Overall our forecast assumes a moderate increase in energy and raw material prices, as well as increasing personnel costs. Since we produce specialty chemicals, the volatility of oil prices does not have a direct impact on our business. As a company that operates globally, Merck is exposed to a variety of foreign exchange risks, arising especially from the U.S. dollar. Targeted hedging measures are taken to offset these risks to a certain degree.
Against the background of expected and the aforementioned overall economic developments, the Executive Board assumes that sales of the Merck Group will show moderate organic growth in 2013 and 2014. We do expect, however, that as in the last two years, all our businesses operating in the European Union will be exposed to pricing pressure as a result of structural problems such as pressure on public funding deficits, governmental indebtedness and increased competition. In Performance Materials, some erosion of the high market share in the Liquid Crystals (LC) business cannot be excluded. All of this could have a negative impact on our sales. With regard to our main performance indicator, EBITDA pre, the Executive Board expects that the Merck Group will again be able to post an increase in 2013 and 2014 resulting from net savings achieved via the “Fit for 2018” efficiency program. Reported EBITDA will increase markedly in 2013 since the vast majority of one-time costs of the efficiency program were already incurred in 2012. We continue to expect a tax ratio of around 25% in both 2013 and 2014.
We expect that free cash flow will again be high in 2013 and 2014. The majority of the cash payments for the efficiency program will be due in 2013, which will lead to around € 300 million in additional cash payments in comparison to 2012. The financial liabilities of the Merck Group should further decrease in the coming years, also as a result of our high free cash flow generation. Capital spending on property, plant and equipment is expected to increase to around € 450 million in 2013 and among others includes capital investments in our efficiency prgram. In 2014, the investments should remain at the same level. We expect the equity ratio to increase slightly and to remain at a high level in both 2013 and 2014.
Apart from Europe, Merck considers Brazil, China, India, Japan, Mexico, South Korea, and the United States to be strategically important. Details on the respective business forecasts and expected developments for these countries can be found in the forecasts for the divisions.
search hit 15
