Net assets and financial position Audited

The total assets of the Merck Group declined in 2013 by € –825 million or –3.8% to € 20,819 million (2012: € 21,643 million). This decline was due, among other things, to the repayment of a bond with a nominal volume of € 750 million as well as the cash transfer of € 200 million to plan assets to cover pension obligations in Germany. Total assets decreased in 2013 because plan assets were netted with pension obligations. Exchange rate changes also lowered total assets. Whereas current assets increased by € 758 million, non-current assets declined by € –1,583 million. The increase in current assets resulted mainly from the development of cash and cash equivalents, which increased by € 251 million, as well as of liquid financial assets, which increased by € 613 million, despite the bond repayment and the cash transfer to the plan assets. This reflects the excellent liquidity position of the Merck Group. The decline in non-current assets was due mainly to depreciation and amortization of intangible assets as well as property, plant and equipment. Goodwill included in intangible assets amounted to € 4,583 million (2012: € 4,696 million) and was thus approximately at the same level as in 2012. The ratio of non-current assets to total assets (asset ratio) declined from 69.4% to 64.5%.

On the liabilities side, equity increased by € 654 million to € 11,069 million (2012: € 10,415 million). The main driver of this increase was profit after tax of € 1,209 million in 2013. The increase was counterbalanced mainly by negative exchange rate changes as well as dividend payments for 2012. As of December 31, 2013, the equity ratio increased by more than five percentage points to 53.2% (2012: 48.1%). Owing to the increase in equity on the one hand and the decrease in non-current assets on the other hand, asset coverage as of December 31, 2013 improved significantly to 82.4% (2012: 69.4%). Asset coverage indicates to what extent non-current assets are covered by equity. Current liabilities declined mainly owing to the repayment of the bond with a nominal volume of € 750 million that matured in 2013. The decline in non-current liabilities was largely the result of lower pension provisions as well as the decline in deferred tax liabilities. The sum of current and non-current liabilities declined by € –1,479 million to € 9,749 million from € 11,228 million. This excellent decline of –13.2% strengthened the consolidated balance sheet further. The financing structure (ratio of current liabilities to total liabilities) also improved. As of December 31, 2013, short-term liabilities were 40.0% of total liabilities (2012: 40.6%).

Financial liabilities were reduced by € –756 million in 2013, amounting to € 3,698 million as of December 31, 2013 (2012: € 4,454 million). Owing to the increase in cash and cash equivalents, the decrease in net financial debt was even greater than that of financial liabilities. In 2013, net financial debt decreased by € –1,619 million or –84.1% to € 307 million (2012: € 1,926 million). Expected future cash flows such as repayments and interest from financial liabilities are presented in the consolidated financial statements under Note [57] “Management of financial risks”.

Following a sharp reduction in working capital in 2012, a further substantial decrease of –9.7% to € 2,132 million was achieved in 2013. Consequently, working capital decreased to 19.9% of sales (2012: 22.0%).