Business Development by Segment

Crop Science

Key Data – Crop Science

 

 

Q3 2017

 

Q3 2018

 

Change1

 

9M 2017

 

9M 2018

 

Change1

 

 

€ million

 

€ million

 

Reported %

Fx & p adj. %

 

€ million

 

€ million

 

Reported %

Fx & p adj. %

Fx & p adj. = currency- and portfolio-adjusted

1

For definition see Annual Report 2017, Chapter “Alternative Performance Measures Used by the Bayer Group.”

Sales

 

2,031

 

3,733

 

+83.8

−9.5

 

7,314

 

9,605

 

+31.3

+3.2

Change in sales1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Volume

 

+7.1%

 

−10.5%

 

 

 

 

−1.2%

 

+3.3%

 

 

 

Price

 

−4.4%

 

+1.0%

 

 

 

 

−2.0%

 

−0.1%

 

 

 

Currency

 

−4.0%

 

−3.0%

 

 

 

 

+0.6%

 

−6.3%

 

 

 

Portfolio

 

0.0%

 

+96.3%

 

 

 

 

0.0%

 

+34.2%

 

 

 

Sales by region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe / Middle East / Africa

 

525

 

817

 

+55.6

−7.9

 

2,895

 

3,097

 

+7.0

−4.1

North America

 

386

 

948

 

+145.6

+5.4

 

2,293

 

2,993

 

+30.5

+2.3

Asia / Pacific

 

380

 

452

 

+18.9

−5.3

 

1,205

 

1,328

 

+10.2

+5.4

Latin America

 

740

 

1,516

 

+104.9

−20.4

 

921

 

2,187

 

+137.5

+26.1

EBITDA1

 

199

 

3,555

 

.

 

 

1,523

 

4,889

 

.

 

Special items1

 

(108)

 

3,169

 

 

 

 

(216)

 

2,830

 

 

 

EBITDA before special items1

 

307

 

386

 

+25.7

 

 

1,739

 

2,059

 

+18.4

 

EBITDA margin before special items1

 

15.1%

 

10.3%

 

 

 

 

23.8%

 

21.4%

 

 

 

EBIT1

 

84

 

3,054

 

.

 

 

1,171

 

4,100

 

.

 

Special items1

 

(121)

 

3,163

 

 

 

 

(253)

 

2,822

 

 

 

EBIT before special items1

 

205

 

(109)

 

.

 

 

1,424

 

1,278

 

−10.3

 

Net cash provided by operating activities

 

841

 

1,244

 

+47.9

 

 

1,332

 

2,194

 

+64.7

 

Third quarter of 2018

Sales

In the third quarter of 2018, Crop Science posted sales of €3,733 million. The businesses divested to BASF contributed approximately €100 million to third-quarter sales prior to the closing of the respective transactions in August. Sales increased by 83.8% on a reported basis, thanks mainly to a positive portfolio effect of 96.3% due to the acquisition of Monsanto (€2,199 million) less the prorated contribution from the divested businesses in the prior year (€243 million). Sales were also impacted by a negative currency effect of 3.0%. The 9.5% decline on a currency- and portfolio-adjusted basis resulted especially from the accounting measures taken in Brazil in the prior year and lower volumes in the Europe / Middle East / Africa region.

Sales by Business Unit

 

 

Q3 2017

 

Q3 2018

 

Change1

 

9M 2017

 

9M 2018

 

Change1

 

 

€ million

 

€ million

 

Reported %

Fx & p adj. %

 

€ million

 

€ million

 

Reported %

Fx & p adj. %

Fx & p adj. = currency- and portfolio-adjusted

1

For definition see Annual Report 2017, Chapter “Alternative Performance Measures Used by the Bayer Group.”

Crop Science

 

2,031

 

3,733

 

+83.8

−9.5

 

7,314

 

9,605

 

+31.3

+3.2

Herbicides

 

454

 

1,171

 

+157.9

−13.2

 

2,107

 

2,999

 

+42.3

−1.2

Corn Seed & Traits

 

13

 

600

 

.

−15.8

 

83

 

772

 

.

−11.8

Soybean Seed & Traits

 

48

 

392

 

.

−9.9

 

153

 

598

 

.

+5.8

Fungicides

 

553

 

453

 

−18.1

−15.0

 

1,842

 

1,890

 

+2.6

+7.6

Insecticides

 

421

 

353

 

−16.2

−13.8

 

978

 

981

 

+0.3

+6.2

Environmental Science

 

149

 

206

 

+38.3

+6.1

 

488

 

503

 

+3.1

−8.0

Vegetable Seeds

 

85

 

266

 

.

+10.7

 

332

 

538

 

+62.0

+1.3

Other

 

308

 

292

 

−5.2

−1.4

 

1,331

 

1,324

 

−0.5

+7.2

Sales by region

  • Sales in the Europe / Middle East / Africa region increased by 59.3% (Fx adj.) to €817 million, with a portfolio effect of €353 million. Sales fell by 7.9% on a currency- and portfolio-adjusted basis. The SeedGrowth business (Other) saw a decline due to a loss of registration in France. We also saw a decline in sales at Herbicides and Fungicides as a result of the dry weather.
  • Sales in North America increased by 145.5% (Fx adj.) to €948 million, with a portfolio effect of €541 million. The 5.4% increase on a currency- and portfolio-adjusted basis was mainly attributable to the Fungicides business, which posted gains due partly to a product launch in Canada, and the SeedGrowth business (Other). We also registered double-digit-percentage sales growth at Environmental Science. By contrast, there was a decline in sales at Soybean Seed & Traits, and sales of selective herbicides were down in the United States.
  • In the Asia / Pacific region, sales increased by 23.1% (Fx adj.) to €452 million, with a portfolio effect of €107 million. Sales fell by 5.3% on a currency- and portfolio-adjusted basis. Insecticides in particular saw a decline in sales in India against a strong prior-year quarter due to the introduction of a new sales tax system in the previous year.
  • In Latin America, sales advanced by 108.7% (Fx adj.) to €1,516 million, with a portfolio effect of €955 million. Sales fell by 20.4% after adjusting for currency and portfolio effects, due primarily to the accounting measures taken in Brazil in the prior year. We posted a slight increase in sales overall in the other Latin American countries on a currency- and portfolio-adjusted basis.

Earnings

EBITDA before special items of Crop Science climbed by 25.7% to €386 million in the third quarter of 2018 (Q3 2017: €307 million). This increase was primarily attributable to earnings contributions from the newly acquired business in the amount of €255 million. Negative factors included the aforementioned accounting measures taken in Brazil in the prior year, lower volumes in Europe, higher other operating income in the prior-year quarter, the prorated Q3 2017 earnings contributions from the businesses divested to BASF, and a negative currency effect of €59 million (excluding the acquired business).

EBIT increased to €3,054 million (Q3 2017: €84 million), after special gains of €3,163 million (Q3 2017: special charges of €121 million) primarily resulting from divestiture proceeds of approximately €3.9 billion before taxes in connection with the businesses divested to BASF. Special charges of €763 million were incurred in connection with the acquisition of Monsanto, including €518 million relating to the remeasurement of inventories. EBIT also included additional depreciation and amortization in the amount of €252 million resulting from remeasurements or the first-time recognition of assets in the course of the purchase price allocation.

Special Items1 Crop Science

 

 

EBIT Q3 2017

EBIT Q3 2018

 

EBIT 9M 2017

EBIT 9M 2018

 

EBITDA Q3 2017

EBITDA Q3 2018

 

EBITDA 9M 2017

EBITDA 9M 2018

 

 

€ million

€ million

 

€ million

€ million

 

€ million

€ million

 

€ million

€ million

1

For definition see Annual Report 2017, Chapter “Alternative Performance Measures Used by the Bayer Group.”

Restructuring

 

(3)

(2)

 

(25)

(8)

 

(4)

(2)

 

(12)

(8)

Litigations

 

(1)

(3)

 

(3)

(6)

 

(1)

(3)

 

(3)

(6)

Acquisition costs

 

(102)

(763)

 

(170)

(1,096)

 

(102)

(757)

 

(170)

(1,088)

Divestments

 

(15)

3,935

 

(55)

3,936

 

(1)

3,935

 

(31)

3,936

Other

 

(4)

 

(4)

 

(4)

 

(4)

Total special items

 

(121)

3,163

 

(253)

2,822

 

(108)

3,169

 

(216)

2,830

First nine months of 2018

Sales

In the first nine months of 2018, Crop Science posted sales of €9,605 million. The divested businesses accounted for approximately €1,500 million of this figure. Sales increased by 31.3% on a reported basis, thanks mainly to a positive portfolio effect of 34.2% due to the acquisition of Monsanto (€2,742 million), which took place on June 7, less the prorated contribution from the divested businesses in the prior year (€243 million). Sales were also impacted by a negative currency effect of 6.3%. The 3.2% increase on a currency- and portfolio-adjusted basis was mainly attributable to the Latin America region due to the significantly higher provisions for crop protection product returns recognized in the second quarter of 2017 due to high inventories in Brazil. The Asia / Pacific and North America regions also developed positively. By contrast, we registered a decline in the Europe / Middle East / Africa region that was mainly the result of exceptionally dry conditions in Western Europe and regulatory changes in France.

Earnings

EBITDA before special items of Crop Science increased by 18.4% to €2,059 million in the first nine months of 2018 (9M 2017: €1,739 million). This significant increase was primarily attributable to positive earnings contributions of €325 million from the newly acquired business and to the significantly higher provisions for product returns in Brazil recognized in the second quarter of 2017. Earnings were held back by a negative currency effect of €155 million (excluding the acquired business) and by lower volumes in Europe.

EBIT increased to €4,100 million (9M 2017: €1,171 million), after special gains of €2,822 million (9M 2017: special charges of €253 million) primarily resulting from the divestiture proceeds outlined above. Special charges of €1,096 million were incurred in connection with the acquired business, including €644 million associated with the sale of acquired inventories remeasured at fair value in connection with the purchase price allocation for Monsanto. EBIT also included additional depreciation and amortization in the amount of €307 million resulting from remeasurements or the first-time recognition of assets in the course of the purchase price allocation.

Pro-forma sales by strategic business entity (unaudited)

Due to the scope of the acquired activities and the seasonality of the business, we are presenting sales by strategic business entity on an unaudited, pro-forma basis, to more transparently reflect the underlying operational business development for the combined business of Crop Science and Monsanto, among other reasons. In this context, sales are presented as if both the acquisition of Monsanto and the associated divestitures had taken place already as of January 1, 2017.

Pro Forma Sales by Business Unit1

 

 

Q3 2017

 

Q3 2018

 

Change2

 

9M 2017

 

9M 2018

 

Change2

 

 

€ million

 

€ million

 

Reported %

Fx adj. %

 

€ million

 

€ million

 

Reported %

Fx adj. %

Fx adj. = currency-adjusted

1

The unaudited pro forma data are presented as if both the acquisition of Monsanto and the associated divestments had taken place as of January 1, 2017. Sales of Monsanto are presented in periods as per the Bayer fiscal year. One-time effects of business operations, the accounting for discontinued operations and the recognition and measurement of sales from certain business transactions have been adjusted in line with our accounting. Due to this simplified procedure, they explicitly do not reflect sales according to IFRS or IDW RH HFA 1.004.

2

For definition see Annual Report 2017, Chapter “Alternative Performance Measures Used by the Bayer Group.”

Crop Science

 

3,704

 

3,578

 

−3.4

+1.4

 

15,684

 

14,821

 

−5.5

+2.9

Herbicides

 

1,079

 

1,132

 

+4.9

+9.7

 

4,033

 

3,889

 

−3.6

+3.3

Corn Seed & Traits

 

572

 

600

 

+4.9

+9.2

 

4,090

 

3,835

 

−6.2

+4.5

Soybean Seed & Traits

 

303

 

375

 

+23.8

+39.8

 

1,955

 

1,727

 

−11.7

−0.4

Fungicides

 

552

 

453

 

−17.9

−13.8

 

1,842

 

1,890

 

+2.6

+8.4

Insecticides

 

421

 

353

 

−16.2

−12.7

 

980

 

980

 

0.0

+6.5

Environmental Science

 

208

 

206

 

−1.0

+0.7

 

825

 

727

 

−11.9

−4.9

Vegetable Seeds

 

217

 

228

 

+5.1

+7.3

 

599

 

579

 

−3.3

+1.9

Other

 

352

 

231

 

−34.4

−31.0

 

1,360

 

1,194

 

−12.2

−2.9

Third quarter of 2018

Sales in the third quarter of 2018 increased by 1.4% (Fx adj.) on a pro-forma basis.

  • The increase at Herbicides resulted mostly from higher prices and from higher volumes in Latin America and North America. This was partly offset by the accounting measures taken in Brazil in the prior year.
  • Corn Seed & Traits developed positively, particularly in North America, thanks to seasonal shifts and a strong start to the season in Latin America.
  • The increase in sales at Soybean Seed & Traits was attributable especially to phasing from the upcoming quarters as well as the higher market penetration achieved by Intacta RR2 PRO™ in Latin America.
  • At Fungicides and Insecticides, we registered a decline in sales due to the accounting measures taken in Brazil in the prior year and weather conditions in Europe.
  • The decline at Other was attributable particularly to SeedGrowth and the aforementioned loss of registration in France, as well as to a decline in the rapeseed / canola market in Europe.

First nine months of 2018

Sales in the first nine months of 2018 increased by 2.9% (Fx adj.) on a pro-forma basis. Fungicides and Insecticides saw positive performance due to the significantly higher provisions for product returns in Brazil recognized in the second quarter of 2017. An encouraging performance was also registered by Corn Seed & Traits in North America and at Herbicides due to higher prices in Latin and North America. This was partly offset by the decline at Environmental Science due to planned lower product deliveries to the acquirer of the consumer business divested in the fourth quarter of 2016.

Compare to Last Year