Overview of Sales, Earnings and Financial Position

Earnings Performance of the Bayer Group1

Third quarter of 2018

Group sales

Group sales in the third quarter of 2018 rose by 1.9% (Fx & portfolio adj.) to €9,905 million (reported: +23.4%). Germany accounted for €922 million of this figure.

Pharmaceuticals posted a 4.8% (Fx & portfolio adj.) increase in sales to €4,163 million, mainly as a result of the continued strong development of our key growth products overall. Consumer Health raised sales by 3.0% (Fx & portfolio adj.) to €1,297 million, with growth particularly strong in the Asia / Pacific region. Crop Science registered a 9.5% (Fx & portfolio adj.) decline in sales to €3,733 million that resulted primarily from the accounting measures taken in Brazil in the prior year. On a reported basis, sales of Crop Science climbed by 83.8%, thanks mainly to portfolio effects of 96.3% (€1,956 million). Sales of Animal Health fell by 13.5% (Fx & portfolio adj.) to €304 million due to lower volumes.

1 For definition of alternative performance measures, see Annual Report 2017,  Chapter “Alternative Performance Measures Used by the Bayer Group.”

EBITDA before special items

EBITDA before special items of the Bayer Group was level year on year at €2,202 million (−0.1%). Negative currency effects diminished earnings by approximately €160 million (excluding the acquired business). EBITDA before special items at Pharmaceuticals rose by 4.1% to €1,554 million. At Consumer Health, EBITDA before special items fell by 9.5% to €248 million. Crop Science posted a 25.7% increase in EBITDA before special items to €386 million, with the newly acquired business contributing €255 million to earnings. EBITDA before special items of Animal Health declined by 45.7% to €44 million.

Depreciation and amortization

Depreciation, amortization and impairment losses increased by 56.6% in the third quarter of 2018 to €910 million (Q3 2017: €581 million). This figure comprised €578 million (Q3 2017: €319 million) in amortization and impairments on intangible assets and €332 million (Q3 2017: €262 million) in depreciation and impairments on property, plant and equipment.

Impairment losses totaled €9 million (Q3 2017: €8 million), including €8 million (Q3 2017: €7 million) on property, plant and equipment. A total of €6 million (Q3 2017: €0 million) in impairment losses and impairment loss reversals, and €1 million (Q3 2017: €16 million) in accelerated depreciation constituted special items.

EBIT and special items

EBIT of the Bayer Group advanced to €4,423 million (Q3 2017: €1,388 million) after net special gains of €3,123 million (Q3 2017: net special charges of €249 million). The gains mainly included divestiture proceeds of approximately €3.9 billion before taxes in connection with the divestments to BASF. These gains were partially offset by expenses of €763 million that were related to the acquisition of Monsanto, including €518 million relating to the remeasurement of inventories. EBIT before special items declined by 20.6% to €1,300 million (Q3 2017: €1,637 million).

The following special effects were taken into account in calculating EBIT and EBITDA:

Special Items Reconciliation by Segment1

 

 

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.”

Before special items

 

1,637

1,300

 

5,873

5,402

 

2,204

2,202

 

7,505

7,433

Pharmaceuticals

 

3

(16)

 

(153)

(73)

 

3

(16)

 

(7)

(30)

Consumer Health

 

(18)

9

 

(42)

5

 

(17)

11

 

(32)

7

Crop Science

 

(121)

3,163

 

(253)

2,822

 

(108)

3,169

 

(216)

2,830

Animal Health

 

(8)

(3)

 

(8)

(6)

 

(8)

(3)

 

(8)

(6)

Reconciliation

 

(105)

(30)

 

(139)

(66)

 

(105)

(30)

 

(139)

(66)

Restructuring

 

(13)

(14)

 

(42)

(32)

 

(13)

(14)

 

(42)

(32)

Litigations / legal risks

 

(92)

 

(97)

(3)

 

(92)

 

(97)

(3)

Acquisition costs

 

(17)

 

(32)

 

(17)

 

(32)

Others

 

1

 

1

 

1

 

1

Total special items

 

(249)

3,123

 

(595)

2,682

 

(235)

3,131

 

(402)

2,735

Impairment losses / reversals

 

5

 

(146)

(43)

 

5

 

(1)

Litigations / legal risks

 

(93)

(3)

 

(100)

(9)

 

(93)

(3)

 

(100)

(9)

Acquisition costs

 

(102)

(780)

 

(170)

(1,128)

 

(102)

(774)

 

(170)

(1,120)

Restructuring

 

(44)

(47)

 

(124)

(92)

 

(44)

(45)

 

(100)

(90)

Divestitures

 

(15)

3,968

 

(55)

3,969

 

(1)

3,968

 

(31)

3,969

Other

 

(15)

 

(15)

 

(15)

 

(15)

After special items

 

1,388

4,423

 

5,278

8,084

 

1,969

5,333

 

7,103

10,168

Special Items Reconciliation by Functional Costs1

 

 

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.”

Total special items

 

(249)

3,123

 

(595)

2,682

 

(235)

3,131

 

(402)

2,735

of which cost of goods sold

 

(24)

(547)

 

(115)

(705)

 

(8)

(540)

 

(61)

(695)

of which selling expenses

 

(15)

(52)

 

(56)

(70)

 

(15)

(52)

 

(24)

(70)

of which research and development expenses

 

(3)

(22)

 

(116)

(75)

 

(3)

(22)

 

(9)

(32)

of which general administration expenses

 

(115)

(203)

 

(208)

(410)

 

(115)

(203)

 

(208)

(410)

of which other operating income / expenses

 

(92)

3,947

 

(100)

3,942

 

(94)

3,948

 

(100)

3,942

Income after income taxes from discontinued operations

Income after income taxes from discontinued operations was €0 million (Q3 2017: €3,423 million). Covestro was still included in the prior-year period.

Net income

After a financial result of minus €678 million (Q3 2017: minus €403 million), income before income taxes was €3,745 million (Q3 2017: €985 million). The financial result primarily comprised net interest expense of €376 million (Q3 2017: €103 million) and a €202 million (Q3 2017 €131 million) net exchange loss. The financial result included special charges of €166 million (Q3 2017: €162 million), mainly in connection with the deconsolidation of our company Bayer S.A. in Venezuela. After income tax expense of €851 million (Q3 2017: €212 million) and adjusting for income attributable to noncontrolling interest, net income for the third quarter of 2018 amounted to €2,886 million (Q3 2017: €3,881 million).

Core earnings per share

Earnings per share (total) were €2.94 in the third quarter of 2018 (Q3 2017: €4.38), while core earnings per share from continuing operations were below the prior-year period as expected, at €1.19 (Q3 2017: €1.45; −17.9%). The financing costs for the Monsanto acquisition stood against the earnings contribution from the acquired business that was lower due to seasonal reasons. In addition, the equity measures implemented in the second quarter had a dilutive effect.

Core Earnings per Share1

 

 

Q3 2017

 

Q3 2018

 

9M 2017

 

9M 2018

 

 

€ million

 

€ million

 

€ million

 

€ million

1

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

2

The weighted average number of shares (basic and diluted) was restated for all periods prior to June 2018 to reflect the effect of the bonus component of the subscription rights issued as part of the June 2018 capital increase.

EBIT (as per income statements)

 

1,388

 

4,423

 

5,278

 

8,084

Amortization and impairment losses / loss reversals on intangible assets

 

319

 

578

 

1,077

 

1,291

Impairment losses / loss reversals on property, plant and equipment, and accelerated depreciation included in special items

 

22

 

10

 

68

 

19

Special items (other than accelerated depreciation, amortization and impairment losses / loss reversals)

 

235

 

(3,131)

 

402

 

(2,735)

Core EBIT

 

1,964

 

1,880

 

6,825

 

6,659

Financial result (as per income statements)

 

(403)

 

(678)

 

(1,068)

 

(870)

Special items in the financial result

 

162

 

166

 

361

 

36

Income taxes (as per income statements)

 

(212)

 

(851)

 

(894)

 

(1,561)

Special items in income taxes

 

 

84

 

 

84

Tax effects related to amortization, impairment losses / loss reversals and special items

 

(228)

 

572

 

(580)

 

225

Income after income taxes attributable to noncontrolling interest (as per income statements)

 

3

 

(8)

 

3

 

(14)

Above-mentioned adjustments attributable to noncontrolling interest

 

 

 

 

Core net income from continuing operations

 

1,286

 

1,165

 

4,647

 

4,559

 

 

 

 

 

 

 

 

 

 

 

Shares

 

Shares

 

Shares

 

Shares

Weighted average number of shares2

 

885,546,889

 

980,151,964

 

885,066,889

 

927,477,704

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core earnings per share from continuing operations

 

1.45

 

1.19

 

5.25

 

4.92

Personnel expenses and employee numbers

Largely due to the Monsanto acquisition, the number of employees in the Bayer Group rose to 118,196 as of the end of the third quarter of 2018 (September 30, 2017: 99,845; +18.4%), with personnel expenses increasing by 21.0% to €2,783 million (Q3 2017: €2,300 million).

First nine months of 2018

Group sales

Group sales in the first nine months of 2018 rose by 4.1% (Fx & portfolio adj.) to €28,524 million (reported: +8.0%). Germany accounted for €2,921 million of this figure.

Sales of Pharmaceuticals advanced by 3.6% (Fx & portfolio adj.) to €12,455 million. Sales at Consumer Health came in level with the prior-year period at €4,119 million (Fx & portfolio adj. −0.4%). Sales of Crop Science advanced by 3.2% (Fx & portfolio adj.) to €9,605 million. On a reported basis, sales increased by 31.3%, thanks mainly to the aforementioned portfolio effects of 34.2% (€2,499 million) primarily relating to the acquisition of Monsanto. Sales of Animal Health were level year on year at €1,171 million (Fx & portfolio adj. −0.1%).

EBITDA before special items

EBITDA before special items of the Bayer Group was nearly level year on year at €7,433 million (−1.0%; 9M 2017: €7,505 million). Earnings were diminished by negative currency effects of €442 million (excluding the acquired business). EBITDA before special items at Pharmaceuticals decreased by 3.2% to €4,332 million. At Consumer Health, EBITDA before special items receded by 16.6% to €817 million. At Crop Science, EBITDA before special items increased by 18.4% to €2,059 million. This was mainly attributable to the significantly higher provisions for crop protection product returns recognized in the second quarter of 2017 due to high inventories in Brazil, and to the earnings contribution of the newly acquired business. At Animal Health, earnings declined by 6.3% to €311 million.

Depreciation and amortization

Depreciation, amortization and impairment losses amounted to €2,084 million in the first nine months of 2018 (9M 2017: €1,825 million), comprising €1,291 million (9M 2017: €1,077 million) in amortization and impairments on intangible assets and €793 million (9M 2017: €748 million) in depreciation and impairments on property, plant and equipment.

Impairment losses totaled €84 million (9M 2017: €181 million), including €17 million (9M 2017: €43 million) on property, plant and equipment. A total of €51 million (9M 2017: €168 million) in impairment losses and impairment loss reversals, and €2 million (9M 2017: €26 million) in accelerated depreciation constituted special items.

EBIT

EBIT of the Bayer Group advanced by 53.2% to €8,084 million (9M 2017: €5,278 million) after net special gains of €2,682 million (9M 2017: net special charges of €595 million). These gains resulted mainly from the aforementioned divestiture proceeds from the divestments to BASF. The special charges related to the acquired business amounted to €1,096 million, including €644 million relating to the remeasurement of inventories. EBIT before special items declined by 8.0% to €5,402 million (9M 2017: €5,873 million).

Income after income taxes from discontinued operations

Income after income taxes from discontinued operations was €0 million (9M 2017: €4,628 million). Covestro was still included in the prior-year period.

Net income

After a financial result of minus €870 million (9M 2017: minus €1,068 million), income before income taxes was €7,214 million (9M 2017: €4,210 million). The financial result comprised income from investments in affiliated companies of €295 million, particularly from the interest in Covestro, net interest expense of €738 million (9M 2017: €354 million), an exchange loss of €280 million (9M 2017: €321 million) and interest cost of €127 million (9M 2017: €143 million) for pension and other provisions. The financial result included net special charges of €36 million (9M 2017: €361 million). After tax expense of €1,561 million (9M 2017: €894 million), income after income taxes was €5,653 million (9M 2017: €3,316 million). After adjusting for income from discontinued operations after income taxes and noncontrolling interest, net income came to €5,639 million (9M 2017: €7,188 million).

Core earnings per share

Earnings per share (total) amounted to €6.08 (9M 2017: €8.12), while core earnings per share from continuing operations were below the prior-year period as expected, at €4.92 (9M 2017: €5.25; −6.3%). The existing financing costs for the Monsanto acquisition stood against the earnings contribution from the acquired business that was lower due to seasonal reasons.

Compare to Last Year