Forecast for the Performance Materials division 

After a strong 2013, the Performance Materials division will be able to maintain its leadership position in the liquid crystals market and to deliver slight growth in the Pigments & Cosmetics business unit in 2014.

We expect in 2014 at best stable sales from the Liquid Crystals business unit. Despite volume growth, prices for established products will decline further. Volumes in the display industry are forecast to increase in 2014 after a moderate development in 2013 according to market researchers from Display Search. LC will remain by far the leading technology and display size will remain the main growth driver. New, innovative liquid crystal technologies will continue to strengthen the market. For example, Merck is advancing nicely with the development of SA-VA technology, which is likely to enter the market in 2015. Display production focus will be shifting gradually to China, where Merck’s new facility in Shanghai will be inaugurated in 2014 to support growth close to main customers.

For Merck’s Pigments & Cosmetics business unit, the markets are assumed to continue to offer attractive growth rates in the future. As in Merck’s other divisions, the need for innovative products and the shift in demand to Emerging Markets and thereby in particular to China, can be observed. Sales by the Pigments & Cosmetics business unit are expected to increase slightly driven by Xirallic® effect pigments.

Overall Merck expects at best stable sales for the Performance Materials division in 2014 as stable organic growth might be offset by a slight contraction of reported sales due to an unfavorable foreign exchange development. Lower prices in Liquid Crystals and additional volumes will put some pressure on the divisional gross margin, whereas marketing & selling expenses and administration costs will be maintained largely at the 2013 level. R&D expenses will be slightly increased with a focus on investments in the OLED area and future LC technologies. As a result of this, we forecast for 2014 at best an EBITDA pre one-time items for Performance Materials at the level of 2013. Business free cash flow is expected to decrease moderately as the division raises its investments in property, plant and equipment in 2014 to support the “Fit for 2018” transformation and growth program and to optimize its capacities.

If the acquisition of AZ Electronic Materials takes place, Merck expects a significant increase in sales, EBITDA pre one-time items as well as business free cash flow for the Performance Materials division in 2014 compared to 2013.