Segment Reporting

At Bayer, the Board of Management – as the chief operating decision-maker – allocates resources to the operating segments and assesses their performance. The reportable segments and regions are identified, and the disclosures selected, in line with the internal financial reporting system (management approach) and based on the Group accounting policies outlined in Note “Basic principles, methods and critical accounting estimates”.

The Bayer Group lost control of the Covestro Group at the end of the third quarter of 2017 and deconsolidated Covestro. As of December 31, 2017, there are four reportable segments: Pharmaceuticals, Consumer Health, Crop Science and Animal Health. Therefore, total figures for the four Life Science segments are no longer presented separately.

The segments’ activities are as follows:

Activities of the Segments

Activities

Development, production and marketing of prescription products, especially for cardiology and women’s healthcare; specialty therapeutics in the areas of oncology, hematology and ophthalmology; diagnostic imaging equipment and the necessary contrast agents

Development, production and marketing of mainly nonprescription (OTC = over-the-counter) products in the dermatology, dietary supplement, analgesic, gastrointestinal, cold, allergy, sinus and flu, foot care and sun protection categories

Development, production and marketing of a broad portfolio of products in seeds and plant traits, crop protection and nonagricultural pest control

Development, production and marketing of prescription and nonprescription veterinary products

In the Crop Science segment, the Crop Protection / Seeds and Environmental Science operating segments were combined, mainly in light of the comparable nature of their products for the agricultural industry, such as in the area of crop protection and the related comparable production processes and comparable distribution methods, including via wholesalers in particular.

Business activities that cannot be allocated to any other segment are reported under “All Other Segments.” These primarily include the services provided by the service areas: Business Services and Currenta.

The items in “Corporate Functions and Consolidation” mainly comprise the Bayer holding companies and and Leaps by Bayer (formerly the Bayer Lifescience Center), which focuses on the development of crucial, cross-species innovations. They also include the increase or decrease in expenses for Group-wide long-term stock-based compensation arising from fluctuations in the performance of Bayer stock, and the consolidation of intersegment sales (2017: €2.4 billion; 2016: €1.4 billion).

The segment data are calculated as follows:

  • Table B 1/1 “Key Data by Segment” and the present chapter contain supplementary performance indicators that are not subject to requirements of the financial reporting standards governing the preparation of the Combined Management Report and the consolidated financial statements. The most important of these indicators are EBIT, EBITDA, EBIT before special items, EBITDA before special items, and the return on capital employed (ROCE). These supplementary indicators are defined, and their calculation explained, in Chapter “Alternative Performance Measures Used by the Bayer Group” of the Combined Management Report in the Bayer Annual Report 2017.
  • The intersegment sales reflect intra-Group transactions effected at transfer prices fixed on an arm’s-length basis.
  • The net cash provided by operating activities is the cash flow from operating activities as defined in IAS 7 (Statement of Cash Flows).
  • The segment assets comprise all assets serving the respective segment, stated as of December 31, including material participating interests of direct relevance to business operations.
  • The equity items reflect the earnings and carrying amounts of investments accounted for using the equity method.

Reconciliations

The Reconciliation The reconciliation records, on the one hand, those business activities not assigned to any other segment (“All Other Segments”), including particularly the services provided by Business Services and Currenta. It also includes “Corporate Functions and Consolidation,” which largely comprises Bayer holding companies and Leaps by Bayer (formerly the Bayer Lifescience Center). of EBITDA before special items, EBIT before special items and EBIT to Group income before income taxes and of the segments’ assets to Group assets are given in the following tables:

Reconciliation of Segments’ EBITDA Before Special Items to Group Income Before Income Taxes

 

 

2016

 

2017

 

 

€ million

 

€ million

2016 figures restated

1

For definition, see Management Report & Annexes, Chapter “Alternative Performance Measures Used by the Bayer Group.”

EBITDA before special items of segments

 

9,656

 

9,724

EBITDA before special items of Corporate Functions and Consolidation

 

(338)

 

(436)

EBITDA before special items1

 

9,318

 

9,288

Depreciation, amortization and impairment losses / loss reversals before special items of segments

 

(2,486)

 

(2,145)

Depreciation, amortization and impairment losses / loss reversals before special items of Corporate Functions and Consolidation

 

(6)

 

(13)

Depreciation, amortization and impairment losses / loss reversals before special items

 

(2,492)

 

(2,158)

EBIT before special items of segments

 

7,170

 

7,579

EBIT before special items of Corporate Functions and Consolidation

 

(344)

 

(449)

EBIT before special items1

 

6,826

 

7,130

Special items of segments

 

(1,068)

 

(1,190)

Special items of Corporate Functions and Consolidation

 

(20)

 

(37)

Special items1

 

(1,088)

 

(1,227)

EBIT of segments

 

6,102

 

6,389

EBIT of Corporate Functions and Consolidation

 

(364)

 

(486)

EBIT1

 

5,738

 

5,903

Financial result

 

(965)

 

(1,326)

Income before income taxes

 

4,773

 

4,577

Reconciliation of Segments’ Assets to Group Assets

 

 

2016

 

2017

 

 

€ million

 

€ million

Prior-year figures include Covestro

Assets of the operating segments

 

66,252

 

52,896

Corporate Functions and Consolidation assets

 

507

 

4,207

Nonallocated assets

 

15,479

 

17,984

Group assets

 

82,238

 

75,087

The reconciliation of the segments’ sales to Group sales is apparent from the table of key data by segment in Note “Key data by segment”.

Information on geographical areas

The following table provides a regional breakdown of external sales by market and of intangible assets, property, plant and equipment:

Information on Geographical Areas

 

 

Net sales (external) – by market

 

IIntangible assets and property, plant and equipment

 

 

2016

2017

 

2016

2017

 

 

€ million

€ million

 

€ million

€ million

2016 figures restated

Europe / Middle East / Africa

 

13,062

13,388

 

23,438

21,356

of which Germany

 

3,329

3,392

 

12,468

10,856

of which Switzerland

 

510

485

 

5,047

5,190

North America

 

10,066

10,143

 

14,693

10,354

of which United States

 

8,706

8,561

 

14,297

10,056

Asia / Pacific

 

7,413

7,637

 

4,116

1,771

of which China

 

2,441

2,594

 

2,938

853

Latin America

 

4,402

3,847

 

746

577

of which Brazil

 

2,173

1,647

 

340

209

Total

 

34,943

35,015

 

42,993

34,058

Information on major customers

Revenues from transactions with a single customer in no case exceeded 10% of Bayer Group sales in 2017 or 2016.

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