Bayer: strong business momentum continues and portfolio transformation underway

Bayer had a very successful year in 2014, both operationally and strategically. The company set new records for sales and for EBITDA before special items. “Contributing to this in particular was the continuing growth momentum in our Life Science businesses, and especially the pleasing development of our recently launched products,” Management Board Chairman Dr. Marijn Dekkers said on Thursday at the Financial News Conference in Leverkusen. MaterialScience also registered encouraging gains in sales and earnings before special items. Bayer also set the course in 2014 for the company to focus on the Life Science businesses – HealthCare and CropScience. MaterialScience is to be floated on the stock market as a separate company by mid-2016 at the latest. The Life Science businesses were additionally strengthened through important acquisitions. Dekkers said the company is targeting further sales growth and a significant rise in earnings in 2015.

Group sales rose by 5.2 percent in 2014, to EUR 42,239 million (2013: EUR 40,157 million). Adjusted for currency and portfolio effects (Fx & portfolio adj.), sales grew by 7.2 percent. All subgroups contributed to this increase. EBIT improved by 11.6 percent to EUR 5,506 million (2013: EUR 4,934 million). Earnings were diminished by special charges of EUR 438 million (2013: EUR 839 million). EBIT before special items advanced by 3.0 percent to EUR 5,944 million (2013: EUR 5,773 million). EBITDA before special items increased by 4.9 percent to EUR 8,812 million (2013: EUR 8,401 million), despite negative currency effects of around EUR 410 million or 4 percent. The good sales development was accompanied by higher R&D and selling expenses. Net income moved forward by 7.4 percent to EUR 3,426 million (2013: EUR 3,189 million) and core earnings per share by 7.3 percent to EUR 6.02 (2013: EUR 5.61).

Gross cash flow climbed by 16.9 percent to EUR 6,820 million (2013: EUR 5,832 million), while net cash flow rose by 12.4 percent to EUR 5,810 million (2013: EUR 5,171 million). Net financial debt increased by EUR 12.9 billion to EUR 19.6 billion compared with December 31, 2013. CFO Johannes Dietsch explained that Bayer last year had placed several bonds on the market, some of them with a large volume, to finance the company's acquisitions. He explained that the success of such bond issues is not automatic. “The fact that we were so successful in these financing activities is also evidence of Bayer's good reputation on the capital market,” remarked Dietsch.

MaterialScience benefits from increased volumes
Sales of the high-tech polymer materials business (MaterialScience) rose by 3.7 percent (Fx & portfolio adj. plus 4.8 percent) to EUR 11,651 million (2013: EUR 11,238 million). This growth was due to higher volumes for Polycarbonates; Polyurethanes; and Coatings, Adhesives, Specialties. However, selling prices declined slightly overall.

Sales of foam raw materials (Polyurethanes) grew by 4.9 percent (Fx & portfolio adj.) thanks to improved demand in nearly all the main customer industries. Sales of the high-tech plastics business (Polycarbonates) advanced by 7.2 percent (Fx & portfolio adj.), due mainly to increased demand from customers in the automotive, electrical/electronics and construction industries. Sales of raw materials for coatings, adhesives and specialties improved by 5.5 percent (Fx & portfolio adj.). This increase resulted from higher volumes in all regions. Selling prices in this business unit were level year on year. Sales of Industrial Operations receded by 7.2 percent (Fx & portfolio adj.) due to lower volumes and selling prices overall.

EBITDA before special items of MaterialScience improved by 10.7 percent to EUR 1,187 million (2013: EUR 1,072 million). This was particularly due to higher volumes, efficiency improvement measures and lower raw material and energy costs. However, earnings were held back by lower selling prices. Currency effects as a whole were neutral to earnings.

Source: Bayer