Management Report & Annexes | Report on Economic Position
17.1 Earnings Performance of Bayer AG
|Bayer AG Summary Income Statements according to the German Commercial Code[Table 3.17.1]|
|€ million||€ million|
|Income from investments in affiliated companies – net||1,719||3,542|
|Interest expense – net||(445)||(315)|
|Other financial income – net||89||110|
|Other operating income||87||118|
|General administration expenses||(228)||(266)|
|Other operating expenses||(106)||(148)|
|Income before income taxes||1,116||3,041|
|Withdrawal from/allocation to retained earnings||682||(761)|
In fiscal 2013 Bayer AG’s net income increased by €1,609 million to €2,498 million, mainly because of significantly higher income from investments in affiliated companies and a decrease in net interest expense. The main negative effect came from higher income taxes.
Income from investments in affiliated companies posted a large increase of €1,823 million to €3,542 million. The previous year’s income was impacted by a one-time charge of €256 million in connection with the extension of the period during which various subsidiaries are assuming the pension fund’s long-term statutory obligation to raise pensions. Bayer Pharma AG again made the largest contribution to income from investments in affiliated companies with income of €1,934 million (2012: €1,397 million). This significant improvement was mainly attributable to the good business performance resulting from a higher proportion of high-margin, recently launched products, as well as the non-recurrence of the one-time pension charge. Bayer CropScience AG increased its contribution to earnings by €933 million to €1,379 million (2012: €446 million). This amount included €570 million from the intra-Group sale of seed technologies. Earnings of the CropScience subgroup were also driven by the positive business development, especially the substantial rise in volumes and an improved product mix. A loss of €20 million (2012: €179 million) was assumed for Bayer MaterialScience AG. However, this was considerably lower than in the previous year, principally because of the impact of extensive cost-cutting programs on operational earnings. Other significant earnings contributions comprised €213 million (2012: €291 million) from a subsidiary that receives foreign dividend income. Bayer Business Services GmbH posted a loss of €74 million (2012: €103 million), and Bayer Technology Services GmbH reported a loss of €30 million (2012: €59 million).
Net interest expense declined by €130 million compared with the previous year, to €315 million, thanks mainly to lower interest rates and also to the restructuring of some debt into lower-interest instruments. Of the net interest expense, €218 million was attributable to transactions with third parties and €97 million to intra-Group transactions.
Other financial income and expenses yielded a positive balance of €110 million (2012: €89 million). This mainly comprised income of €162 million (2012: €183 million) from the subgroups and service companies to cover pension expenses for retirees remaining with Bayer AG following the hive-down of the operating business. The non-interest portion of the corresponding expense, amounting to €26 million (2012: €56 million), is included in other financial expenses; the remainder is reflected in net interest expense. A further charge of €14 million (2012: €33 million) resulted from the translation of foreign currency receivables and payables and from currency derivatives.
General administration expenses relating to Bayer AG’s performance of its functions as a holding company amounted to €266 million (2012: €228 million). Miscellaneous operating expenses relating to these functions, net of the respective miscellaneous operating income, came to €30 million (2012: €19 million). The increase in administration expenses was attributable to the higher number of employees and higher performance-related compensation. The other operating expenses include an amount of €14 million for the company’s 150th anniversary celebrations.
Pre-tax income increased by €1,925 million to €3,041 million (2012: €1,116 million). Tax expense also increased, by €316 million to €543 million. After deduction of taxes, net income was €2,498 million (2012: €889 million). An allocation of €761 million was made to other retained earnings, leaving a distributable profit of €1,737 million.
The Board of Management and Supervisory Board will propose to the Annual Stockholders’ Meeting on April 29, 2014 that the distributable profit be used to pay a dividend of €2.10 per share (826,947,808 shares) on the capital stock of €2,117 million entitled to the dividend for 2013.