Capital Structure, Investments, and Financing Activities

(34) Equity

Equity capital/Capital reserves

The equity capital of the company consisted of the subscribed capital composed of shares and the equity interest held by the general partner E. Merck KG (general partner’s equity). As of the balance sheet date, the company’s subscribed capital amounting to € 168 million was divided into 129,242,251 no-par value bearer shares plus one registered share. Each share therefore corresponded to € 1.30 of the subscribed capital. The amount resulting from the issue of shares by Merck KGaA exceeding the nominal amount was recognized in the capital reserves. The equity interest held by the general partner amounted to € 397 million. As in the previous year, there were no changes in subscribed capital in fiscal 2023.

Retained earnings

Retained earnings developed as follows:

Gains/losses recognized in equity

Gains/losses recognized in equity developed as follows (see also Note (39) “Derivative financial instruments”):

E. Merck KG’s share of net profit

E. Merck KG and Merck KGaA engage in reciprocal net profit transfers. This makes it possible for E. Merck KG, the general partner of Merck KGaA, and the shareholders to participate in the net profit/loss of Merck KGaA in accordance with the ratio of the general partner’s equity interest and the subscribed capital (70.274% or 29.726% of the equity capital).

The allocation of net profit/loss is based on the net income of both E. Merck KG and Merck KGaA, determined in accordance with the provisions of the German Commercial Code. These figures are adjusted for trade tax and/or corporation tax and create the basis for the allocation of net profit/loss. The adjustment for corporation tax is made to compensate for the difference in the tax treatment between the general partner and the limited liability shareholders. Corporation tax is only calculated on the income received by the limited liability shareholders. Its equivalent is the income tax applicable to the partners of E. Merck KG which must be paid by them directly. The adjustment thus ensures that the share in net profit corresponds to the respective interests held by the two shareholder groups.

The reciprocal net profit/loss transfer between E. Merck KG and Merck KGaA as stipulated by the Articles of Association was as follows:

The result of E. Merck KG adjusted for trade tax, on which the appropriation of profits is based, amounted to € ‑12 million (2022: € 23 million). This resulted in a profit/loss transfer to Merck KGaA of € -4 million (2022: € 7 million). Merck KGaA’s net income adjusted for corporation tax, on which the appropriation of its profit is based, amounted to € 985 million (2022: € 974 million). Merck KGaA transferred a profit of € 692 million to E. Merck KG (2022: € 684 million). In addition, an expense from corporation tax charges was reported in the amount of € 4 million (2022: expense of € 54 million).

Appropriation of profits

The profit distribution to be resolved by shareholders also defines the amount of that portion of net profit/loss freely available to E. Merck KG. If the shareholders resolve to carry forward or to allocate to retained earnings a portion of Merck KGaA’s net retained profit to which they are entitled, E. Merck KG shall be obliged to allocate to the profit carried forward/retained earnings of Merck KGaA a comparable sum determined according to the ratio of subscribed capital to general partner’s equity. This ensures that the retained earnings and the profit carried forward by Merck KGaA correspond to the ownership ratios of the shareholders on the one hand and E. Merck KG on the other hand. Consequently, for distributions to E. Merck KG, the available amount is the amount that results from netting the profit transfer of Merck KGaA with the amount either allocated or withdrawn by E. Merck KG from retained earnings/profit carried forward. This amount corresponds to the sum paid as a dividend to the shareholders and reflects their pro rata shareholding in the company.

Based on the profit transfer, the appropriation of profits by Merck KGaA was as follows:

A dividend of € 2.20 per share was distributed for fiscal 2022. The dividend proposal for fiscal 2023 is unchanged at € 2.20 per share. With the proposed dividend payment to shareholders amounting to € 284 million (2022: € 284 million), the profit carried forward of the shareholders after the dividend payment would amount to € 34 million (2022: € 34 million). Based on the proposed dividend payment to the shareholders, E. Merck KG would be entitled to withdraw € 682 million (2022: € 801 million), meaning that E. Merck KG would be entitled to a profit brought forward of € 81 million (2022: € 80 million).

Appropriation of profits and changes in reserves

Based on the proposed appropriation of profits, the profit transfer to E. Merck KG for fiscal 2023, including changes in reserves, amounted to € -746 million. This consisted of the profit/loss transfer to E. Merck KG (€ ‑692 million), the profit transfer to Merck KGaA (€ -4 million), the change in profit carried forward by E. Merck KG (€ 1 million) and the profit transfer from Merck & Cie KmG, Switzerland, to E. Merck KG (€ ‑52 million). In the previous year, the profit transfer to E. Merck KG including changes in reserves amounted to -868 million. This consisted of the profit transfer to E. Merck KG (€ -684 million), the profit transfer to Merck KGaA (€ 7 million), the change in profit carried forward by E. Merck KG (€ -100 million) and the profit transfer from Merck & Cie KmG to E. Merck KG (€ -90 million) and was paid to E. Merck KG in fiscal 2023. Merck & Cie KmG is a partnership under Swiss law that is controlled by Merck KGaA but distributes its operating result directly to E. Merck KG. This distribution is a payment to shareholders and is therefore also presented under changes in equity.

Non-controlling interests

The calculation of non-controlling interests was based on the reported equity of the subsidiaries concerned.

The non-controlling interests in consolidated equity and profit or loss essentially related to the non-controlling interests in Versum Materials Taiwan Co., Ltd., Taiwan; Merck Ltd., Thailand; and in the listed company PT Merck Tbk., Indonesia.