Bayer: Very successful start to 2014

The Bayer Group started the year 2014 with encouraging growth in sales and earnings. "Our Life Science businesses continued their dynamic development and achieved slight earnings increases despite significant negative currency effects," Bayer CEO Dr. Marijn Dekkers said on Monday when the interim report was published. MaterialScience, in particular, raised earnings substantially. "We are confident about our business development for the rest of the year and confirm our guidance for 2014," said Dekkers.

Sales of the Bayer Group advanced by 2.8 percent in the first quarter of 2014 to EUR 10,555 million (Q1 2013: EUR 10,266 million). Adjusted for currency and portfolio effects (Fx & portfolio adj.), business expanded by 8.4 percent. EBIT rose by 18.4 percent to EUR 2,096 million (Q1 2013: EUR 1,771 million) after net special items of plus EUR 7 million (Q1 2013: minus EUR 45 million). EBIT before special items increased by 15.0 percent to EUR 2,089 million (Q1 2013: EUR 1,816 million). In spite of negative currency effects of some EUR 200 million or roughly 8 percent, EBITDA before special items improved by 11.6 percent to EUR 2,738 million (Q1 2013: EUR 2,453 million). Net income climbed by 22.7 percent to EUR 1,423 million (Q1 2013: EUR 1,160 million) and core earnings per share by 14.7 percent to EUR 1.95 (Q1 2013: EUR 1.70).

Gross cash flow in the first quarter of 2014 rose by 13.3 percent to EUR 2,048 million (Q1 2013: EUR 1,807 million) due to the improvement in EBITDA. Net cash flow, however, declined to EUR 163 million (Q1 2013: EUR 327 million) because more cash was tied up in working capital. Net financial debt rose from EUR 6.7 billion on December 31, 2013, to EUR 9.1 billion on March 31, 2014. This increase was driven by the acquisition of Algeta ASA, Norway.

Earnings at MaterialScience substantially improved
Sales of the high-tech polymer materials business (MaterialScience) increased in the first quarter by 1.0 percent (Fx & portfolio adj. 4.8 percent) to EUR 2,803 million (Q1 2013: EUR 2,775 million). "This growth was the result of significantly higher volumes in all business units and regions except Latin America/Africa/Middle East," Dekkers explained. Selling prices were below the level of the prior-year period.

Sales of foam raw materials (Polyurethanes) improved by 6.5 percent (Fx & portfolio adj.). Higher volumes in nearly all regions, especially North America and Asia/Pacific, contributed to this increase. Sales of high-tech plastics (Polycarbonates) rose by 2.3 percent (Fx & portfolio adj.) as a result of higher volumes in nearly all regions. Business with the raw materials marketed by the Coatings, Adhesives, Specialties business unit expanded by 6.6 percent (Fx & portfolio adj.) due to higher volumes in all regions.

EBITDA before special items of MaterialScience improved by a substantial 79.4 percent against a weak prior-year quarter, to EUR 366 million (Q1 2013: EUR 204 million). This increase was largely due to lower raw material prices. Earnings were also boosted by higher volumes and efficiency improvement measures. Lower selling prices, however, had a negative effect.

Adjusted sales growth of about 5 percent planned for 2014
After the very encouraging first quarter, Bayer confirms the 2014 guidance it issued at the end of February based on average exchange rates for the fourth quarter of 2013. The company experienced negative currency effects in the first quarter of 2014 compared to these assumptions, but so far these have been more than offset by the improvement in its operational performance and by seasonal effects. Bayer plans to grow sales for the full year by about 5 percent on a currency- and portfolio-adjusted basis. Allowing for expected negative currency effects of about 2 percent compared to the previous year, Group sales would be approximately EUR 41 billion to EUR 42 billion. It is planned to raise EBITDA before special items by a low- to mid-single-digit percentage, allowing for expected negative currency effects of about EUR 450 million or roughly 5 percent. Bayer aims to increase core earnings per share by a mid-single-digit percentage, allowing for expected negative currency effects of around 6 percent. Bayer expects net financial debt at year end to be less than EUR 9.0 billion.

MaterialScience expects to increase sales in 2014 by a mid-single-digit percentage on a currency- and portfolio-adjusted basis and predicts negative currency effects of about 2 percent compared to 2013. The subgroup anticipates an increase in EBITDA before special items, allowing for negative currency effects of roughly EUR 50 million. In the second quarter of 2014, MaterialScience expects to raise sales compared to the first quarter. EBITDA before special items is likely to show a slight decrease due to scheduled maintenance shutdowns.

Source: Bayer