Pigments & Cosmetics: Economic developments and inventory reductions impact business Audited

As a result of a decline in demand, total revenues of the Pigments & Cosmetics business unit decreased to € 372 million in 2011 from € 393 million in 2010. Besides the natural disaster in Japan and the associated production outages at our site in Onahama, global economic developments also impacted our Pigments business. Consequently, after a strong start to the year, many of our customers began to reduce inventories. Business with cosmetic active ingredients performed well in the course of the year.

Owing to continuously rising energy and raw material costs, effective November 1, Merck increased its prices for pigments and cosmetic raw materials by 5% to 15% – in individual cases by as much as 30%. The prices for Xirallic® pearl effect pigments were also raised. These pigments are used in high-quality automotive coatings and continue to be a mainstay of our Pigments business. Our decision to establish a second production site for Xirallic® effect pigments outside of Japan will enable us to significantly increase our supply reliability for this very important part of our portfolio.

In 2011, Merck significantly strengthened its expertise both in cosmetic functional fillers and active ingredients as well as in the core business with pearl effect pigments. In addition, we continue to focus our innovation efforts on high value-added segments. We are achieving this by developing products that make it possible to design entirely new effects and by resolutely expanding our highly specialized applications expertise.