Thursday - February 25, 2016
Financial News Conference

Address by Johannes Dietsch

Member of the Board of Management

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Ladies and gentlemen,

I would now like to give you further details about the Bayer Group’s financial report. Let’s start with a look at our business performance in the fourth quarter.


In the last three months of 2015, Bayer posted currency- and portfolio-adjusted sales growth of 2.4 percent. Sales benefited from positive currency effects, improving by a reported 4.9 percent to around EUR 11.3 billion.

HealthCare achieved currency- and portfolio-adjusted growth of 8.5 percent, due especially to the gratifying development of our recently launched pharmaceutical products. Sales of HealthCare thus came in at EUR 5.8 billion. Due to expanded volumes, CropScience raised sales by 5.3 percent to EUR 2.4 billion on a currency- and portfolio adjusted basis. By contrast, sales of Covestro decreased by nearly 11 percent to EUR 2.8 billion after adjusting for currency and portfolio effects. This was attributable to much lower selling prices. On the other hand, Covestro registered a slight expansion of volumes.

EBITDA before special items improved by 4.0 percent in the fourth quarter to EUR 1.9 billion, due above all to the good development of business at HealthCare. Positive currency effects contributed EUR 200 million to earnings, which, however, were held back by higher R&D and selling expenses.

EBITDA before special items of HealthCare advanced by 7.2 percent to EUR 1.5 billion. This growth in earnings was largely due to the gratifying expansion of business at Pharmaceuticals and Consumer Health. Positive effects came from the development of the recently launched pharmaceutical products and the earnings contribution from the acquired businesses at Consumer Care. EBITDA before special items of CropScience declined by 9.5 percent to EUR 334 million. Covestro improved EBITDA before special items by 18.4 percent to EUR 257 million.

I’d like to take a moment to mention the successful stock market flotation of Covestro AG. On October 6, 2015, Covestro AG issued 62.5 million new shares from a capital increase. The issue price was EUR 24 per share, and the flotation generated gross proceeds of EUR 1.5 billion. Bayer currently still holds a 69 percent interest in Covestro. As a fully consolidated subsidiary, Covestro continues to be included in the Bayer Group consolidated financial statements. In core earnings per share, however, 31 percent of Covestro earnings are attributable to external stockholders of Covestro. This has the effect of diminishing Bayer’s core earnings per share.

In the fourth quarter, core earnings per share from continuing operations decreased by 8.5 percent to EUR 1.07. However, this was due mainly to higher income taxes compared with tax income recorded in the fourth quarter of the previous year.


That brings me to the full year 2015. We are pleased to announce that 2015 was a record year for Bayer. Sales rose to EUR 46.3 billion. This corresponds to a currency- and portfolio-adjusted increase of 2.7 percent. The reported year-on-year increase exceeded 12 percent. This resulted in a substantial improvement of more than 18 percent in EBITDA before special items, an increase that was supported by positive currency effects.

EBIT was held back by special items of EUR 819 million, however. These special items were considerably higher than in the previous year and comprised mainly EUR 280 million in charges for the consolidation of production sites. Furthermore, the integration of acquired businesses at HealthCare resulted in charges of EUR 227 million. Special charges of EUR 212 million resulted in 2015 from the carve-out and stock market flotation of Covestro. Further charges of EUR 202 million related to efficiency improvements, particularly at HealthCare. By contrast, CropScience posted net special gains of EUR 222 million, comprising mainly damage and license payments in connection with the infringement of Bayer’s rights to the LibertyLink weed control system. EBIT of the Bayer Group after these special items increased by 15.8 percent to nearly EUR 6.3 billion.

In summary, I would like to note that all three subgroups contributed to the reported sales and earnings growth in 2015.


This brings us to the financial result, which declined by a slight 2.4 percent compared with 2014, to about EUR 1 billion. This development was primarily attributable to higher financing costs in connection with the acquired consumer care business of Merck & Co., Inc. Tax expense rose to more than EUR 1.2 billion in 2015. The effective tax rate thus amounted to 23.4 percent.

Net income also takes into account income from discontinued operations after taxes and noncontrolling interest. In 2015, we reported net income of EUR 4.1 billion – a year-on-year increase of 20 percent. This represents earnings per share of EUR 4.97. Core earnings per share from continuing operations came in at a gratifying EUR 6.83, against EUR 5.89 in 2014.


Turning now to cash flow development: Gross cash flow from continuing operations increased by 4.4 percent in 2015 to EUR 7 billion, due especially to the improved operating result. The defined gross cash flow hurdle of roughly EUR 5.7 billion was thus clearly exceeded. In 2015, therefore, Bayer far exceeded the minimum return and reproduction requirements and – in terms of value management – created value. All subgroups contributed to this performance.

Due to a substantial decrease in cash tied up in working capital, net cash flow – including discontinued operations – rose by nearly 19 percent to EUR 6.9 billion. Expenditures for property, plant and equipment and intangible assets were 6.2 percent higher in 2015, at EUR 2.5 billion. Nearly half of this amount was invested in Germany – for example, to expand production capacities for the new Factor VIII products in Wuppertal and Leverkusen and to increase herbicides production capacities in Knapsack and Frankfurt. The free operating cash flow – in other words the cash flow contribution after capital expenditures – rose significantly year on year to EUR 4.4 billion.

Net financial debt declined from EUR 19.6 billion at the end of 2014 to EUR 17.4 billion at the end of 2015. This reduction of EUR 2.2 billion was mainly achieved through cash inflows from operating activities and the stock market flotation of Covestro. We received a payment of EUR 0.9 billion at the beginning of January 2016 in connection with the sale of the Diabetes Care business that is not yet included in the aforementioned net financial debt figure. At the beginning of this year, moreover, we redeemed a bond with a nominal volume of EUR 500 million and repaid commercial paper and promissory notes amounting to EUR 383 million.


Dr. Dekkers has already explained the outlook for the Bayer Group as a whole so I’d like to give you some more details on the outlook for the individual divisions.

This is based on pro forma figures that show fiscal 2015 as if our new organizational structure had already been in place. You can see those figures here.

The Pharmaceuticals Division encompasses the business of our former Pharmaceuticals segment, plus the Radiology business. Consumer Health comprises the former Consumer Care Division. The scope of activity of Crop Science and Animal Health has not changed.


On this basis, we expect sales of approximately EUR 16 billion for Pharmaceuticals, despite declining price developments in some areas. This corresponds to a mid-single-digit percentage increase on a currency- and portfolio-adjusted basis. We plan to raise sales of our recently launched pharmaceutical products to more than EUR 5 billion. We expect a mid- to high-single-digit percentage increase in EBITDA before special items.

In the Consumer Health Division, we expect sales to come in at more than EUR 6 billion and plan growth by a mid-single-digit percentage on a currency- and portfolio-adjusted basis. We also aim to improve EBITDA before special items by a mid-single-digit percentage.

At Crop Science we expect sales to be at the prior-year level. This corresponds to a low-single-digit percentage increase on a currency- and portfolio-adjusted basis. We plan to improve EBITDA before special items by a low-single-digit percentage.


Ladies and gentlemen,

let’s now take a look at the way the dividend for Bayer stock has developed over the past ten years. This year again, both the Board of Management and the Supervisory Board of Bayer will propose to the Annual Stockholders’ Meeting that the dividend be increased – by 25 cents per share. This would give a dividend per share of EUR 2.50.

Based on core earnings per share, the proposed dividend for 2015 would result in a payout ratio of 37 percent. That in turn would be within our target corridor of 30 to 40 percent calculated on core earnings per share, thus satisfying our dividend policy. The total dividend payment would climb to over EUR 2 billion for the first time.

As you can see, we have been able to continuously increase the dividend over the past 10 years. We are pleased that our stockholders have been able to share in Bayer’s positive business performance through a steadily growing dividend payment. The proposed dividend for 2015 is two-and-a-half times higher than that paid for 2006. This too is an expression of our focus on the long-term success of our company.

Thank you very much.

Forward-Looking Statements
This release may contain forward-looking statements based on current assumptions and forecasts made by Bayer management. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. These factors include those discussed in Bayer’s public reports which are available on the Bayer website at The company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments.

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