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Bayer Continues Successful Course in 2013

The Bayer Group, Leverkusen, Germany, continued its successful course in 2013. There was continuing momentum in the Life Science businesses: HealthCare achieved pleasing gains with its recently launched pharmaceutical products, while CropScience was very successful in a positive market environment. Overall, Bayer achieved its operational targets in the Life Science businesses despite substantial negative currency effects. The business of MaterialScience continued to be affected by a difficult market situation. “We are optimistic for 2014 and plan further growth in sales and earnings,” said Management Board Chairman Dr. Marijn Dekkers on Friday at the Financial News Conference in Leverkusen.

Management Board Chairman Dr. Marijn Dekkers  (figure: Bayer)

Management Board Chairman Dr. Marijn Dekkers (figure: Bayer)

The Numbers

Sales of the Bayer Group climbed by 1.0 percent in 2013 to EUR 40,157 million (2012: EUR 39,741 million). “This is a new record in our company’s 150-year history,” said the Management Board Chairman. Adjusted for currency and portfolio effects (Fx & portfolio adj.), sales grew by 5.1 percent. EBIT rose by 25.6 percent to EUR 4,934 million (2012: EUR 3,928 million). Earnings were diminished by net special charges of EUR 839 million (2012: EUR 1,711 million). The special charges mainly included EUR 358 million in restructuring expenses and EUR 276 million in additional charges related to legal claims. EBIT before special items advanced by 2.4 percent to EUR 5,773 million (2012: EUR 5,639 million), while EBITDA before special items rose by 1.5 percent to EUR 8,401 million (2012: EUR 8,280 million). Negative currency effects diminished Group earnings by about EUR 260 million overall. In addition, expenses for long-term stock-based compensation increased by EUR 70 million in light of the pleasing market performance of Bayer stock. Net income grew by 32.7 percent to EUR 3,189 million (2012: EUR 2,403 million), and core earnings per share advanced by 5.8 percent to EUR 5.61 (2012: EUR 5.30).

Gross cash flow climbed by 28.0 percent to EUR 5,832 million (2012: EUR 4,556 million), mainly because of the improvement in EBIT. Net cash flow moved ahead by 14.2 percent to EUR 5,171 million (2012: EUR 4,530 million), while net financial debt fell by EUR 0.3 billion against December 31, 2012, to EUR 6.7 billion. “Due to the strong cash flow, we were able to slightly reduce debt despite high capital expenditures and the acquisitions of Conceptus and Steigerwald,” explained CFO Werner Baumann.

Challenges for MaterialScience

Sales in Bayer's high-tech polymer materials business (MaterialScience) receded by 2.2 percent to EUR 11,238 million (2012: EUR 11,491 million), matching the prior-year level (plus 0.4 percent) on a currency- and portfolio-adjusted basis.

Business with foam raw materials (Polyurethanes) rose by 3.9 percent (Fx & portfolio adj.). Volume gains in Asia/Pacific and North America contributed to this increase. Selling prices as a whole were at the prior-year level. Sales of high-tech plastics (Polycarbonates) receded by 4.5 percent (Fx & portfolio adj.), mainly due to a drop in volumes in all regions on account of weaker demand. A further factor was the lower level of selling prices in Asia/Pacific caused by market overcapacities. Sales of raw materials for coatings, adhesives and specialties fell by 1.9 percent (Fx & portfolio adj.), largely as a result of lower selling prices in Asia/Pacific. Volumes as a whole were flat with the prior year.

EBITDA before special items of the subgroup dropped by 15.1 percent to EUR 1,072 million (2012: EUR 1,263 million), mainly due to higher raw material costs. “Despite the difficult market environment for MaterialScience in 2013, we are cautiously optimistic about the future,” said Dekkers. The expected increase in capacity utilization in the industry in the coming years should relieve the pressure on prices.

Positive Outlook for 2014

“We are optimistic about 2014,” continued Dekkers. “We aim to maintain the growth of our recently launched products in the Life Science businesses and improve profitability at MaterialScience.” The forecast for fiscal 2014 is based on average exchange rates for the fourth quarter of 2013, including a rate of US$1.36 to the euro. In 2014 Bayer plans to grow sales by about 5 percent on a currency- and portfolio-adjusted basis.

The company expects to take special charges of approximately EUR 200 million for restructuring in 2014. Bayer intends to increase research and development expenses to EUR 3.5 billion in 2014. The company has planned capital expenditures of about EUR 2.1 billion for property, plant and equipment and EUR 0.3 billion for intangible assets

MaterialScience plans to raise sales in 2014 by a mid-single-digit percentage on a currency- and portfolio-adjusted basis. The subgroup predicts negative currency effects of about 2 percent compared to 2013. MaterialScience anticipates an increase in EBITDA before special items, allowing for negative currency effects of around EUR 50 million. For the first quarter of 2014, MaterialScience expects sales to increase on a currency- and portfolio-adjusted basis against the prior-year period and EBITDA before special items to gain significantly.

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