Merck 2014 Annual Report Download - page 93

88 GROUP MANAGEMENT REPORT → REPORT ON ECONOMIC POSITION → Course of business and economic position
The consolidated income statement of the Group is as follows:
GROUP →
CONSOLIDATED INCOME STATEMENT
2014 2013 Change
€ million in % € million in % € million in %
Sales 11,291.5 100.0 10,700.1 100.0 591.4 5.5
Royalty, license and commission income 209.3 1.9 395.0 3.7 –185.7 – 47.0
Total revenues 11,500.8 101.9 11,095.1 103.7 405.7 3.7
Cost of sales1– 3,526.4 – 31.2 – 3,041.7 – 28.4 – 484.7 15.9
(of which: amortization of intangible assets)1(– 94.0) (– 49.2) (– 44.8) (91.2)
Gross profit17,974.4 70.6 8,053.4 75.3 – 79.0 – 1.0
Marketing and selling expenses1– 3,104.9 – 27.5 – 3,088.5 – 28.9 –16.4 0.5
(of which: amortization of intangible assets)1(– 719.0) (– 762.0) (43.0) (– 5.7)
Royalty, license and commission expenses – 537.5 – 4.8 – 567.0 – 5.3 29.5 – 5.2
Administration expenses – 608.6 – 5.4 – 562.4 – 5.3 – 46.2 8.2
Research and development costs1–1,703.7 –15.1 –1,506.6 –14.1 – 197.1 13.1
(of which: amortization of intangible assets)1(– 3.8) (– 2.3) (– 1.5) (64.6)
Other operating expenses and income – 257.7 – 2.3 – 718.1 – 6.7 460.4 – 64.1
Operating result (EBIT) 1,762.0 15.6 1,610.8 15.1 151.2 9.4
Financial result – 205.0 –1.8 – 222.2 – 2.1 17.2 – 7.7
Profit before income tax 1,557.0 13.8 1,388.6 13.0 168.4 12.1
Income tax – 392.2 – 3.5 –179.5 –1.7 – 212.7 118.4
Profit after tax 1,164.8 10.3 1,209.1 11.3 – 44.3 – 3.7
Attributable to non-controlling interests – 7.5 – 0.1 – 6.9 – 0.1 – 0.6 8.4
Net income 1,157.3 10.2 1,202.2 11.2 – 44.9 – 3.7
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.
Royalty, license and commission income declined by – 47.0 % to
€209 million in 2014 (2013: €395 million). This sharp drop of
€–186 million was mainly due to the decrease in royalty, and li-
cense and commission income in the Biopharmaceuticals division.
Total revenues (sales plus royalty, license and commission income)
rose by 3.7 % to €11,501 million (2013: €11,095 million).
Including cost of sales, which increased by 15.9 % to €3,526
million in 2014, the Group recorded gross profit of €7,974 million
(2013: €8,053 million). The strong increase in cost of sales was
due among other things to organic sales growth in all divisions, as
well as the first-time consolidation of AZ. As part of the purchase
price allocation, the acquired inventories of AZ were
stepped up
to fair values on the date of first-time consolidation. In
2014,
€45 million of this step-up was recognized as an expense
in cost
of sales. In addition, cost of sales of the Performance
Materials
division rose due to the amortization of intangible assets in con-
nection with the AZ purchase price allocation. Along with stron-
ger sales growth in regions with lower margins as well as isolated
production and supply bottlenecks in the Biopharmaceuticals
division, gross margin, i.e. gross profit as a percentage of sales,
declined to 70.6 % (2013: 75.3 %) in 2014. In addition to the afore-
mentioned effects, the sharp decline in royalty, license and com-
mission income also had a negative effect on gross margin.