Underlying free cash flow reflects good business performance Audited

The free cash flow of the Merck Group in 2010 was also strongly affected by the acquisition of Millipore. It amounted to EUR –3,522 million compared to EUR 812 million in 2009. By contrast, adjusted for the effects of acquisitions and divestments, underlying free cash flow rose from EUR 852 million in 2009 to EUR 1,670 million, an increase of 96%.

Firstly, this increase is due to the strong improvement in the performance of the Chemicals business sector compared to 2009. This business sector’s contribution to underlying free cash flow rose from EUR 432 million in 2009 to EUR 812 million in 2010, a rise equivalent to around 88%. Secondly, the Pharmaceuticals business sector accounted for 48% or EUR 1,353 million of underlying free cash flow, which was also mainly the result of good business performance. Underlying free cash flow for Corporate and Other, which also includes interest and tax payments, amounted to EUR –496 million, which was nearly consistent with 2009.

Cash flow was lowered by payments amounting to EUR 241 million in connection with our former subsidiary Dey Inc., USA, having allegedly reported false price information. EUR 215 million of these costs relate to the settlement with the U.S. Department of Justice. Although the company Dey Inc. was transferred to Mylan Inc., USA, within the scope of the divestment of the Generics business in 2007, Merck remains liable to Mylan for the costs of this litigation. The overall effect is reported in the segment Corporate and Other but was eliminated in the calculation of underlying free cash flow as adjustments for the divestment of the Generics business.

Free cash flow and underlying free cash flow

Free cash flow and underlying free cash flow – 5-year diagram (bar chart)