Merck 2014 Annual Report Download - page 100

95GROUP MANAGEMENT REPORT → REPORT ON ECONOMIC POSITION → Course of business and economic position
Not presented: Decline in Group business free cash flow by € – 215 million due to Corporate and Other.
GROUP →
BUSINESS FREE CASH FLOW BY DIVISION – 2014
€ million / in %
%
Biopharmaceuticals → 1,577.2
Consumer Health → 124.0
Performance Materials → 699.6
Life Science → 419.0
4
25
15
56
In 2014, all four operating divisions generated lower business free
cash flow than in 2013. The Biopharmaceuticals division generat-
ed business free cash flow amounting to €1,577 million (2013:
€1,787 million), thus raising its contribution to Group business
free cash flow to 56 % (2013: 55 %). This excludes the decline of
€– 215 million due to Corporate and Other. Performance Materials
contributed €700 million (2013: €788 million) to this Group fi-
nancial indicator, equivalent to 25 % (2013: 24 %). Taken together,
the Life Science and Consumer Health divisions contributed 19 %
(2013: 21 %) to Group business free cash flow.
The investments in property, plant, equipment and software
included in the calculation of business free cash flow as well as
advance payments for intangible assets increased in 2014 by 18.2 %
to a total of €528 million (2013: €446 million). The investments
in property, plant and equipment included therein amounted to
€485 million in 2014 (2013: €408 million), of which €220 million
was attributable to strategic investment projects each with a project
volume of more than €2 million; the remainder was attributable
to smaller capital spending projects.
In 2014, significant investments were approved for the expan-
sion of the Darmstadt site. Some of these investments will serve to
upgrade global headquarters. This includes the construction of an
Innovation Center, a Visitors Center and an employee restaurant.
A new laboratory building involving a total investment of €65
million will bundle the pharmaceutical research activities of the
Biopharmaceuticals division as of 2017. Moreover, OLED production
capacity in the Performance Materials division will be expanded by
an investment of €31 million in order to meet growing market
demand.
Production facilities at two further locations of the Biopharma-
ceuticals division are being significantly expanded. At the Aubonne
site in Switzerland, €27 million is being invested in a new pack-
aging unit and at the Bari site in Italy, €49 million is being invested
in the expansion of the existing filling unit.
In 2014, the two rating agencies Moody’s and Standard &
Poor’s adjusted the Group’s long-term credit ratings owing to the
expected higher level of debt in the course of the acquisition of
Sigma-Aldrich. While Standard & Poor’s has now issued a rating
of “A” with negative outlook, (previously: “A” with stable outlook),
Moody’s changed its rating from “A3” with stable outlook to “Baa1”
with negative outlook. An overview of the development of the
company’s rating for the period from 2009 to 2014 is presented in
the Report on Risks and Opportunities.
In October 2014, the Group renewed its Debt Issuance Program
with a volume of €15 billion. The Debt Issuance Program forms
the contractual basis for issuing bonds, thus giving the company
flexibility in its issuing activities. It represents an important element
of the Group’s financing activities.