Bayer Continues Positive Business Development in 2Q 2014

The Bayer Group was again successful in the second quarter of 2014, with group sales reaching €10,458 million, an increase of 0.9%.

“Our Life Science businesses, in particular, saw unabated growth momentum, with very encouraging sales gains for our recently launched pharmaceutical products and our North and Latin American CropScience business,” said Dr. Marijn Dekkers, management board chairman.

Although earnings growth was again held back by substantial negative currency effects, these were offset by the good business development. EBITDA before special items and core earnings per share were at the previous year’s level. The chairman confirmed the Bayer Group’s forecast for the current year.

Dekkers said Bayer made progress in the second quarter from a strategic point of view as well with the planned acquisition of the consumer care activities of U.S. company Merck & Co., Inc.

“This acquisition will greatly strengthen our Consumer Health business,” he added.

Sales of the Bayer Group rose by 0.9% in the second quarter of 2014 to €10,458 million (Q2 2013: €10,360 million). Adjusted for currency and portfolio effects, sales advanced by 6.3%. EBIT rose by 14.5% to €1,473 million (Q2 2013: €1,287 million). Net income climbed by 13.3% to €953 million (Q2 2013: €841 million).

Gross cash flow in the second quarter of 2014 advanced by 1.5% to €1,705 million (Q2 2013: €1,680 million) due to the improvement in EBITDA, while net cash flow moved ahead by 4.2% to €1,601 million (Q2 2013: €1,536 million). Net financial debt increased from €9.1 billion on March 31, 2014, to €9.9 billion on June 30, 2014.

Sales of HealthCare rose to €4,845 million (Q2 2013: €4,800 million). Within HealthCare, sales of the Pharmaceuticals segment advanced by 10.0% to €2,960 million, while sales of the Consumer Health segment in the second quarter were slightly ahead of the prior-year period at €1,885 million (plus 1.1%).

Sales of the agriculture business (CropScience) increased by 3.3% to €2,470 million (Q2 2013: €2,392 million).

Second-quarter sales in the high-tech polymers business (MaterialScience), at €2,864 million, were at the level of the prior-year period (Q2 2013: €2,875 million).

“This growth was due to significantly higher volumes for Polycarbonates; Polyurethanes; and Coatings, Adhesives, Specialties,” Dekkers explained. Higher volumes in North America, Europe and Asia/Pacific more than offset volume declines in Latin America/Africa/Middle East. Selling prices were below the prior-year period in all regions.

Sales of foam raw materials (Polyurethanes) grew by 3.0%. Sales of the high-tech plastics business (Polycarbonates) rose by a substantial 8.3%, mainly in light of increased demand from customers in the automotive and electrical/electronics industries. Sales in the Coatings, Adhesives, Specialties unit advanced by 3.7%, due to higher volumes in nearly all regions.

EBITDA before special items of MaterialScience came in just 1.5% below the prior-year quarter at €270 million (Q2 2013: €274 million). Earnings were helped by higher volumes, lower raw material prices and efficiency improvements. Negative factors were a drop in selling prices and costs for scheduled maintenance shutdowns in Asia and North America. Earnings were also held back by negative currency effects of around €10 million or 3%.

The Bayer Group grew both sales and EBITA before special items in the first half of 2014. All subgroups contributed to the increases. Sales advanced by 1.9% to €21,013 million (H1 2013: €20,626 million). EBIT improved by 16.7% to €3,569 million (H1 2013: €3,058 million). EBITDA before special items rose by 6.6% to €4,955 million (H1 2013: €4,648 million), reflecting negative currency effects of about €360 million and additional R&D expenses of roughly €170 million. Net income improved by a substantial 18.7% to €2,376 million (H1 2013: €2,001 million). Core earnings per share advanced by 7.4% to €3.48 (H1 2013: €3.24).

“We are upholding the previous guidance for the Group in light of our good operational performance,” said Dekkers. This forecast does not take into account the planned acquisitions of Merck & Co., Inc.’s OTC business and Dihon Pharmaceutical Group Co., Ltd. or the divestiture of the Interventional devices business. Bayer expects these transactions to close in the second half of 2014.

The Group now plans to grow sales by about 6% (previously: about 5%). Allowing for negative currency effects of about 4% (previously: about 2%) compared to the prior year, Bayer currently predicts Group sales of approximately €41 billion (previously: approximately €41 billion to €42 billion).

As before, it is planned to raise EBITDA before special items by a low- to mid-single-digit percentage, allowing for expected negative currency effects of about €550 million or roughly 6% (previously: about €450 million or roughly 5%). Bayer continues to aim to increase core earnings per share by a mid-single-digit percentage, allowing for expected negative currency effects of around 9% (previously: around 6%). As before, the Group’s net financial debt at year-end is predicted to be less than €9 billion. Taking into account the planned acquisitions, net financial debt at year-end would be around €19 billion.