Earnings; Asset and Financial Position of the Bayer Group

Earnings Performance of the Bayer Group

Bayer Group Summary Income Statements

 

 

Q4 2016

Q4 2017

Change

 

2016

2017

Change

 

 

€ million

€ million

%

 

€ million

€ million

%

2016 figures restated

1

For definition see Chapter “Alternative Performance Measures Used by the Bayer Group.”

Net sales

 

8,823

8,596

−2.6

 

34,943

35,015

+0.2

Cost of goods sold

 

(3,148)

(3,047)

−3.2

 

(11,756)

(11,382)

−3.2

Selling expenses

 

(3,198)

(3,074)

−3.9

 

(11,148)

(11,116)

−0.3

Research and development expenses

 

(1,245)

(1,234)

−0.9

 

(4,405)

(4,504)

+2.2

General administration expenses

 

(553)

(588)

+6.3

 

(1,804)

(2,026)

+12.3

Other operating income (+) and expenses (−)

 

(93)

(28)

−69.9

 

(92)

(84)

−8.7

EBIT1

 

586

625

+6.7

 

5,738

5,903

+2.9

Financial result

 

(224)

(258)

+15.2

 

(965)

(1,326)

+37.4

Income before income taxes

 

362

367

+1.4

 

4,773

4,577

−4.1

Income taxes

 

(63)

(435)

.

 

(1,017)

(1,329)

+30.7

Income from continuing operations after taxes

 

299

(68)

−122.7

 

3,756

3,248

−13.5

Income from discontinued operations after taxes

 

208

218

+4.8

 

1,070

4,846

.

Income after income taxes (total)

 

507

150

−70.4

 

4,826

8,094

+67.7

of which attributable to noncontrolling interest

 

54

2

−96.3

 

295

758

+157.0

of which attributable to Bayer AG stockholders (net income)

 

453

148

−67.3

 

4,531

7,336

+61.9

Group sales increased by 1.5% (Fx & portfolio adj.)

Sales of the Bayer Group rose by 1.5% (Fx & portfolio adj.) to €35,015 million (reported: +0.2%) in 2017, including €3,392 million in Germany.

Sales of Pharmaceuticals advanced by 4.3% (Fx & portfolio adj.) to €16,847 million. Our key growth products once again posted strong gains. Consumer Health registered a slight decline in sales of 1.7% (Fx & portfolio adj.) to €5,862 million. Sales of Crop Science also declined slightly, moving back by 2.2% (Fx & portfolio adj.) to €9,577 million, while sales at Animal Health increased by 2.0% (Fx & portfolio adj.) to €1,571 million.

Changes in Sales

 

 

Bayer Group

 

 

2016

 

2017

 

 

%

 

%

2016 figures restated

Volume

 

+3.9

 

+2.3

Price

 

+0.8

 

−0.8

Currency

 

−2.2

 

−1.4

Portfolio

 

0.0

 

+0.1

Total

 

+2.5

 

+0.2

Online Annex: A 2.2.1-1

limited assurance
Business Development by Region

 

 

Q4 2016

Q4 2017

Change1

 

2016

2017

Change1

 

 

€ million

€ million

Reported %

Fx adj. %

 

€ million

€ million

Reported %

Fx adj. %

2016 figures restated

Fx adj.= currency adjusted

1

For definition see Chapter “Alternative Performance Measures Used by the Bayer Group.”

Europe / Middle East / Africa

 

2,962

3,115

+5.2

+6.9

 

13,062

13,388

+2.5

+2.9

North America

 

2,413

2,219

−8.0

−1.0

 

10,066

10,143

+0.8

+1.7

Asia / Pacific

 

1,862

1,774

−4.7

+3.1

 

7,413

7,637

+3.0

+5.7

Latin America

 

1,586

1,488

−6.2

+0.1

 

4,402

3,847

−12.6

−9.5

Group (incl. Reconciliation)

 

8,823

8,596

−2.6

+2.7

 

34,943

35,015

+0.2

+1.6

The cost of goods sold declined by 3.2% to €11,382 million in 2017. The ratio of the cost of goods sold to total sales therefore declined year on year to 32.5% (2016: 33.6%). The selling expenses of €11,116 million (−0.3%) amounted to 31.7% of sales (2016: 31.9%). Research and development (R&D) expenses rose by 2.2% to €4,504 million. The ratio of R&D expenses to sales was 12.9% (2016: 12.6%). General administration expenses climbed by 12.3% to €2,026 million, due especially to additional expenditures for the Monsanto acquisition. The ratio of general administration expenses to total sales therefore increased to 5.8% (2016: 5.2%). The balance of other operating expenses and other operating income of minus €84 million (2016: minus €92 million) was at the prior-year level.

EBITDA before special items at prior-year level

EBITDA before special items of the Bayer Group was at the prior-year level (−0.3%), coming in at €9,288 million (2016: €9,318 million; Fx adj. +1.8%). At Pharmaceuticals, EBITDA before special items climbed by an encouraging 8.8% to €5,711 million (2016: €5,251 million). This growth was chiefly due to the good business development of our key growth products coupled with a lower cost of goods sold. At Consumer Health, EBITDA before special items declined substantially, falling by 12.8% to €1,231 million, due particularly to lower volumes and a higher cost of goods sold. EBITDA before special items also declined markedly at Crop Science, falling by 15.6% to €2,043 million. This was largely attributable to the effects of an adjustment in inventories in the distribution channel in Brazil. At Animal Health, EBITDA before special items improved substantially, rising by 9.2% to €381 million.

Depreciation and amortization

Depreciation, amortization and impairment losses declined by 13.2% in 2017 to €2,660 million (2016: €3,063 million). They comprised €1,679 million (2016: €2,193 million) in amortization and impairments on intangible assets and €981 million (2016: €870 million) in depreciation and impairments on property, plant and equipment. Impairment losses in the amount of €474 million (2016: €566 million) as well as accelerated depreciation in the amount of €28 million (2016: €5 million) were included in special items. EBITDA for the reporting year amounted to €8,563 million.

EBIT and special items

+2.9%

Increase in EBIT

EBIT increased by 2.9% in 2017 to €5,903 million after special charges of €1,227 million (2016: €1,088 million). These mainly comprised €450 million in impairment losses on intangible assets and €304 million in expenses in connection with the planned acquisition of Monsanto. Further special charges included €227 million for efficiency improvement programs and €188 million in provisions for litigations and legal risks. EBIT before special items rose by 4.5% to €7,130 million (2016: €6,826 million).

In 2017, the following special effects were taken into account in calculating EBIT and EBITDA before special items.

Special Items Reconciliation by Segment1

 

 

EBIT
Q4 2016

EBIT
Q4 2017

 

EBIT
2016

EBIT
2017

 

EBITDA Q4 2016

EBITDA Q4 2017

 

EBITDA 2016

EBITDA 2017

 

 

€ million

€ million

 

€ million

€ million

 

€ million

€ million

 

€ million

€ million

1

For definition see Chapter “Alternative Performance Measures Used by the Bayer Group.”

Before special items

 

1,173

1,257

 

6,826

7,130

 

1,806

1,783

 

9,318

9,288

Pharmaceuticals

 

(310)

(187)

 

(558)

(340)

 

(152)

(128)

 

(167)

(135)

Consumer Health

 

(199)

(258)

 

(292)

(300)

 

(38)

(54)

 

(115)

(86)

Crop Science

 

(39)

(155)

 

(143)

(408)

 

(37)

(111)

 

(141)

(327)

Animal Health

 

(5)

(23)

 

(7)

(31)

 

(4)

(21)

 

(6)

(29)

Reconciliation

 

(34)

(9)

 

(88)

(148)

 

(34)

(9)

 

(88)

(148)

Restructuring

 

(34)

(15)

 

(83)

(57)

 

(34)

(15)

 

(83)

(57)

Litigations / legal risks

 

37

 

(5)

(60)

 

37

 

(5)

(60)

Acquisition costs

 

(31)

 

(31)

 

(31)

 

(31)

Total special items

 

(587)

(632)

 

(1,088)

(1,227)

 

(265)

(323)

 

(517)

(725)

Impairment losses / reversals

 

(330)

(304)

 

(561)

(450)

 

(12)

(2)

 

(12)

(3)

Litigations / legal risks

 

(85)

(88)

 

(94)

(188)

 

(85)

(88)

 

(94)

(188)

Acquisition costs

 

(64)

(134)

 

(186)

(304)

 

(64)

(134)

 

(186)

(304)

Restructuring

 

(104)

(103)

 

(242)

(227)

 

(100)

(97)

 

(220)

(197)

Divestments

 

(4)

(3)

 

(5)

(58)

 

(4)

(2)

 

(5)

(33)

After special items

 

586

625

 

5,738

5,903

 

1,541

1,460

 

8,801

8,563

Special Items Reconciliation by Functional Costs1

 

 

EBIT Q4 2016

EBIT Q4 2017

 

EBIT
2016

EBIT
2017

 

EBITDA Q4 2016

EBITDA Q4 2017

 

EBITDA 2016

EBITDA 2017

 

 

€ million

€ million

 

€ million

€ million

 

€ million

€ million

 

€ million

€ million

1

For definition see Chapter “Alternative Performance Measures Used by the Bayer Group.”

Total special items

 

(587)

(632)

 

(1,088)

(1,227)

 

(265)

(323)

 

(517)

(725)

of which cost of goods sold

 

(193)

(48)

 

(412)

(163)

 

(53)

(44)

 

(93)

(105)

of which selling expenses

 

(221)

(249)

 

(317)

(305)

 

(39)

(47)

 

(99)

(71)

of which research and development expenses

 

(18)

(116)

 

(84)

(232)

 

(17)

(13)

 

(50)

(22)

of which general administration expenses

 

(69)

(131)

 

(185)

(339)

 

(69)

(131)

 

(185)

(339)

of which other operating income / expenses

 

(86)

(88)

 

(90)

(188)

 

(87)

(88)

 

(90)

(188)

Income after income taxes from discontinued operations

Income after income taxes from discontinued operations rose to €4,846 million (2016: €1,070 million). Of this amount, €4,468 million (2016: €802 million) was attributable to Covestro. This figure primarily comprises a gain from deconsolidation and on remeasurement of the remaining interest at the end of the third quarter, as well as operating income in the first nine months of 2017. In comparison with the prior-year reporting period, Covestro increased sales during the first nine months of 2017 by 19.9% (Fx & portfolio adj.) to €10,556 million (9M 2016: €8,829 million), in particular owing to significantly higher selling prices and higher volumes. EBITDA before special items of Covestro improved by 56.2% in the first nine months to €2,517 million (9M 2016: €1,611 million). Substantially higher selling prices more than offset increased raw material prices.

Increase in net income

Including a financial result of minus €1,326 million (2016: minus €965 million), income before income taxes was €4,577 million (2016: €4,773 million). Among other items, the financial result comprised net interest expense of €413 million (2016: €504 million), currency hedging costs in the amount of €326 million (2016: €121 million), and interest cost of €189 million (2016: €251 million) for pension and other provisions, as well as net other financial expenses of €428 million (2016: €87 million). The financial result included special charges of €611 million (2016: positive special items of €105 million), mainly in conjunction with the planned acquisition of Monsanto and the exchangeable bond issued in June 2017.

Income taxes amounted to €1,329 million (2016: €1,017 million). This includes a negative one-time effect of €455 million that relates exclusively to the tax reform in the United States and results from the revaluation of deferred tax items and the recognition of an additional tax on unrepatriated profits. After income tax expense, income from discontinued operations after taxes and noncontrolling interest, net income in 2017 came to €7,336 million (2016: €4,531 million).

Core earnings per share increased by 1.0%

Earnings per share (total) in 2017 improved to €8.41 (2016: €5.44). This takes into account the remeasurement of the shares in Covestro AG in the third quarter of 2017, which is reflected in income from discontinued operations. Core earnings per share from Continuing operations Sales and earnings reporting for continuing operations pertains only to business operations that are expected to remain in the company’s portfolio for the foreseeable future; opposite of discontinued operations. improved by 1.0% to €6.74 (2016: €6.67). This includes the effect of the difference in the number of shares, which grew significantly in 2017 as a result of the mandatory convertible notes issued in November 2016. If the number of shares had remained the same, core earnings per share from continuing operations would have improved by 5.8% to €7.06.

Core Earnings per Share1

 

 

Q4 2016

Q4 2017

 

2016

2017

 

 

€ million

€ million

 

€ million

€ million

1

For definition see Chapter “Alternative Performance Measures Used by the Bayer Group.”

EBIT (as per income statements)

 

586

625

 

5,738

5,903

Amortization and impairment losses / loss reversals on intangible assets

 

717

602

 

2,193

1,679

Impairment losses / loss reversals on property, plant and equipment, and accelerated depreciation included in special items

 

12

16

 

29

84

Special items (other than accelerated depreciation, amortization and impairment losses / loss reversals)

 

265

323

 

517

725

Core EBIT

 

1,580

1,566

 

8,477

8,391

Financial result (as per income statements)

 

(224)

(258)

 

(965)

(1,326)

Special items in the financial result

 

(61)

250

 

(105)

611

Income taxes (as per income statements)

 

(63)

(435)

 

(1,017)

(1,329)

Special items in income taxes

 

455

 

455

Tax effects related to amortization, impairment losses / loss reversals and special items

 

(293)

(342)

 

(826)

(922)

Income after income taxes attributable to noncontrolling interest (as per income statements)

 

(4)

(2)

 

(13)

1

Above-mentioned adjustments attributable to noncontrolling interest

 

 

(1)

Core net income from continuing operations

 

935

1,234

 

5,550

5,881

 

 

 

 

 

 

 

 

 

Shares

Shares

 

Shares

Shares

Weighted average number of shares

 

849,167,808

872,467,808

 

832,502,808

872,107,808

 

 

 

 

 

 

 

 

 

 

Core earnings per share from continuing operations

 

1.10

1.41

 

6.67

6.74

Online Annex: A 2.1.3-1

limited assurance

Development in the fourth quarter of 2017

Group sales in the fourth quarter of 2017 rose by 2.7% (Fx & portfolio adj.) to €8,596 million (reported: −2.6%). Germany accounted for €883 million of this figure.

Sales of Pharmaceuticals improved by 3.6% (Fx & portfolio adj.) to €4,215 million (reported: −1.4%), due in particular to the strong business development of our key growth products. Sales at Consumer Health came in 4.2% (Fx & portfolio adj.) below the prior-year quarter at €1,399 million (reported: −9.1%). Sales of Crop Science were up slightly year on year, advancing by 1.1% (Fx & portfolio adj.) to €2,263 million (reported: −5.9%). Animal Health sales edged 1.8% higher to €322 million.

EBITDA before special items of the Bayer Group declined slightly, moving back by 1.3% to €1,783 million in the fourth quarter of 2017 (Q4 2016: €1,806 million; Fx adj. +4.4%). At Pharmaceuticals, EBITDA before special items edged forward by 1.5% to €1,235 million (Q4 2016: €1,217 million). EBITDA before special items of Consumer Health fell by a substantial 32.5% to €251 million. EBITDA before special items of Crop Science declined by 13.4% to €304 million (Q4 2016: €351 million). EBITDA before special items of Animal Health increased markedly, moving forward by 28.9% to €49 million (Q4 2016: €38 million).

EBIT of the Bayer Group climbed by 6.7% to €625 million in the fourth quarter of 2017 (Q4 2016: €586 million) after special charges of €632 million (Q4 2016: €587 million). These mainly comprised €304 million in impairment losses on intangible assets and €134 million in expenses related to the planned acquisition of Monsanto. Litigations resulted in additional charges of €88 million. EBIT before special items advanced by 7.2% to €1,257 million (Q4 2016: €1,173 million).

Bayer Group Quarterly Sales, EBIT and EBITDA before Special Items

 

 

Q1

 

Q2

 

Q3

 

Q4

 

Total

 

 

2016

2017

 

2016

2017

 

2016

2017

 

2016

2017

 

2016

2017

 

 

€ million

€ million

 

€ million

€ million

 

€ million

€ million

 

€ million

€ million

 

€ million

€ million

2016 figures restated.

1

For definition see Chapter “Alternative Performance Measures Used by the Bayer Group.”

Sales

 

9,004

9,680

 

8,858

8,714

 

8,258

8,025

 

8,823

8,596

 

34,943

35,015

EBIT1

 

1,984

2,427

 

1,771

1,463

 

1,397

1,388

 

586

625

 

5,738

5,903

EBITDA before special items1

 

2,883

3,054

 

2,511

2,247

 

2,118

2,204

 

1,806

1,783

 

9,318

9,288

Including a financial result of minus €258 million (Q4 2016: minus €224 million), income before income taxes came in at €367 million (Q4 2016: €362 million). The financial result mainly comprised net interest expense of €59 million (Q4 2016: €135 million), interest cost of €46 million (Q4 2016: €73 million) for pension and other provisions, and currency hedging losses of €5 million (Q4 2016: currency hedging gains of €36 million), as well as other financial income and expenses of minus €187 million (2016: minus €48 million). The financial result included special charges of €250 million (2016: positive special items of €61 million), mainly in conjunction with the planned acquisition of Monsanto and the exchangeable bond issued in June 2017.

Income taxes amounted to €435 million (Q4 2016: €63 million). This figure includes a negative special effect of €455 million that relates to the tax reform in the United States and results from the revaluation of deferred tax items and the recognition of an additional tax on unrepatriated profits. After income tax expense, income from discontinued operations after taxes and noncontrolling interest, net income in the fourth quarter of 2017 came to €148 million (Q4 2016: €453 million).

Earnings per share (total) declined to €0.17 in the fourth quarter of 2017 (Q4 2016: €0.53), due mainly to a special effect in income tax expense in connection with the tax reform in the United States. Core earnings per share from continuing operations improved to €1.41 (Q4 2016: €1.10). This is partly due to the difference in the number of shares, which grew significantly in 2017 as a result of the mandatory convertible notes issued in November 2016. If the number of shares had remained the same, core earnings per share would have improved by 31.8% to €1.45.

Net cash provided by operating activities in continuing operations increased by 12.8% to €2,256 million (Q4 2016: €2,000 million), due mainly to lower tax payments. In the fourth quarter of 2017, we paid income taxes amounting to €291 million (Q4 2016: €576 million). Cash inflows from operating activities (total) fell by a substantial 16.9% to €2,269 million (Q4 2016: €2,732 million), due entirely to the deconsolidation of Covestro in the preceding quarter.

Net financial debt declined by €1.1 billion in the fourth quarter of 2017 to €3.6 billion (September 30, 2017: €4.7 billion), due mainly to cash inflows from operating activities. The net defined benefit liability for post-employment benefits increased by €0.2 billion against September 30, 2017, to €8.0 billion, due primarily to a slight decline in long-term capital market interest rates for high-quality corporate bonds in Germany.

Compare to Last Year