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Management Report

First quarter of 2015

Strong start to the year for Bayer

  • Significant sales and earnings growth at HealthCare
  • CropScience performance steady in a weaker market environment
  • MaterialScience posts earnings growth
  • Group sales €12.1 billion (+14.8%; Fx & portfolio adj. +2.7%)
  • EBITDA before special items €3.0 billion (+9.6%)
  • EBIT €2.0 billion (-4.7%)
  • Net income €1.3 billion (-8.4%)
  • Core earnings per share €2.10 (+7.7%)
  • Guidance for full year 2015 raised due to currency effects

Bayer once again improved its operating performance in the first quarter of 2015. At HealthCare we continued to benefit from the positive development of our recently launched pharmaceutical products and the gratifying expansion of business in all Consumer Health divisions, particularly Consumer Care, where the products acquired from Merck & Co., Inc., United States, also contributed to growth. Despite a weaker market environment, our CropScience business slightly exceeded the strong prior-year quarter. How­ever, earnings were down year on year. MaterialScience registered a slight decline in sales (Fx & portfolio adj.) as expected, with lower raw material prices causing a fall in selling prices. Earnings before special items improved. Preparations for the stock market flotation of MaterialScience are on schedule. As before, we plan to carry out the flotation by mid-2016 at the latest. In light of the business development in the first quarter of 2015 and the considerably more positive exchange rates prevailing on March 31, 2015, we are raising our Group guidance for the current year.

1. Overview of Sales, Earnings and Financial Position

First quarter of 2015

Bayer Group Quarterly Sales

Sales of the Bayer Group moved ahead in the first quarter of 2015 by 2.7% after adjusting for currency and portfolio effects (Fx & portfolio adj.) to €12,117 million (reported: +14.8%; q1 2014: €10,555 million). HealthCare sales improved by 7.2% (Fx & portfolio adj.) to €5,742 million (reported: +25.6%; q1 2014: €4,572 million). CropScience raised sales by 1.0% (Fx & portfolio adj.) against the prior-year quarter to €3,092 million (reported: +6.6%; q1 2014: €2,900 million). As expected, sales of MaterialScience decreased by 2.1% (Fx & portfolio adj.) to €3,014 million (reported: +7.5%; q1 2014: €2,803 million).

Bayer Group Quarterly EBIT and EBITDA Before Special Items

ebit of the Bayer Group fell by 4.7% to €1,998 million (q1 2014: €2,096 million). Earnings were held back by net special charges of €244 million (q1 2014: net special gains of €7 million) that mainly comprised €91 million for the integration of acquired businesses, €77 million for the consolidation of production sites and €41 million for additional efficiency improvement measures. ebit before special items rose by 7.3% to €2,242 million (q1 2014: €2,089 million).

ebitda before special items climbed by 9.6% to €3,000 million (q1 2014: €2,738 million). This good sales development was accompanied by higher r&d and selling expenses. Positive currency effects buoyed earnings by about €50 million. At HealthCare, ebitda before special items rose by a considerable 24.1% to €1,615 million (q1 2014: €1,301 million). This was chiefly attributable to the very good development of business at Pharmaceuticals and Consumer Health, as well as the contribution from the acquired consumer care businesses. ebitda before special items of CropScience fell by 5.3% to €1,040 million (q1 2014: €1,098 million), due particularly to negative currency effects and lower volumes. ebitda before special items of MaterialScience advanced by 15.8% to €424 million (q1 2014: €366 million), mainly because of lower raw material costs. Earnings of the reconciliation declined largely on account of higher expenses for long-term stock-based compensation.

After a financial result of minus €274 million (q1 2014: minus €159 million), income before income taxes was €1,724 million (q1 2014: €1,937 million). After tax expense of €415 million (q1 2014: €512 million) and non-controlling interest, net income in the first quarter of 2015 came to €1,303 million (q1 2014: €1,423 million). Earnings per share were €1.58 (q1 2014: €1.72). Core earnings per share advanced by 7.7% to €2.10 (q1 2014: €1.95), calculated as explained in Chapter 7 “Core Earnings Per Share.”

Quarterly Gross and Net Cash Flow

Gross cash flow was level year on year in the first quarter of 2015 at €2,060 million (q1 2014: €2,048 million). Net cash flow rose sharply to €724 million (q1 2014: €163 million) due to a reduction in cash tied up in working capital. We paid income taxes of €444 million in the first quarter of 2015 (q1 2014: €375 million).

Net financial debt rose by €1.7 billion against December 31, 2014, to €21.3 billion, mainly on account of negative currency effects. The net defined benefit liability for post-employment benefits – the difference between benefit obligations and plan assets – increased from €12.2 billion to €13.6 billion over the same period, mainly due to a decline in long-term capital market interest rates for high-quality corporate bonds.

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Last updated: August 16, 2017  Copyright © Bayer AG