Merck 2014 Annual Report Download - page 117

112 GROUP MANAGEMENT REPORT → REPORT ON ECONOMIC POSITION → Performance Materials
The results of operations developed as follows:
PERFORMANCE MATERIALS →
RESULTS OF OPERATIONS
2014 2013 Change
€ million in % € million in % € million in %
Sales 2,059.6 100.0 1,642.1 100.0 417.5 25.4
Royalty, license and commission income 0.9 0.0 2.3 0.1 –1.4 – 63.1
Total revenues 2,060.5 100.0 1,644.4 100.1 416.1 25.3
Cost of sales1– 983.2 – 47.7 – 617.1 – 37.6 – 366.1 59.3
(of which: amortization of intangible assets) 1 (– 46.4) (– 1.2) (– 45.2) (–)
Gross profit11,077.3 52.3 1,027.3 62.6 50.0 4.9
Marketing and selling expenses1–177.8 – 8.6 –151.6 – 9.2 – 26.2 17.3
(of which: amortization of intangible assets) 1 (– 11.7) (– 11.1) (– 0.6) (6.0)
Royalty, license and commission expenses –1.1 – 0.1 –1.3 – 0.1 0.2 –13.4
Administration expenses – 56.1 – 2.7 – 27.8 –1.7 – 28.3 101.4
Research and development costs1–170.6 – 8.3 –145.4 – 8.9 – 25.2 17.4
(of which: amortization of intangible assets) 1 (– 2.8) (– 2.3) (– 0.5) (22.6)
Other operating expenses and income – 60.2 – 2.9 – 47.9 – 2.9 –12.3 25.9
Operating result (EBIT) 611.5 29.7 653.3 39.8 – 41.8 – 6.4
Depreciation / Amortization / Reversals of impairments 192.1 9.3 112.5 6.9 79.6 70.9
(of which: one-time items) (–) (– 3.7) (3.7) (–)
EBITDA 803.6 39.0 765.8 46.6 37.8 4.9
Restructuring costs 6.0 11.1 – 5.1 – 46.1
Integration costs / IT costs 12.2 2.8 9.4 –
Gains / losses on the divestment of businesses 4.6 – 4.6 –
Acquisition-related one-time items 68.4 – 68.4 –
Other one-time items – – – –
EBITDA pre one-time items 894.8 43.4 779.7 47.5 115.1 14.8
1 The disclosure of amortization of intangible assets (excluding software) has been changed. See “Accounting and measurement principles“ in the Notes to the Group accounts.
The development of the results of operations was significantly influ-
enced by the inclusion of AZ. In particular, the sharp increase in
cost of sales in 2014 related mainly to the first-time consolidation
of AZ. The inventories from the acquisition were stepped up to fair
values on the date of first-time consolidation. In 2014, the step-up
of € 45 million was included as an expense in cost of sales. In
addition, cost of sales rose due to the amortization of intangible
assets in connection with the AZ purchase price allocation. As a
consequence of these one-time expenses, the consolidated contri-
bution of AZ to divisional gross profit was low in 2014. The gross
margin of Performance Materials fell accordingly to 52.3 % (2013:
62.6 %). The decrease in the operating result (EBIT) to €611 mil-
lion was due among other things to the described AZ inventory
revaluation, which was recognized as an expense as well as addi-
tional one-time expenses in connection with the acquisition of
AZ. During the determination of EBITDA pre one-time items,
these one-time effects from the inventory revaluation were added
back. EBITDA pre one-time items thus includes the adjusted earn-
ings contribution from AZ. Along with the very successful busi-
ness performance of Liquid Crystals, EBITDA pre one-time items
thus rose in 2014 by 14.8 % to €895 million. The EBITDA margin
pre one-time items fell to 43.4 % (2013: 47.5 %), reflecting in par-
ticular the lower margin of the AZ business.