Management Report

8. Financial Position of the Bayer Group

Bayer Group Summary Statements of Cash Flows   [Table 15]
  1st Quarter
2014
1st Quarter
2015
  € million € million
Gross cash flow1 2,048 2,060
Changes in working capital/other non-cash items (1,885) (1,336)
Net cash provided by (used in) operating activities (net cash flow) 163 724
Net cash provided by (used in) investing activities (2,180) (596)
Net cash provided by (used in) financing activities 3,019 (410)
Change in cash and cash equivalents due to business activities 1,002 (282)
Cash and cash equivalents at beginning of period 1,662 1,853
Change due to exchange rate movements and to changes in scope of consolidation (33) 36
Cash and cash equivalents at end of period 2,631 1,607
1 Gross cash flow = income after income taxes, plus income taxes, plus financial result, minus income taxes paid or accrued, plus depreciation, amortization and impairment losses, minus impairment loss reversals, plus/minus changes in pension provisions, minus gains/plus losses on retirements of noncurrent assets, minus gains from the remeasurement of already held assets in step acquisitions. The change in pension provisions includes the elimination of non-cash components of EBIT. It also contains benefit payments during the year.

Operating cash flow

Gross cash flow in the first quarter of 2015 was level year on year at €2,060 million. Net cash flow rose sharply to €724 million due to a reduction in cash tied up in working capital. Net cash flow reflected income tax payments of €444 million (q1 2014: €375 million).

Investing cash flow

Net cash outflow for investing activities in the first quarter of 2015 amounted to €596 million. Disbursements for property, plant and equipment and intangible assets were 3.4% lower at €345 million (q1 2014€357 million). Of this amount, HealthCare accounted for €110 million (q1 2014: €101 million), CropScience for €96 million (q1 2014: €115 million) and MaterialScience for €89 million (q1 2014: €98 million). The €33 million (q1 2014: €1,857 million) in outflows for acquisitions related mainly to the purchase of Thermoplast Composite GmbH. The cash outflow for noncurrent and current financial assets amounted to €254 million (q1 2014: cash inflow of €2 million).

Financing cash flow

In the first quarter of 2015, there was a net cash outflow of €410 million for financing activities, including net loan repayments of €323 million (q1 2014: net borrowings of €3,078 million). Net interest payments were 41.4% higher at €82 million (q1 2014: €58 million).

Liquid assets and net financial debt

Net Financial Debt   [Table 16]
  Dec. 31,
2014
March 31,
2015
  € million € million
Bonds and notes/promissory notes 14,964 15,842
of which hybrid bonds1 4,552 4,544
Liabilities to banks 3,835 3,916
Liabilities under finance leases 441 476
Liabilities from derivatives 642 1,254
Other financial liabilities 1,976 1,943
Positive fair values of hedges of recorded transactions (258) (400)
Financial liabilities 21,600 23,031
Cash and cash equivalents (1,853) (1,607)
Current financial assets (135) (132)
Net financial debt 19,612 21,292
1 classified as debt according to IFRS

Net financial debt of the Bayer Group increased by 8.6%, from €19.6 billion on December 31, 2014, to €21.3 billion on March 31, 2015, mainly as a result of negative currency effects arising from the financing of the acquisition of the consumer care business of Merck & Co., Inc. in u.s. dollars.

Financial debt included three subordinated hybrid bonds reflected at a total of €4.5 billion. Net financial debt should be viewed against the fact that Moody’s and Standard & Poor’s treat 75% and 50%, respectively, of the hybrid bond with a nominal volume of €1.3 billion issued in July 2005 as equity. Moody’s and Standard & Poor’s treat 50% of the hybrid bonds issued in July 2014 with nominal volumes of €1.75 billion and €1.5 billion, respectively, as equity. The hybrid bonds thus have a more limited effect on the Group’s rating-specific debt indicators than conventional borrowings. The other financial liabilities as of March 31, 2015 included commercial paper totaling €1.4 billion. Our noncurrent financial liabilities declined in the first quarter of 2015 from €18.5 billion to €16.9 billion. At the same time, current financial liabilities increased from €3.4 billion to €6.5 billion. We have decided to early redeem the hybrid bond with a nominal volume of €1.3 billion issued in July 2005. This bond is therefore no longer reflected in noncurrent liabilities but in current liabilities instead.

Standard & Poor’s gives Bayer a long-term issuer rating of a– with stable outlook, while Moody’s gives us a long-term rating of a3 with stable outlook. The short-term ratings are a-2 (Standard & Poor’s) and p-2 (Moody’s). These investment-grade ratings document good creditworthiness.

Asset and capital structure

Bayer Group Summary Statements of Financial Position   [Table 17]
  Dec. 31,
2014
March 31,
2015
  € million € million
Noncurrent assets 48,007 51,689
Current assets 22,227 24,951
Total assets 70,234 76,640
     
Equity 20,218 21,863
Noncurrent liabilities 34,513 34,514
Current liabilities 15,503 20,263
Liabilities 50,016 54,777
Total equity and liabilities 70,234 76,640

Total assets rose by €6.4 billion against December 31, 2014 to €76.6 billion. Noncurrent assets increased by €3.7 billion to €51.7 billion, largely due to currency effects. Total current assets rose by €2.7 billion to €25.0 billion due to a mainly operational €2.4 billion increase in trade accounts receivable.

Equity increased by €1.6 billion to €21.9 billion, lifted by income after income taxes of €1.3 billion and currency effects of €1.3 billion but diminished by the €0.8 billion increase – recognized outside profit or loss – in post-employment benefit obligations and changes of €0.2 billion in the cash flow hedges. The equity ratio (equity coverage of total assets) as of March 31, 2015 was 28.5% (December 31, 201428.8%).

Liabilities rose by €4.8 billion in the first quarter of 2015 to €54.8 billion. Provisions for pensions and other post-employment benefits increased by €1.4 billion, while other provisions rose by €1.3 billion. The €1.6 billion increase in financial liabilities was largely the result of currency effects amounting to €1.2 billion.

Net Defined Benefit Liability for Post-Employment Benefits   [Table 18]
  Dec. 31,
2014
March 31,
2015
  € million € million
Provisions for pensions and other post-employment benefits 12,236 13,594
Net defined benefit asset (41) (41)
Net defined benefit liability for post-employment benefits 12,195 13,553

The net defined benefit liability for post-employment benefits rose in the first quarter of 2015 from €12.2 billion to €13.6 billion, mainly due to a decline in long-term capital market interest rates.

Last updated: August 16, 2017  Copyright © Bayer AG
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