Third quarter of 2018

Bayer: Good performance in a challenging environment, Group outlook confirmed

  • Group sales €9.9 billion (Q3 2017: €8.0 billion; Fx & portfolio adj. +1.9%)
  • EBITDA before special items level year on year at €2.2 billion (−0.1%)
  • Business performance at Pharmaceuticals remains strong
  • Consumer Health with increase in sales (Fx & portfolio adj.), while currency effects weigh on earnings
  • Crop Science posts substantial rise in sales and earnings due to the acquisition – successful start to integration process
  • Sales and earnings of Animal Health decline following a strong second quarter
  • 3.9 billion one-time gain (before taxes) from divestments
  • Net income €2.9 billion
  • Core earnings per share €1.19
  • Adjusted 2018 Group outlook confirmed

Interim Group Management Report as of September 30, 2018

Economic Position of the Bayer Group

Sales of the Bayer Group increased by 1.9% (Fx & portfolio adj.) to €9.9 billion in the third quarter of 2018. EBITDA before special items was level year on year at €2.2 billion (−0.1%). Core earnings per share were down against the prior-year period as expected, at €1.19 (−17.9%).

Pharmaceuticals saw encouraging development, with sales increasing as a result of higher volumes and earnings benefiting from one-time income from a development collaboration. Consumer Health posted higher sales on a currency- and portfolio-adjusted basis; despite positive operational development, earnings declined due to currency effects and one-time gains in the prior-year quarter. Crop Science registered a significant decline in sales on a currency- and portfolio-adjusted basis due to the accounting measures taken in Brazil in the prior year, while the positive earnings development was supported by the contribution from Monsanto. Sales and earnings declined at Animal Health as expected, mainly as a result of shifts in demand from the third quarter into the first half of the year.

We confirm our Group outlook for 2018 based on the acquisition-related adjustments made in the second quarter.

Key Events

On June 7, 2018, Bayer completed the acquisition of the Monsanto Company, St. Louis, Missouri, United States (Monsanto) for US$63 billion including debt.

The divestments to BASF required to fulfill the antitrust conditions were completed on August 1, 2018, for all businesses earmarked for divestment excluding the vegetable seed business, which was divested as of August 16, 2018. The closing of these transactions led to the hold separate order being lifted. The preliminary purchase price received was approximately €7.3 billion. The transactions resulted in divestment proceeds of approximately €3.9 billion before taxes.

Please see the Bayer Q2 2018 Interim Report for further details on key events in connection with the Monsanto acquisition, including the relevant capital measures, and on the sale of Covestro shares.

On August 10, 2018, a state court jury in San Francisco, United States, awarded approximately US$39 million in compensatory and US$250 million in punitive damages to a plaintiff who claimed that a Monsanto product caused his non-Hodgkin lymphoma (NHL). We consider this decision to be incorrect and asked in September 2018 that the responsible judge, who had also presided over the jury trial, review the verdict. In October 2018, the judge decided to reduce the punitive damages from US$250 million to approximately US$39 million. The compensatory damages of approximately US$39 million were not reduced. However, based on the body of scientific evidence available and the assessments of regulatory authorities worldwide, we continue to believe that we have meritorious defenses and intend to defend ourselves vigorously in this and other product liability lawsuits relating to products containing glyphosate. The next two trials are currently scheduled for February 2019, before a state court in the city of St. Louis and a federal court in San Francisco, respectively. However, trial dates in all venues remain subject to change depending on court schedules and rulings. For further details on this series of proceedings, please see the “Legal Risks” section in the Notes to the Condensed Consolidated Interim Financial Statements.

Changes to the Corporate Structure

Since the closing of the acquisition of Monsanto, the business has been included in full. The divestments to BASF closed on August 1 and August 16, 2018, and are not included in the figures from these dates. The reported portfolio effect on the sales of Crop Science (and the Bayer Group) therefore includes the contribution from the Monsanto business since June 7, 2018, less the contribution of the divested businesses to Q3 2017 sales after August 1 and 16, respectively.

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