Report on Expected Developments

Owing to the good business performance in the first nine months and the very good organic sales growth in the third quarter, Merck is raising its sales forecast for the full year 2014 and expects to achieve slight organic sales growth compared to the previous year. Due to the successful acquisition of AZ Electronic Materials (AZ) and the related portfolio effect, Merck assumes overall that sales will increase to approximately € 11.0–€ 11.2 billion. With respect to the development of sales, we are taking into account negative foreign exchange effects of approximately 3% compared to the previous year and resulting from a decline in the value of the Japanese yen and especially Latin American currencies. As a result of the significant decline in the value of the euro against the U.S. dollar in the third quarter of 2014, we expect for the full year 2014 a U.S. dollar-euro exchange rate that is approximately at the previous year’s level.

Based on business performance in the first three quarters of 2014, Merck reiterates its forecast for EBITDA pre one-time items for the full year 2014. The planned efficiency increases should be able to offset the effects of the decline in royalty, license and commission income as well as the negative impact of foreign currency. Merck therefore expects EBITDA pre one-time items to grow moderately in comparison with the previous year as a result of the acquisition of AZ. Business free cash flow is forecast to decrease slightly in 2014 due to investments in growth projects, as well as against the background of the high level of repayments of overdue trade accounts receivable of southern European hospitals in the previous year.

Subsequent to the underlying organic sales growth in the first nine months of 2014, we expect slight organic sales growth in the Merck Serono division for the full year as well. We still expect a slight year-on-year decline in EBITDA pre one-time items of Merck Serono, particularly as a result of the expected decline in royalty, license and commission income, which will have a net effect of approximately € –100 million versus 2013.

For the Consumer Health division, we continue to forecast moderate organic sales growth in 2014. We expect that all regions and especially the core strategic brands to contribute to sales growth. EBITDA pre one-time items should likewise increase slightly in 2014 as a result of positive sales developments.

We expect that the Performance Materials division will achieve slight organic sales growth in 2014. In the Liquid Crystals business unit, we assume an expected strong volume increase amid the customary price decline for established products. Merck sees a slightly weaker than expected development of the Pigments & Cosmetics business unit, for which organic sales are forecast to reach the year-earlier level. As a result of the acquisition of AZ, overall Merck expects sales of the Performance Materials division to increase substantially despite slightly negative foreign exchange effects. EBITDA pre one-time items of the division should therefore also increase considerably in 2014. The integration costs resulting from the acquisition of AZ will amount to approximately € 50 million, approximately € 10 million of which will be incurred in 2014.

The Process Solutions business area should remain the main growth driver of the Merck Millipore division, for which Merck continues to assume moderate organic sales growth in 2014 compared to the previous year. We expect that this growth will be slightly lowered by negative foreign exchange effects. Based on the resulting sales growth and a stable cost level, we expect EBITDA pre one-time items of the Merck Millipore division to increase slightly in 2014 over the year-earlier level.

The assumptions of market and exchange rate developments lead to the following forecast of business performance for the full year 2014:

Earnings per share pre one-time items ~ € 4.50 – € 4.75 (based on the number of shares following the share split, which was approved by the Annual General Meeting on May 9, 2014).

Full-year FX assumptions for 2014:
€ 1 = US$ 1.33
€ 1 = JPY 140