Report on Expected Developments

With the publication of the results of 2013, Merck provided a forecast of expected sales, EBITDA pre one-time items and business free cash flow for the Merck Group and its divisions for 2014. Owing to business performance in the first quarter of 2014, Merck confirms its forecast for the full year 2014 despite anticipated negative foreign exchange effects. The latter will stem mainly from the U.S. dollar and the Japanese yen, yet also from the Brazilian real, the Argentinean peso and additional currencies. Relative to the sales of the Merck Group, we therefore currently assume negative exchange rate effects of approximately 3–4% compared to the previous year.

Merck continues to expect for 2014 slight organic sales growth, which will be cancelled out by the aforementioned negative foreign exchange effects. Due to the successful acquisition of AZ Electronic Materials and the related portfolio effect, Merck assumes that sales will increase to around € 10.9–€ 11.1 billion. It will be possible for the planned efficiency increases to offset the effects of the decline in royalty, license and commission income as well as negative exchange rate movements. This leads us to expect EBITDA pre one-time items to grow moderately in comparison with the previous year notably due to the acquisition of AZ Electronic Materials. Business free cash flow is forecast to decrease slightly due to investments in growth projects.

For the Merck Serono division, stable organic sales are assumed. It can be expected that the well-balanced product portfolio as well as organic growth in the Emerging Markets region will offset the declines in sales of Rebif® in the United States and Europe. EBITDA pre one-time items of Merck Serono should decrease slightly in 2014 as forecast, particularly as a result of the expected decline in royalty, license and commission income, which will have a net effect of more than € 100 million versus 2013. The negative impact from the absence of royalty, license and commission income for Avonex®, Enbrel® and Humira® will be partially offset by the co-promotion agreement for Glucophage® in China entered into with Bristol-Myers Squibb in 2013.

For the Consumer Health division, we forecast moderate organic sales growth in 2014. We expect all regions and especially the core strategic brands to contribute to sales growth. EBITDA pre one-time items should increase moderately in 2014 within the framework of sales developments.

We assume that the Performance Materials division will achieve slight organic sales growth in 2014. We continue to assume the expected volume increase in the Liquid Crystals business unit amid the normal price decline for established products. The Pigments & Cosmetics business unit should benefit from the positive development of the global automotive market and generate a slight organic increase in sales. As a result of the acquisition of AZ Electronic Materials, overall Merck expects sales of the Performance Materials division to increase substantially despite strong negative foreign exchange effects. EBITDA pre one-time items of the Performance Materials division should therefore also increase considerably in 2014.

The market environment of Merck Millipore should allow us to report in 2014 moderate organic sales growth, which will however be partly cancelled out by foreign exchange effects. Organic growth should be driven in particular by the positive development of the Process Solutions and Lab Solutions business units. Based on sales growth, we expect EBITDA pre one-time items of the Merck Millipore division to increase slightly in 2014.

Based on the aforementioned assumptions, Merck is expecting for the full year 2014 the following business performance:

Earnings per share pre one-time items ~ € 9.00 – 9.50 (based on number of shares before the share split that was approved by the Annual General Meeting on 9, May 2014).

Full-year FX assumptions for 2014:
€ 1 = US$ 1.36
€ 1 = JPY 141