Merck 2014 Annual Report Download - page 52

47GROUP MANAGEMENT REPORT → FUNDAMENTAL INFORMATION ABOUT THE GROUP → The Group
PERFORMANCE MATERIALS
Performance Materials comprises the Group’s entire specialty
chemicals business. The portfolio includes high-tech performance
chemicals for applications in fields such as consumer electronics,
lighting, coatings, printing technology, plastics, and cosmetics.
The acquisition in May2014 of AZ Electronic Materials (AZ), a
leading supplier of high-tech materials for the electronics industry,
significantly strengthened Performance Materials.
Performance Materials’ share of Group sales increased in 2014
to 18 % (2013: 15 %) and its share of EBITDA pre one-time items
(excluding Corporate and Other) rose to 25 % (2013: 23 %). The
results of AZ have been included since May2, 2014. The EBITDA
margin pre one-time items amounted to 43.4 % of sales.
Up until December31, 2014, i.e. during the reporting period,
Performance Materials consisted of four business units: Liquid
Crystals, Pigments & Cosmetics, Advanced Technologies and AZ.
Effective January1, 2015, Performance Materials was organized
into the following business units: Display Materials, Pigments &
Functional Materials, Integrated Circuit Materials comprising the
AZ business with specialty chemicals for use in integrated circuits
(semiconductors), as well as Advanced Technologies.
The Liquid Crystals business, which became part of the Display
Materials business unit on January1, 2015, generated more than
half of Performance Materials’ sales in 2014. With a high market
share, Merck KGaA, Darmstadt, Germany, has established itself
as the global market and technology leader in liquid crystal mix-
tures. The market is highly consolidated. In addition, barriers to
market entry exist due to the technological complexity of liquid
crystals and the high quality requirements of customers and con-
sumers. The seven largest LC display manufacturers are primarily
among the customers of the Liquid Crystals business. The company
has the broadest product offering in the industry and offers,
among other things, liquid crystals based on PS-VA and IPS tech-
nologies. This enables Performance Materials to meet individual
customer needs and offer solutions for all display sizes, from
smartphones and tablet computers to large-size television screens.
The Group is pursuing a strategy of leveraging its expertise in
liquid crystals in order to develop new fields of application for
innovative liquid crystal technology. On July1, 2014, the company
completely acquired Peer+, a Dutch specialist for smart window
technology. The company has mean
while been fully integrated.
With the acquisition of its long-
standing cooperation partner
Peer+, the Group is further advancing the development of the
fu
ture-oriented market for liquid crystal windows ( LCW ). The major
i
nnovation of liquid crystal windows lies in their continuously
variable switching functionality from light to dark in just seconds.
In January2015, the first LCW panels were installed in the new
modular Innovation Center in Darmstadt.
At the same time, the
new technology is being presented to a wider
audience at exhibi-
tions and congresses.
The Pigments & Functional Materials business unit develops
and markets a comprehensive product portfolio of decorative
effect pigments and functional materials. The effect pigments are
primarily used in automotive and industrial coatings, plastics,
printing applications, and cosmetics in order to give products a
unique shine. Functional materials include laser marking, conduc-
tive additives and applications for counterfeit protection, as well
as high-quality cosmetic active ingredients, for example for use in
skin care, sun protection or insect repellants.
Merck KGaA, Darmstadt, Germany, completed the integration
of AZ and its global workforce of around 1,100 employees accord-
ing to schedule by the end of 2014. During the integration phase
in 2014, AZ was treated as an independent business unit within
Performance Materials for reporting purposes. On January1, 2015,
AZ was transferred to the Integrated Circuit Materials business
unit. As a key partner to leading global electronics manufacturers,
in 2014 AZ generated nearly 80 % of its sales in Asia. AZ materials
are widely used in integrated circuits, flat-panel displays and
light-emitting diodes. The AZ portfolio thus optimally comple-
ments the range of materials offered by Performance Materials.
The Advanced Technologies business unit invests in future-
oriented research and development, supporting the growth and
sustainable competitiveness of Performance Materials. The busi-
ness unit also manufactures and markets materials for organic
light-emitting diodes (OLEDs), which are used in new lighting
applications and display technologies. The performance of the
OLED materials business was very positive in 2014. The demand
for OLED materials from the company increased significantly, par-
ticularly in Asian countries. At the same time, the customer base
expanded.