Total assets of the Merck Group amounted to € 21,643 million as of December 31, 2012 (December 31, 2011: € 22,122 million). This decrease was driven by the increased focus on working capital management and resulted in both lower trade accounts receivable and inventories. Non-current assets, mainly intangibles and property, plant and equipment, also decreased during the year.
Financial liabilities decreased during 2012 as bonds due for repayment totalling € 1 billion related to the 2010 acquisition of Millipore were repaid in March and December, respectively. On the other hand, provisions increased mainly as a result of the ongoing restructuring initiatives.
Financial liabilities were reduced by a further € 1,086 million to € 4,453 million as of December 31, 2012 (December 31, 2011: € 5,539 million) primarily as a result of the aforementioned bond repayment. Net financial debt (financial liabilities minus cash and cash equivalents as well as short-term securities and financial assets) decreased to € 1,926 million as of December 31, 2012 (December 31, 2011: € 3,484 million). Moody’s, a corporate financial rating agency, upgraded Merck’s long-term issuer and senior unsecured ratings to ‘Baa1’ with stable outlook from ‘Baa2’ in December 2012, citing the substantial deleveraging underpinned by solid cash flow generation. Standard & Poor’s raised the long-term credit rating to ‘A-’ with stable outlook from ‘BBB+’ in November 2012, expecting significant free operating cash flow to increase gradually over the next few years, in line with increasing sales and profit margins on the back of the efficiency program. Both ratings ensure that Merck will be able to benefit from attractive financing terms in the future. The factor of net financial debt to net cash flow from operating activities lessened from 2.7x as of December 31, 2011 to below 1x as of December 31, 2012, driven by both the reduction of financial debt as well as a strong operating cash flow.
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Merck Group | Working capital1 |
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€ million |
as of |
as of |
as of |
as of |
as of |
Change | ||
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Trade accounts receivable |
2,328.3 |
2,343.5 |
2,284.8 |
2,206.7 |
2,114.6 |
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Inventories |
1,691.1 |
1,658.9 |
1,667.6 |
1,609.6 |
1,533.9 |
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Trade accounts payable |
–1,100.8 |
–1,112.8 |
–1,216.5 |
–1,297.9 |
–1,288.3 |
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Working capital |
2,918.6 |
2,889.6 |
2,735.9 |
2,518.4 |
2,360.2 |
–19.1% | ||
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as % of sales |
29.5% |
28.9% |
26.7% |
23.9% |
22.0% |
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The focus on improving working capital (trade accounts receivable plus inventories minus trade accounts payable) resulted in working capital declining to 22.0% (in % of sales) as of December 31, 2012 (29.5% as of December 31, 2011).
Investments in property, plant and equipment amounted to € 329 million in 2012 (2011: € 366 million). This included for example investments in the Merck Millipore GMP bioproduction facility in Martillac (France), which provides customers with access to single-use process technologies. Due to the 2012 focus on implementing efficiency and restructuring measures, investments in property, plant and equipment remained behind projections (€ 360 million to € 380 million).
The equity ratio was 48.1% as of December 31, 2012 (December 31, 2011: 47.4%).
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