The Performance Materials division primarily comprises Merck’s Liquid Crystals and Pigments & Cosmetics business units.
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Performance Materials | Key figures |
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€ million |
Q3 – 2011 |
Q3 – 2010 |
Jan.–Sep. |
Jan.–Sep. |
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Total revenues |
341.7 |
360.4 |
1,123.8 |
1,114.5 |
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Gross margin |
195.7 |
241.5 |
658.5 |
733.5 |
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Research and development |
–34.3 |
–33.4 |
–100.9 |
–94.7 |
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Operating result |
112.9 |
148.7 |
386.0 |
447.6 |
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Exceptional items |
–0.1 |
– |
157.3 |
– |
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Free cash flow |
153.5 |
158.9 |
606.0 |
418.5 |
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Underlying free cash flow |
153.5 |
165.4 |
405.1 |
425.0 |
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ROS in % |
33.0 |
41.2 |
34.3 |
40.2 |
Third-quarter total revenues of the division declined 5.2% year-over-year to € 342 million. Currency exchange rates lowered revenue growth by 1.7% and the divestment of the division’s Crop BioScience business in February subtracted another 2.2 percentage points from growth, resulting in an organic revenue decline of 1.3% in the third quarter.
Third-quarter sales for the Liquid Crystals business unit increased organically by just 2.4% in the quarter as customers reduced stocks in the third quarter in response to a weaker economic environment. Similar to the trend that the division saw in the second quarter, the primary driver of sales in the third quarter was solid volume demand for Merck’s broad range of innovative liquid crystal materials, which are used in flat panel screens for televisions and computer monitors as well as touch screens for the very popular smart phones and electronic tablets.
Performance Materials | Sales by region – Q3
Sales by the Pigments & Cosmetics business unit declined 12% organically during the third quarter due to lower volumes and softer demand across all business fields.
On September 21, Merck announced a global price increase for all its pigments and cosmetics raw materials, in most cases up by 5% to 15% and in select cases by as much as 30%. The new prices, which take effective November 1, 2011, reflect the higher costs of energy and raw materials.
Reactive mesogens and other optic materials are beginning to make a noticeable contribution to the division’s revenue stream. Reactive mesogens are liquid crystalline materials that can either be coated onto flexible plastic foils to form compensation films or be used inside a display to form in-cell optical elements. Their main application at this time is in 3D displays, such as in flat-panel televisions.
The division’s gross margin dropped 19% to € 196 million from € 242 million in the year-ago quarter. This decrease was due to lower revenue and an unfavorable product mix, as well as lower utilization rates, increased raw material costs and additional expenses linked to new product launches.
Research and development costs rose 2.7% to € 34 million, or 10% of total revenues.
This led to a 24% decline in the third-quarter EBIT to € 113 million, or 33.0% of revenues, compared to € 149 million, or 41.2% of revenues in the third quarter of 2010.
Through the first nine months of the year, the division generated 4.4% organic revenue growth and posted an underlying core operating result of € 395 million, or 35.1% of revenues.
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