased by 2.3% to € 629 million. In comparison with the previous
year, which saw restructuring costs, the operating result rose by 15% to € 167 million.
At 13.4%, return on sales was better than in the previous year. Free cash flow decreased
by 56% to € 58 million, which was mainly the result of investments in property, plant
and equipment, as well as changes in working capital. In 2008, the Performance & Life
Science Chemicals division spent around € 58 million on research and development. We
consolidated our global chemical production organization in 2008 in order to serve our
markets more efficiently.
Growth in the most important markets of Asia
The division performed well in the most important markets of Asia, such as China and
India, which recorded growth of 15% and 10%, respectively. Robust growth of 8.7% was
also achieved in Latin America. In North America, sales dropped due to the economic
downturn that already began in the third quarter. Laboratory Products recorded a slight
nominal decline in sales compared with the previous year. The Pigments business, which
accounted for around one-fifth of the division’s total revenues, was the first to feel
the effects of the economic crisis. The automotive coatings business was particularly
impacted by declining production in the automotive industry. By contrast, the Life Sci-
ence Solutions businesses, which are less dependent on economic cycles and accounted
for around one-third of the division’s total revenues, achieved an increase in sales.
Performance & Life Science Chemicals | K
ey figures
€ million 2008 2007 ∆ in %
Total revenues 1,246 1,235 0.9
Gross margin 629 615 2.3
R&D 58 58 0.0
Operating result 167 144 15
Exceptional items –46 – –
Free cash flow (FCF) 58 132 –56
FCF before acquisi-
tions and disposals 67 132 –49
ROS in % 13.4 11.7 –
321
26%
142
12%
226
18%
552
44%
Performance & Life Science Chemicals
Sales by region | € million
Asia, Africa,
Australasia
North America
Latin America
Europe
www.merck-chemicals.com