Bayer: continuing growth momentum

2012 was a very successful year for the Bayer Group. "We continued to grow dynamically and achieved our targets for the Group. All the subgroups posted gains in sales and earnings before special items," said Bayer CEO Dr. Marijn Dekkers at the Financial News Conference in Leverkusen on Thursday. The life-science businesses registered particularly rapid growth and were strengthened by further progress in the innovation pipeline. Moreover, Bayer sharply expanded business in the emerging markets. Dekkers expressed his confidence for the company’s future development: "We expect to continue our record development in 2013 and beyond."

Sales of the Bayer Group grew by 8.8 percent in 2012, to EUR 39,760 million (2011: EUR 36,528 million). "Sales thus reached the highest level in our company’s 150-year history," said Dekkers. Adjusted for currency and portfolio effects (Fx & portfolio adj.), sales were up by 5.3 percent. The gain in the emerging markets, at 7.4 percent (Fx & portfolio adj.), was twice as large as in the industrialized countries. "In other words, our strategic focus on these markets of the future - and the investments we are making there - are paying off," Dekkers remarked.

EBIT declined by 4.6 percent to EUR 3,960 million (2011: EUR 4,149 million). Special items totaled minus EUR 1,711 million (2011: minus EUR 876 million). They included EUR 1,186 million in litigation expenses in connection with the Yasmin™/YAZ™ line of oral contraceptives. Of this figure, EUR 455 million was taken in the fourth quarter of 2012, primarily in connection with further provisions for the settlement in the United States of venous clot injury claims of which Bayer is currently aware and anticipated future claims. Further special charges for the year overall included EUR 396 million for restructuring measures and EUR 289 million for impairment of intangible assets. An offsetting effect came from gains of EUR 158 million from divestitures and EUR 114 million in adjustments of benefit entitlements.

EBIT before special items increased by 12.9 percent to EUR 5,671 million (2011: EUR 5,025 million). EBITDA before special items rose by 8.8 percent to EUR 8,284 million (2011: EUR 7,613 million). Contributing to this were a good business performance and savings from the efficiency program successfully completed in 2012. Earnings also benefited from positive currency effects totaling about EUR 400 million. Net income declined slightly by 1.0 percent to EUR 2,446 million (2011: EUR 2,470 million). Core earnings per share, however, improved by 10.8 percent to EUR 5.35 (2011: EUR 4.83).

Gross cash flow fell by 11.1 percent to EUR 4,599 million (2011: EUR 5,172 million), while net cash flow declined by 10.4 percent to EUR 4,532 million (2011: EUR 5,060 million). Net financial debt was level with December 31, 2011, at EUR 7.0 billion. "This included additional funding of EUR 1.0 billion for our pension fund in the fourth quarter of 2012," explained Chief Financial Officer Werner Baumann. "Our outstanding financial liabilities have a balanced maturity structure. We therefore intend to continue making repayments in the coming years entirely from our available liquidity and current cash flows," Baumann added.


"Bayer MaterialScience also contributed to the very good full-year performance," said Dekkers. Sales of the high-tech materials business rose by 6.2 percent (Fx & portfolio adj. 3.0 percent) to EUR 11,503 million (2011: EUR 10,832 million). While volumes were flat in Europe, the subgroup posted good gains in the other regions. In addition, MaterialScience was able to slightly raise prices in all regions except Asia/Pacific.

Business with raw materials for foams (Polyurethanes) improved by 7.9 percent (Fx & portfolio adj.). Contributing to this increase were higher volumes and prices in all product groups and regions. By contrast, high-tech plastics (Polycarbonates) declined by 7.1 percent (Fx & portfolio adj.) due to lower selling prices that resulted primarily from new production capacities on the world market. However, volumes as a whole were level year on year. Sales in the Coatings, Adhesives, Specialties business unit moved forward by 3.5 percent (Fx & portfolio adj.) as a result of the higher volumes and prices achieved in nearly all regions.

EBITDA before special items of MaterialScience advanced by 6.8 percent to EUR 1,251 million (2011: EUR 1,171 million). This increase was mainly the result of higher volumes, savings achieved from efficiency improvement measures and positive currency effects. By contrast, earnings were diminished by higher raw material and energy costs.

Bayer expects to increase spending for research and development to around EUR 3.2 billion (2012: EUR 3.0 billion). The company has planned capital expenditures of EUR 1.9 billion (2012: EUR 1.6 billion) for property, plant and equipment and EUR 0.4 billion (2012: EUR 0.4 billion) for intangible assets. Depreciation and amortization are expected to total about EUR 2.6 billion. As regards Bayer’s financial position, the company anticipates that net financial debt will total less than EUR 7.0 billion at the end of 2013.

For 2013 MaterialScience is planning a slight increase in sales on a currency- and portfolio-adjusted basis to about EUR 12 billion. That subgroup intends to further improve EBITDA before special items. For the first quarter of 2013, MaterialScience anticipates a currency- and portfolio-adjusted sales increase compared to the preceding quarter. The subgroup expects EBITDA before special items to come in at the level of the preceding quarter.

In the MaterialScience business, Bayer anticipates that it will be able to achieve a volume-driven expansion in business beyond the growth rate of the global economy. The current high capacities on the world market are likely to be absorbed by rising global demand in the coming years. Bayer nonetheless intends to respond to the commoditization of the business through further efficiency measures that should contribute 1.5 percentage points to the EBITDA margin before special items by 2015.

Source: Bayer