Management Report & Annexes | Report on Economic Position

Fiscal 2013:

Continuous growth in Bayer’s Anniversary Year

  • Dynamic development in the Life Sciences, MaterialScience below expectations
  • Outstanding growth for recently launched pharmaceutical products
  • Group sales €40.2 billion (Fx & portfolio adj. +5.1%)
  • EBIT €4.9 billion (+25.6%)
  • EBITDA before special items €8.4 billion (+1.5%)
  • Net income €3.2 billion (+32.7%)
  • Core earnings per share €5.61 (+5.8%)
  • Forecast for 2014: further growth in sales and earnings

14. Overview of Sales, Earnings and Financial Position

Full year 2013

In 2013 we saw continuous growth and met important business objectives. HealthCare posted excellent sales gains for its recently launched pharmaceutical products. CropScience was very successful in a positive environment. In the Life Sciences, we continued to strengthen our businesses through ­acquisitions. We achieved our operational targets overall despite substantial negative currency effects. The business of MaterialScience continued to be affected by a difficult market situation. We remain optimistic for 2014 and plan to further improve sales and earnings.

Changes in Sales[Table 3.14.1]
20122013
 %%
Volume+4.7+4.3
Price+0.6+0.8
Currency+4.0-4.4
Portfolio-0.5+0.3
Total+8.8+1.0

Group sales advanced by 5.1% on a currency- and portfolio-adjusted basis (reported: +1.0%) to €40,157 million (2012: €39,741 million). Sales at HealthCare climbed by 6.8% (Fx & portfolio adj.). CropScience posted a substantial 9.4% sales gain (Fx & portfolio adj.). Sales at MaterialScience were level with the prior year (Fx & portfolio adj. +0.4%).

EBIT of the Bayer Group rose by 25.6% to €4,934 million (2012: €3,928 million) after net special charges of €839 million (2012: €1,711 million). The special charges mainly included €358 million in restructuring expenses and €276 million in additional charges related to legal claims. EBIT before ­special items came in at €5,773 million (2012: €5,639 million). EBITDA before special items increased by 1.5% to €8,401 million (2012: €8,280 million). Earnings growth was attributable to good sales development in the Life Science businesses, while MaterialScience saw earnings decline due to market factors. Negative currency effects diminished Group earnings by about €260 million. In addition, ­expenses for long-term stock-based compensation increased by €70 million in light of the pleasing market performance of Bayer stock. EBITDA before special items at HealthCare advanced by 4.2% to €5,334 million (2012: €5,119 million) as a result of the positive business development in the Pharmaceuticals segment. EBITDA before special items in Crop­Science rose by 11.0% to €2,248 million (2012: €2,025 million), largely on account of significant volume increases and higher selling prices. EBITDA before special items of MaterialScience fell by 15.1% to €1,072 million (2012: €1,263 million), mainly because of significantly higher raw material costs.

After a financial result of minus €727 million (2012: minus €752 million), income before income taxes amounted to €4,207 million (2012: €3,176 million). After tax expense of €1,021 million (2012: €723 million) and non-controlling interest, net income in 2013 came in at €3,189 million (2012: €2,403 million). Earnings per share were €3.86 (2012: €2.91). Core earnings per share advanced by 5.8% to €5.61 (2012: €5.30), calculated as explained in Chapter 16.3 “Core Earnings Per Share.”

Gross cash flow climbed by 28.0% in 2013 to €5,832 million (2012: €4,556 million), mainly because of the improvement in EBIT. Cash tied up in working capital increased considerably for business-related reasons. Net cash flow moved ahead by 14.2% to €5,171 million (2012: €4,530 million). Net financial debt fell by €0.3 billion against December 31, 2012, to €6.7 billion. The net defined benefit liability for post-employment benefits – the difference between benefit obligations and plan assets – declined from €9.2 billion at the end of 2012 to €7.3 billion, mainly due to a rise in long-term capital market interest rates.

Fourth quarter of 2013

Group sales in the fourth quarter of 2013 rose by 6.4% (Fx & portfolio adj.) to €9,888 million (reported: +0.3%). Sales of HealthCare gained 7.2% (Fx & portfolio adj.) to €4,939 million (reported: +0.4%). Business in the Pharmaceuticals segment expanded by 11.5% (Fx & portfolio adj.) to ���2,975 million (reported: +3.8%), driven by the encouraging development of our recently launched products. Sales at Consumer Health came in slightly ahead of the prior-year quarter at €1,964 million (Fx & portfolio adj. +1.0%; reported: -4.4%). CropScience sales climbed by 12.8% (Fx & portfolio adj.) in the fourth quarter to €1,951 million (reported: +5.1%) as a result of higher volumes. Sales of MaterialScience rose by 1.6% (Fx & portfolio adj.) against the prior-year period, to €2,691 million (reported: -2.5%) thanks to volume increases.

EBIT of the Bayer Group declined by 10.2% in the fourth quarter of 2013, to €655 million (Q4 2012: €729 million). Earnings were diminished by net special charges of €439 million (Q4 2012: €424 million). The special charges mainly included €192 million in restructuring expenses and €182 million in additional charges related to legal claims. Of the latter amount, €155 million related to claims concerning Yasmin™/YAZ™ in the United States. EBIT before special items fell by 5.1% to €1,094 million (Q4 2012: €1,153 million).

EBITDA before special items declined in the fourth quarter of 2013 by 3.1% to €1,769 million (Q4 2012: €1,826 million). Earnings were held back by higher research and development expenses and negative currency effects. In addition, expenses for long-term stock-based compensation increased in light of the pleasing market performance of Bayer stock. HealthCare registered a 1.6% decline in EBITDA before special items to €1,337 million (Q4 2012: €1,359 million), while CropScience posted an 8.1% increase to €319 million (Q4 2012: €295 million). EBITDA before special items at MaterialScience amounted to €248 million (Q4 2012: €264 million), down 6.1% against the prior-year quarter.

The financial result improved in the fourth quarter of 2013 to minus €84 million (Q4 2012: minus €169 million), primarily due to gains from the sale of the shares in Onyx Pharmaceuticals Inc., United States. Income before income taxes amounted to €571 million (Q4 2012: €560 million). After taxes and non-controlling interest, net income came in at €455 million (Q4 2012: €366 million). Earnings per share improved to €0.55 (Q4 2012: €0.45). Core earnings per share rose to €1.10 (Q4 2012: €1.01), calculated as explained in Chapter 16.3 “Core Earnings Per Share.”

Gross cash flow of the Group advanced by 34.7% to €978 million (Q4 2012: €726 million) and net cash flow by 74.4% to €1,580 million (Q4 2012: €906 million). The sharp increase in net cash flow was partly due to lower tax payments. Net financial debt declined by €1.0 billion in the fourth quarter of 2013 to €6.7 billion (September 30, 2013: €7.7 billion), largely thanks to cash inflows from operating activities. The net defined benefit liability for post-employment benefits declined by €0.5 billion against September 30, 2013, to €7.3 billion, mainly due to a rise in long-term capital market interest rates.

Key Data by Subgroup and Segment[Table 3.14.2]
  Sales EBIT EBITDA before special items*
  4th Quarter 2012 4th Quarter 2013 4th Quarter 2012 4th Quarter 2013 4th Quarter 2012 4th Quarter 2013
€ million € million € million € million € million € million
HealthCare 4,921 4,939 558 631 1,359 1,337
Pharmaceuticals 2,866 2,975 165 321 835 822
Consumer Health 2,055 1,964 393 310 524 515
CropScience 1,856 1,951 247 163 295 319
MaterialScience 2,760 2,691 94 70 264 248
Reconciliation 323 307 (170) (209) (92) (135)
Group 9,860 9,888 729 655 1,826 1,769
2012 figures restated*
For definition see Chapter 16.2 “Calculation of EBIT(DA) Before Special Items.”
Last updated: February 28, 2014  Copyright © Bayer AG
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