Quarterly Report • Apr 24, 2008
Quarterly Report
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as of March 31, 2008
R Notes to the Consolidated Interim Financial Statements as of March 31, 2008 ………………………………………………………………………………………… 32 R Key Data by Segment and Region ………………………………………………………………… 32 R Explanatory Notes …………………………………………………………………………………………… 34 R Financial Calendar ……………………………………………………………………………………………… 37 R Masthead ……………………………………………………………………………………………………………… 38 cover picture
Apart from the discovery of new active substances, the refi nement of established products capable of enhancing patients' quality of life is another major focus at Bayer HealthCare. One example is the multiple sclerosis (ms) drug Betaferon® / Betaseron®, which helps to reduce the frequency of ms episodes. Now a new study has found that early treatment can further delay the onset of disability. Our cover illustration shows Sandra Patkovic and Dr. Jürgen Heubach of Bayer HealthCare studying gene activity patterns from patients treated with Betaferon® / Betaseron®. The scientists' goal is to identify biomarkers of successful treatment with this drug.
| 1st Quarter 2007 |
1st Quarter 2008 |
Change | Full Year 2007 |
|
|---|---|---|---|---|
| € million | € million | % | € million | |
| Sales | 8,335 | 8,536 | + 2.4 | 32,385 |
| Change in sales | ||||
| Volume | + 7.6% | + 5.9% | + 5.6% | |
| Price | – 0.1% | + 1.0% | + 0.5% | |
| Currency | – 4.6% | – 4.8% | – 3.6% | |
| Portfolio | + 19.8% | + 0.3% | + 9.3% | |
| EBITDA1 | 1,774 | 2,055 | + 15.8 | 5,866 |
| Special items | (216) | (130) | (911) | |
| EBITDA before special items | 1,990 | 2,185 | + 9.8 | 6,777 |
| EBITDA margin before special items | 23.9% | 25.6% | 20.9% | |
| EBIT 2 | 1,175 | 1,343 | + 14.3 | 3,154 |
| Special items | (200) | (154) | (1,133) | |
| EBIT before special items | 1,375 | 1,497 | + 8.9 | 4,287 |
| EBIT margin before special items | 16.5% | 17.5% | 13.2% | |
| Non-operating result | (218) | (275) | – 26.1 | (920) |
| Net income | 2,809 | 762 | – 72.9 | 4,711 |
| Earnings per share (€) 3 | 3.44 | 0.96 | 5.84 | |
| Core earnings per share (€) 4 | 1.26 | 1.44 | 3.80 | |
| Gross cash flow 5 | 1,411 | 1,651 | + 17.0 | 4,784 |
| Net cash flow 6 | 375 | 528 | + 40.8 | 4,281 |
| Cash outflows for capital expenditures | 201 | 288 | + 43.3 | 1,860 |
| Research and development expenses | 625 | 633 | + 1.3 | 2,578 |
| Depreciation and amortization | 599 | 712 | + 18.9 | 2,712 |
| Number of employees at end of period 7 | 105,100 | 106,000 | + 0.9 | 106,200 |
| Personnel expenses | 1,898 | 1,988 | + 4.7 | 7,571 |
EBITDA = EBIT plus amortization of intangible assets and depreciation of property, plant and equipment. EBITDA, EBITDA before special items and EBITDA margin are not defined in the International Financial Reporting Standards and should therefore be regarded only as supplementary information. The company considers underlying EBITDA to be a more suitable indicator of operating performance since it is not affected by depreciation, amortization, write-downs/write-backs or special items. The company also believes that this indicator gives readers a clearer picture of the results of operations and ensures greater comparability of data over time. The underlying EBITDA margin is calculated by dividing underlying EBITDA by sales. See also page 21.
EBIT as shown in the income statement
Earnings per share as defined in IAS 33 = net income divided by the average number of shares. For details see page 34.
Core earnings per share is not defined in the International Financial Reporting Standards and should therefore be regarded only as supplementary information. The company believes that this indicator gives readers a clearer picture of the results of operations and ensures greater comparability of data over time. The calculation of core earnings per share is explained on page 27.
Gross cash flow = income from continuing operations after taxes, plus income taxes, plus/minus non-operating result, minus income taxes paid, plus depreciation, amortization and write-downs, minus write-backs, plus/minus changes in pension provisions, minus gains/plus losses on retirements of noncurrent assets, plus noncash effects of the remeasurement of acquired assets. The change in pension provisions includes the elimination of non-cash components of the operating result. It also contains benefit payments during the year. For details see page 21 ff.
Net cash flow = cash flow from operating activities according to IAS 7
Number of employees in full-time equivalents
Financial Report as of March 31, 2008
Group Management Report
Earning power further strengthened in the fi rst quarter
The Bayer Group posted excellent fi rst-quarter results, carrying over the previous year's positive trend into 2008. Sales increased by 2.4 percent to €8,536 million (q1 2007: €8,335 million). This corresponds to a 6.9 percent improvement when adjusted to refl ect currency and portfolio effects. The main contributions to this improvement came from CropScience (+14.8 percent) and HealthCare (+8.6 percent). MaterialScience held steady at the prior-year level (+0.6 percent).
| Sales by Market | EBITDA Before Special Items | |||
|---|---|---|---|---|
| € million | Total | € million | ||
| Q1 | Q1 | |||
| 2007 | 1,301 7,034 |
8,335 | 2007 | 1,990 |
| 2008 | 1,325 7,211 |
8,536 | 2008 | 2,185 |
| Q2 | Q2 | |||
| 2007 | 1,199 7,018 |
8,217 | 2007 | 1,806 |
| 2008 | 2008 | |||
| Q3 | Q3 | |||
| 2007 | 1,190 6,603 |
7,793 | 2007 | 1,559 |
| 2008 | 2008 | |||
| Q4 | Q4 | |||
| 2007 | 1,125 6,915 |
8,040 | 2007 | 1,422 |
| 2008 | 2008 |
ebitda before special items rose by 9.8 percent in the fi rst quarter to €2,185 million (q1 2007: €1,990 million) despite adverse shifts in currency parities. HealthCare posted a 10.8 percent improvement to €1,050 million (q1 2007: €948 million), while underlying ebitda of CropScience climbed by 22.1 percent to €713 million (q1 2007: €584 million). Earnings of MaterialScience were fl at, with ebitda before special items coming in at €407 million (q1 2007: €409 million). Group ebitda amounted to €2,055 million, up 15.8 percent year on year.
ebit before special items advanced by 8.9 percent in the fi rst quarter of 2008 to €1,497 million (q1 2007: €1,375 million). Special charges totaled €154 million (q1 2007: €200 million), including €100 million (q1 2007: €139 million) related to the acquisition of Schering AG, Germany, and €54 million (q1 2007: €39 million) arising from the cost structure program at CropScience. ebit climbed by 14.3 percent to €1,343 million (q1 2007: €1,175 million).
After a non-operating result of minus €275 million (q1 2007: minus €218 million), income before income taxes came in at €1,068 million (q1 2007: €957 million). The non-operating result contained net interest expense of €189 million (q1 2007: €156 million). This increase was due mainly to the early redemption of a u.s. bond. After tax expense of €306 million (q1 2007: €301 million), income from continuing operations rose to €762 million (q1 2007: €656 million). Net income for the fi rst quarter of 2008, at €762 million, corresponded to the income from continuing operations. The net income of €2,809 million for the prior-year period included income of €2,154 million from discontinued operations, largely comprising the proceeds of the divestiture of our Diagnostics business. Earnings per share came to €0.96 (q1 2007: €3.44). Core earnings per share improved to €1.44 (q1 2007: €1.26). Details of how core earnings per share are calculated are given on page 27.
| Gross Cash Flow | Net Cash Flow | ||
|---|---|---|---|
| € million | € million | ||
| Q1 | Q1 | ||
| 2007 | 1,411 | 2007 | 375 |
| 2008 | 1,651 | 2008 | 528 |
| Q2 | Q2 | ||
| 2007 | 1,187 | 2007 | 816 |
| 2008 | 2008 | ||
| Q3 | Q3 | ||
| 2007 | 1,165 | 2007 | 1,623 |
| 2008 | 2008 | ||
| Q4 | Q4 | ||
| 2007 | 1,021 | 2007 | 1,467 |
| 2008 | 2008 |
Gross cash fl ow moved ahead by 17.0 percent year on year in the fi rst quarter of 2008, to €1,651 million (q1 2007: €1,411 million). Despite an increase in cash tied up in working capital, net cash fl ow rose by 40.8 percent to €528 million. Net debt was €12.1 billion as of March 31, 2008, compared with €12.2 billion on December 31, 2007. The Group's net pension obligations – the difference between pension provisions and plan assets – declined by €0.9 billion compared with the end of 2007, to €4.1 billion. The decrease was mainly due to higher long-term interest rates on the capital market.
Financial Report as of March 31, 2008
Group Management Report
We expect global economic growth to slow in 2008 compared to the previous year, particularly as a result of the economic weakness in the United States. We anticipate that growth in the other industrialized countries and the emerging economies will remain relatively stable at a lower level. It remains diffi cult to predict the extent to which the u.s. subprime crisis and the turbulence on the international fi nancial markets will affect the global economy.
We continue to expect solid growth in our health care markets, especially for pharmaceuticals. This year our business with crop protection and seed products is likely to benefi t from high demand for food, energy and feed crops. We do not foresee any major impairments to growth in the markets relevant for our MaterialScience business, except in the United States.
The start to 2008 exceeded our expectations, strengthening our confi dence for the year as a whole. We continue to target about 5 percent currency-adjusted growth in Bayer Group sales, an increase in ebitda before special items and a further improvement in the underlying ebitda margin.
We confi rm our target margin for 2009 and continue to aim for an improvement in the Group's underlying ebitda margin to over 22 percent.
We remain confi dent about the performance of our HealthCare business, and are targeting a market or above-market rate of currency-adjusted sales growth in all divisions in 2008. Following the negative ruling in the United States regarding our Yasmin® patent (see page 24), we have made a minor adjustment to our HealthCare guidance. We now aim to improve our ebitda margin before special items toward 27 percent (previously: approximately 27 percent). There is no change to our target margin of approximately 28 percent for 2009.
Our CropScience business shared in the positive performance of the world's agricultural markets in the fi rst quarter of 2008. We now believe that we will exceed our forecast of 5 percent currency-adjusted sales growth. Our goal is to improve the ebitda margin before special items for the full year to about 24 percent (previously: more than 23 percent). We plan to further increase our profi tability by 2009 and continue to target an ebitda margin before special items of around 25 percent in a normal market environment.
Our MaterialScience business turned in a pleasingly robust performance in the fi rst quarter. Its development over the remainder of the year is diffi cult to forecast due to the considerable uncertainty regarding the business environment and the movement of raw material prices. Against this background, we expect second-quarter ebitda before special items at MaterialScience to be close to the level of the fi rst quarter. For the year as a whole, we continue to expect that we can achieve a good, value-creating earnings level, though without matching the 2007 fi gure.
Our business activities are grouped into the HealthCare, CropScience and Material-Science subgroups. There was no change to the corporate structure of the Bayer Group in the fi rst quarter. The commentaries in this report relate exclusively to continuing operations, except where specifi c reference is made to discontinued operations or to a total value (total).
| Sales | EBIT before special items* |
EBITDA before special items* |
EBITDA margin before special items* |
||||||
|---|---|---|---|---|---|---|---|---|---|
| € million | 1st Quarter 2007 |
1st Quarter 2008 |
1st Quarter 2007 |
1st Quarter 2008 |
1st Quarter 2007 |
1st Quarter 2008 |
1st Quarter 2007 |
1st Quarter 2008 |
|
| HealthCare | 3,610 | 3,731 | 624 | 663 | 948 | 1,050 | 26.3 % | 28.1 % | |
| Pharmaceuticals | 2,495 | 2,614 | 420 | 441 | 711 | 794 | 28.5 % | 30.4 % | |
| Consumer Health | 1,115 | 1,117 | 204 | 222 | 237 | 256 | 21.3 % | 22.9 % | |
| CropScience | 1,786 | 1,978 | 447 | 578 | 584 | 713 | 32.7 % | 36.0 % | |
| Crop Protection | 1,434 | 1,622 | 343 | 493 | 461 | 607 | 32.1 % | 37.4 % | |
| Environmental | |||||||||
| Science, BioScience | 352 | 356 | 104 | 85 | 123 | 106 | 34.9 % | 29.8 % | |
| MaterialScience | 2,608 | 2,512 | 291 | 281 | 409 | 407 | 15.7 % | 16.2 % | |
| Systems | 1,869 | 1,839 | 253 | 281 | 329 | 368 | 17.6 % | 20.0 % | |
| Materials | 739 | 673 | 38 | 0 | 80 | 39 | 10.8 % | 5.8 % | |
| Reconciliation | 331 | 315 | 13 | (25) | 49 | 15 | 14.8 % | 4.8 % | |
| Continuing operations |
8,335 | 8,536 | 1,375 | 1,497 | 1,990 | 2,185 | 23.9 % | 25.6 % |
* for definition see Bayer Group Key Data on page 2, also page 21
Financial Report as of March 31, 2008
Group Management Report
Sales of the HealthCare subgroup rose by 3.4 percent in the fi rst quarter of 2008, to €3,731 million. Adjusted for currency and portfolio effects, business expanded by 8.6 percent. This increase was mainly attributable to the positive performance of the Pharmaceuticals segment. On a currency-adjusted basis, sales rose strongly in all regions, and by 5.2 percent in North America.
Bayer HealthCare increased fi rst-quarter ebitda before special items by 10.8 percent to €1,050 million (q1 2007: €948 million). Earnings growth was bolstered by the strong business performance and synergies from the integration of Schering AG, Germany. Negative currency effects were more than offset. ebit before special items also rose considerably from the prior-year period to €663 million (q1 2007: €624 million). Included here is some €60 million in additional amortization of intangible assets, which also takes into account the change in the patent situation regarding Yasmin®. The special items totaling minus €100 million resulted from charges in connection with the acquisition of Schering AG. ebit advanced by 16.1 percent to €563 million.
The names "Bayer Schering Pharma" or "Schering" as used in this report always refer to Bayer Schering Pharma AG, Berlin, Germany, or its predecessor, Schering AG, Berlin, Germany, respectively. The reference to Bayer Schering Pharma AG or Schering AG also includes business conducted by affi liated entities in countries outside Germany. Bayer Schering Pharma AG and Schering-Plough Corporation, New Jersey, u.s., are unaffi liated companies that have been totally independent of each other for many years.
In the Pharmaceuticals segment, sales increased by 4.8 percent in the fi rst quarter of 2008 to €2,614 million (q1 2007: €2,495 million). Adjusted for currency effects, business expanded by 9.9 percent. The principal growth drivers were Yasmin® / YAZ® / Yasminelle® and Nexavar®.
Sales of the Primary Care business unit rose slightly by 0.4 percent to €776 million (q1 2007: €773 million). On a currency-adjusted basis, this was equivalent to a 4.4 percent increase. Signifi cant sales gains for Aspirin Cardio® (currency-adjusted: +22.4 percent), Avalox® / Avelox® (currency-adjusted: +18.2 percent) and Glucobay® (currency-adjusted: +14.6 percent) more than offset the expected decline for Cipro® / Ciprobay® (currency-adjusted: -21.7 percent) in Europe and North America that resulted from generic competition.
The positive trend in the Women's Healthcare business unit – particularly in the United States – continued, with sales up 11.0 percent to €696 million (q1 2007: €627 million). Adjusted for currency changes, sales advanced by 17.4 percent. The strongest growth was recorded by the intra-uterine system Mirena®, sales of which climbed by 50.8 percent on a currency-adjusted basis. Business with the oral contraceptives of the Yasmin® / yaz® / Yasminelle® product group climbed by 33.3 percent when adjusted for currency effects. In early March 2008, a u.s. court declared our patent '531 for Yasmin® invalid. Bayer has appealed this ruling (see page 24 f).
Sales of the Diagnostic Imaging business unit fell by 2.9 percent to €298 million (q1 2007: €307 million), but rose by 2.9 percent on a currency-adjusted basis. Business with Ultravist® improved by 28.4 percent after adjusting for currency effects, the prior-year fi gure having been diminished by a temporary interruption in distribution of the 375 mgI/ml formulation of Ultravist®. Sales of Magnevist® dropped by a currencyadjusted 20.2 percent, partly because of a shift toward Gadovist®. The Medrad business expanded by 8.0 percent on a currency-adjusted basis. At the beginning of April 2008,
| Bayer HealthCare | 1st Quarter 2007 |
1st Quarter 2008 |
Change |
|---|---|---|---|
| € million | € million | % | |
| Sales | 3,610 | 3,731 | + 3.4 |
| Pharmaceuticals | 2,495 | 2,614 | + 4.8 |
| Consumer Health | 1,115 | 1,117 | + 0.2 |
| Sales by Region | |||
| Europe | 1,495 | 1,626 | + 8.8 |
| North America | 1,145 | 1,045 | – 8.7 |
| Asia / Paci fi c |
466 | 526 | + 12.9 |
| Latin America /Africa / Middle East | 504 | 534 | + 6.0 |
| 1 EBITDA |
783 | 970 | + 23.9 |
| Special items | (165) | (80) | |
| 2 EBITDA before special items |
948 | 1,050 | + 10.8 |
| EBITDA margin before special items | 26.3 % | 28.1 % | |
| 1 EBIT |
485 | 563 | + 16.1 |
| Special items | (139) | (100) | |
| 2 EBIT before special items |
624 | 663 | + 6.3 |
| 1 Gross cash flow |
557 | 737 | + 32.3 |
| 1 Net cash flow |
383 | 577 | + 50.7 |
for definition see Bayer Group Key Data on page 2 for definition see also page 21
| Pharmaceuticals | 1st Quarter 2007 |
1st Quarter 2008 |
Change |
|---|---|---|---|
| € million | € million | % | |
| Sales | 2,495 | 2,614 | + 4.8 |
| Primary Care | 773 | 776 | + 0.4 |
| Women's Healthcare | 627 | 696 | + 11.0 |
| Diagnostic Imaging (including Medrad) | 307 | 298 | – 2.9 |
| Specialized Therapeutics | 303 | 327 | + 7.9 |
| Hematology / Cardiology | 268 | 255 | – 4.9 |
| Oncology | 159 | 202 | + 27.0 |
| Dermatology (Intendis) | 58 | 60 | + 3.4 |
| Sales by Region | |||
| Europe | 1,039 | 1,140 | + 9.7 |
| North America | 754 | 707 | – 6.2 |
| Asia / Paci fi c |
379 | 429 | + 13.2 |
| Latin America /Africa / Middle East | 323 | 338 | + 4.6 |
| 1 EBITDA |
546 | 714 | + 30.8 |
| Special items | (165) | (80) | |
| 2 EBITDA before special items |
711 | 794 | + 11.7 |
| EBITDA margin before special items | 28.5 % | 30.4 % | |
| 1 EBIT |
281 | 341 | + 21.4 |
| Special items | (139) | (100) | |
| 2 EBIT before special items |
420 | 441 | + 5.0 |
| 1 Gross cash flow |
390 | 544 | + 39.5 |
| 1 Net cash flow |
279 | 415 | + 48.7 |
for definition see Bayer Group Key Data on page 2
2 for definition see also page 21
Financial Report as of March 31, 2008
Group Management Report
Bayer HealthCare subsidiary Medrad, Inc. completed its tender offer for u.s.-based Possis Medical, Inc., a supplier of mechanical thrombectomy systems to treat constricted or blocked arteries and veins. Our interest in this company as of March 31, 2008 amounted to 91.8 percent.
The Specialized Therapeutics business unit saw sales rise by 7.9 percent to €327 million (q1 2007: €303 million). Adjusted for changes in currency parities, business expanded by 12.6 percent. Sales of Betaferon® / Betaseron®, our product to treat multiple sclerosis, continued to grow strongly, increasing by 18.3 percent on a currency-adjusted basis. Business with Betaferon® / Betaseron® in the United States, Russia and Germany was particularly gratifying.
In the Hematology / Cardiology business unit, sales declined by 4.9 percent to €255 million (q1 2007: €268 million). On a currency-adjusted basis, sales edged down 0.6 percent. The main reason for this was the temporary, worldwide suspension of marketing in November 2007 for Trasylol®, the product to control loss of blood during coronary bypass operations. Business with Kogenate® increased by a currency-adjusted 21.5 percent from the previous year's low level.
Sales of the Oncology business unit expanded by 27.0 percent to €202 million, with the currency-adjusted increase amounting to 34.7 percent. Growth was mainly attributable to our cancer drug Nexavar®, which posted a currency-adjusted 129.9 percent increase. During 2007 we received marketing authorization for Nexavar® in various countries to treat renal cell carcinoma and hepatocellular carcinoma. In January 2008, Nexavar® was approved in Japan for the treatment of advanced renal cell carcinoma, the most common form of kidney cancer. Also in January 2008, the Japanese health authority mhlw granted Priority Review Status to the registration application for Nexavar® to treat liver cancer.
Sales of the Dermatology (Intendis) business unit improved by 3.4 percent to €60 million (q1 2007: €58 million). This corresponds to a currency-adjusted increase of 6.2 percent.
ebitda before special items in the Pharmaceuticals segment improved to €794 million in the fi rst quarter of 2008 (q1 2007: €711 million). This increase was mainly due to the gratifying business performance and to synergies already realized. ebit before special items came in at €441 million, up €21 million or 5.0 percent from the prior-year period. Earnings were diminished by special charges of €100 million from the acquisition of Schering. ebit rose by 21.4 percent to €341 million (q1 2007: €281 million).
| Best-Selling Pharmaceutical Products | 1st Quarter 2007 |
1st Quarter 2008 |
Change | Currency adjusted change |
|---|---|---|---|---|
| € million | € million | % | % | |
| ® / YAZ ® / Yasminelle® (Women's Healthcare) Yasmin |
240 | 297 | + 23.8 | + 33.3 |
| ® / Betaseron ® (Specialized Therapeutics) Betaferon |
244 | 274 | + 12.3 | + 18.3 |
| ® (Hematology / Cardiology) Kogenate |
201 | 233 | + 15.9 | + 21.5 |
| ® (Primary Care) Adalat |
145 | 150 | + 3.4 | + 6.0 |
| ® / Avelox ® (Primary Care) Avalox |
128 | 143 | + 11.7 | + 18.2 |
| ® (Women's Healthcare) Mirena |
81 | 112 | + 38.3 | + 50.8 |
| ® (Oncology) Nexavar |
47 | 101 | + 114.9 | + 129.9 |
| ® (Primary Care) Levitra |
84 | 82 | – 2.4 | + 4.0 |
| ® / Ciprobay ® (Primary Care) Cipro |
108 | 81 | – 25.0 | – 21.7 |
| ® (Primary Care) Glucobay |
72 | 80 | + 11.1 | + 14.6 |
| ® (Diagnostic Imaging) Ultravist |
55 | 68 | + 23.6 | + 28.4 |
| ® (Primary Care) Aspirin Cardio |
54 | 64 | + 18.5 | + 22.4 |
| ® (Diagnostic Imaging) Magnevist |
80 | 60 | – 25.0 | – 20.2 |
| ® (Diagnostic Imaging) Iopamiron |
47 | 43 | – 8.5 | – 7.8 |
| ® (Women's Healthcare) Diane |
45 | 41 | – 8.9 | – 7.5 |
| Total | 1,631 | 1,829 | + 12.1 | + 18.2 |
| Proportion of Pharmaceuticals sales | 65 % | 70 % | ||
Financial Report as of March 31, 2008
Group Management Report
Sales in the Consumer Health segment edged up 0.2 percent to €1,117 million in the fi rst quarter of 2008 (q1 2007: €1,115 million). After adjusting for currency and portfolio changes, the increase came to 5.4 percent.
In the Consumer Care Division, sales remained practically level with the prior-year period, at €655 million (-0.6 percent). Adjusted for currency and portfolio effects, business was up by 3.9 percent. The strongest growth was achieved by Bepanthen® / Bepanthol® (currency-adjusted: +27.8 percent), Canesten® (currency-adjusted: +14.9 percent) and Supradyn® (currency-adjusted: +10.7 percent). Sales of Aleve®, however, were down by 21.7 percent on a currency-adjusted basis. Here it should be kept in mind that the prioryear sales performance was positively impacted by the launch of Aleve® Liquid Gels in the United States. Bayer HealthCare has reached an agreement to acquire the over-the-counter (otc) medicines business of u.s.-based Sagmel, Inc. Sagmel operates this business in the Commonwealth of Independent States (cis), where it occupies a leading position. With this acquisition, Bayer aims to strengthen its Consumer Care business in eastern Europe, one of the world's fastest-growing otc markets. Closing of the transaction is expected for the second half of this year.
The Diabetes Care Division had sales of €227 million (+0.4 percent). Adjusted for shifts in exchange rates, business expanded by 6.6 percent. This performance was attributable largely to the successful marketing of the Contour® blood glucose monitoring systems (currency-adjusted: +27.7 percent), which are replacing our Elite® systems (currency-adjusted: -26.3 percent). Sales of Breeze® dropped by 17.1 percent on a currencyadjusted basis, the high sales level in the prior-year period having been due to the market introduction of "Breeze® 2" in North America.
Sales of the Animal Health Division grew by 2.2 percent to €235 million (q1 2007: €230 million), and by 8.5 percent when adjusted for the effects of currency translation. The principal growth driver was the Advantage® product line (currency-adjusted: +10.3 percent).
ebitda of the Consumer Health segment in the fi rst quarter of 2008 improved by 8.0 percent to €256 million (q1 2007: €237 million). ebit rose by €18 million, or 8.8 percent, to €222 million.
| Consumer Health | 1st Quarter 2007 |
1st Quarter 2008 |
Change |
|---|---|---|---|
| € million | € million | % | |
| Sales | 1,115 | 1,117 | + 0.2 |
| Consumer Care | 659 | 655 | – 0.6 |
| Diabetes Care | 226 | 227 | + 0.4 |
| Animal Health | 230 | 235 | + 2.2 |
| Sales by Region | |||
| Europe | 456 | 486 | + 6.6 |
| North America | 391 | 338 | – 13.6 |
| Asia / Pacifi c | 87 | 97 | + 11.5 |
| Latin America /Africa / Middle East | 181 | 196 | + 8.3 |
| EBITDA1 | 237 | 256 | + 8.0 |
| Special items | 0 | 0 | |
| EBITDA before special items 2 | 237 | 256 | + 8.0 |
| EBITDA margin before special items | 21.3 % | 22.9 % | |
| EBIT1 | 204 | 222 | + 8.8 |
| Special items | 0 | 0 | |
| EBIT before special items 2 | 204 | 222 | + 8.8 |
| Gross cash flow 1 | 167 | 193 | + 15.6 |
| Net cash flow 1 | 104 | 162 | + 55.8 |
for definition see Bayer Group Key Data on page 2
for definition see also page 21
| Best-Selling Consumer Health Products | 1st Quarter 2007 |
1st Quarter 2008 |
Change | Currency adjusted change |
|---|---|---|---|---|
| € million | € million | % | % | |
| Contour® 1 (Diabetes Care) |
106 | 128 | + 20.8 | + 27.7 |
| Aspirin® 2 (Consumer Care) |
113 | 114 | + 0.9 | + 7.2 |
| Advantage® product line (Animal Health) | 75 | 77 | + 2.7 | + 10.3 |
| Aleve® / naproxen (Consumer Care) | 69 | 48 | – 30.4 | – 21.7 |
| Canesten® (Consumer Care) | 43 | 47 | + 9.3 | + 14.9 |
| Bepanthen® / Bepanthol® (Consumer Care) | 36 | 46 | + 27.8 | + 27.8 |
| Baytril® (Animal Health) | 40 | 38 | – 5.0 | + 2.0 |
| Supradyn® (Consumer Care) | 33 | 35 | + 6.1 | + 10.7 |
| Breeze® 1 (Diabetes Care) |
43 | 34 | – 20.9 | – 17.1 |
| Elite® 1 (Diabetes Care) |
44 | 32 | – 27.3 | – 26.3 |
| Total | 602 | 599 | – 0.5 | + 5.3 |
| Proportion of Consumer Health sales | 54 % | 54 % |
previously included with the Ascensia® product family
total Aspirin® sales = €178 million (Q1 2007: €167 million), including Aspirin Cardio®, which is reflected in sales
of the Pharmaceuticals segment
Financial Report as of March 31, 2008
Group Management Report
Bayer CropScience raised sales by 10.8 percent in the fi rst quarter of 2008 to €1,978 million (q1 2007: €1,786 million). Adjusted for currency and portfolio changes, sales advanced by 14.8 percent. Substantially higher volumes and selling price increases contributed to growth. High prices for major agricultural crops due to low inventories worldwide, combined with stronger demand for plants as an alternative energy source, prompted farmers to increase their expenditures for high-quality seed and innovative crop protection products.
ebitda before special items came in at €713 million, up 22.1 percent from €584 million in the prior-year period. This signifi cant earnings improvement was due particularly to the growth in business, selling price increases and cost savings, which more than offset the negative currency effects. ebit before special items rose by 29.3 percent to €578 million (q1 2007: €447 million). Earnings were diminished by €54 million in special charges for the cost structure program we initiated in 2006. After special items, ebit moved ahead 28.4 percent to €524 million (q1 2007: €408 million).
Sales of the Crop Protection segment for the fi rst quarter of 2008 rose by 13.1 percent, from €1,434 million in the prior-year period to €1,622 million. The currency-adjusted increase was 17.8 percent. Sales of all business units rose signifi cantly in a positive market environment.
Growth was driven mainly by our young products based on active ingredients that have been introduced to core markets since 2000. Sales of these products climbed by some 40 percent to more than €600 million.
In the Europe region, sales advanced by 21.7 percent to €880 million (q1 2007: €723 million), or by 22.7 percent on a currency-adjusted basis. The suspension of mandatory fallowing practices in the European Union led to an increase in planted acreages, particularly for cereals. In France, we registered a sales shift from the fourth quarter of 2007 to the beginning of 2008 due to a change in the French taxation system for crop protection products. Overall, the positive market environment benefi ted all our business units, and especially sales of the herbicides Atlantis®, Hussar® and MaisTer®, the fungicides Fandango®, Proline® and Flint®, and the insecticide Biscaya®.
Our crop protection business in North America expanded by 1.4 percent to €296 million. Adjusted for currency effects, the increase came to 10.6 percent. Sales of our soybean fungicides, in particular, made considerable gains against the background of an anticipated increase in planted acreages, more than offsetting a slight decline in the insecticides business. Sales of our cereal herbicides recorded a gratifying increase, due partly to the successful market introduction of our products HuskieTM and Infi nityTM based on the innovative active ingredient pyrasulfotole.
Sales in the Asia-Pacifi c region came in at €185 million, down 2.1 percent from the prioryear fi gure of €189 million, but up 2.8 percent on a currency-adjusted basis. Our business in India, Southeast Asia and China posted strong increases, particularly for insecticides, while herbicide sales declined as a result of the receding rice market, especially in Japan. Business in Australia improved slightly following rainfall over large areas of the country at the beginning of the year.
| Bayer CropScience | 1st Quarter 2007 |
1st Quarter 2008 |
Change |
|---|---|---|---|
| € million | € million | % | |
| Sales | 1,786 | 1,978 | + 10.8 |
| Crop Protection | 1,434 | 1,622 | + 13.1 |
| Environmental Science, BioScience | 352 | 356 | + 1.1 |
| Sales by Region | |||
| Europe | 862 | 1,022 | + 18.6 |
| North America | 447 | 456 | + 2.0 |
| Asia / Pacifi c | 219 | 211 | – 3.7 |
| Latin America /Africa / Middle East | 258 | 289 | + 12.0 |
| EBITDA1 | 548 | 663 | + 21.0 |
| Special items | (36) | (50) | |
| EBITDA before special items 2 | 584 | 713 | + 22.1 |
| EBITDA margin before special items | 32.7 % | 36.0 % | |
| EBIT1 | 408 | 524 | + 28.4 |
| Special items | (39) | (54) | |
| EBIT before special items2 | 447 | 578 | + 29.3 |
| Gross cash flow 1 | 369 | 489 | + 32.5 |
| Net cash flow 1 | (238) | (312) | – 31.1 |
for definition see Bayer Group Key Data on page 2
2 for definition see also page 21
| Best-Selling Bayer CropScience Products* | 1st Quarter 2007 |
1st Quarter 2008 |
Change | Currency adjusted change |
|---|---|---|---|---|
| € million | € million | % | % | |
| Confi dor® / Gaucho® / Admire® / Merit® | ||||
| (Insecticides / Seed Treatment / Environmental Science) | 163 | 157 | – 3.7 | + 2.5 |
| Atlantis® (Herbicides) | 76 | 124 | + 63.2 | + 68.6 |
| Flint® / Stratego® / Sphere® (Fungicides) | 60 | 91 | + 51.7 | + 63.1 |
| Basta®/ Liberty® (Herbicides) | 72 | 81 | + 12.5 | + 14.9 |
| ® (Fungicides) Prolinee |
72 | 81 | + 12.5 | + 13.9 |
| Folicur® / Raxil® (Fungicides / Seed Treatment) | 77 | 75 | – 2.6 | – 0.2 |
| Poncho® (Seed Treatment) | 59 | 72 | + 22.0 | + 33.1 |
| Puma® (Herbicides) | 69 | 66 | – 4.3 | – 1.8 |
| Hussar® (Herbicides) | 47 | 60 | + 27.7 | + 28.4 |
| Decis® / K-Othrine® (Insecticides / Environmental Science) | 45 | 46 | + 2.2 | + 7.5 |
| Total | 740 | 853 | + 15.3 | + 20.2 |
| Proportion of Bayer CropScience sales | 41 % | 43 % |
* Figures are based on active ingredient class. For the sake of clarity, only the principal brands and business units are listed.
Financial Report as of March 31, 2008
Group Management Report
Sales in Latin America /Africa / Middle East rose by 13.5 percent to €261 million (q1 2007: €230 million). Adjusted for currency effects, the increase was 24.1 percent. While sales in Africa and the Middle East moved slightly lower, business in Latin America registered very pleasing growth in a market environment that was considerably more favorable than in the previous year. Sales gained strongly in Brazil and Argentina, particularly those of insecticides and seed treatment products.
ebitda before special items climbed by 31.7 percent in the fi rst quarter of 2008, to €607 million. This earnings improvement resulted mainly from increased volume sales, slight selling price increases, and higher margin contributions by our new products, as well as from the savings achieved through the cost structure program initiated in 2006. These factors combined to more than offset negative currency effects. ebit before special items also improved signifi cantly, advancing by 43.7 percent to €493 million (q1 2007: €343 million). Special charges for our cost structure program came to €47 million. ebit rose by €142 million to €446 million (q1 2007: €304 million).
Sales in the Environmental Science, BioScience segment rose by 1.1 percent in the fi rst quarter of 2008, to €356 million (q1 2007: €352 million). After adjusting for currency and portfolio effects, sales improved by 2.3 percent.
Sales of Environmental Science fell by 12.2 percent to €165 million. The currencyadjusted decrease came to 8.3 percent. Business shrank in North America, chiefl y as a result of adverse weather patterns and heightened generic competition. Sales growth in Europe only partially offset this decline.
Sales of BioScience grew by 16.5 percent to €191 million. Adjusted for currency and portfolio effects, business expanded by 14.4 percent. The portfolio effects resulted from the acquisition of the u.s. cotton seed producer Stoneville and from businesses acquired in the area of vegetable seeds. The expansion resulted mainly from the success of the InVigor® hybrid canola seed business in North America and a further increase in global sales of vegetable seeds.
ebitda before special items in the Environmental Science, BioScience segment came in at €106 million, down €17 million compared with the same period in 2007. To reinforce the innovative capability and future growth of our seed business, we have increased research and development spending in BioScience. Earnings also were impacted by the decline in the Environmental Science business in North America. ebit before special items receded by 18.3 percent to €85 million. Special charges in connection with our restructuring program amounted to €7 million. After special items, ebit came in at €78 million (q1 2007: €104 million).
| Crop Protection | 1st Quarter 2007 |
1st Quarter 2008 |
Change |
|---|---|---|---|
| € million | € million | % | |
| Sales | 1,434 | 1,622 | + 13.1 |
| Herbicides | 568 | 664 | + 16.9 |
| Fungicides | 384 | 448 | + 16.7 |
| Insecticides | 311 | 322 | + 3.5 |
| Seed Treatment | 171 | 188 | + 9.9 |
| Sales by Region | |||
| Europe | 723 | 880 | + 21.7 |
| North America | 292 | 296 | + 1.4 |
| Asia / Paci fi c |
189 | 185 | – 2.1 |
| Latin America /Africa / Middle East | 230 | 261 | + 13.5 |
| 1 EBITDA |
425 | 564 | + 32.7 |
| Special items | (36) | (43) | |
| 2 EBITDA before special items |
461 | 607 | + 31.7 |
| EBITDA margin before special items | 32.1 % | 37.4 % | |
| 1 EBIT |
304 | 446 | + 46.7 |
| Special items | (39) | (47) | |
| 2 EBIT before special items |
343 | 493 | + 43.7 |
| 1 Gross cash flow |
282 | 416 | + 47.5 |
| 1 Net cash flow |
(113) | (266) | – 135.4 |
1 for definition see Bayer Group Key Data on page 2
for definition see also page 21
| Environmental Science, BioScience | 1st Quarter 2007 |
1st Quarter 2008 |
Change |
|---|---|---|---|
| € million | € million | % | |
| Sales | 352 | 356 | + 1.1 |
| Environmental Science | 188 | 165 | – 12.2 |
| BioScience | 164 | 191 | + 16.5 |
| Sales by Region | |||
| Europe | 139 | 142 | + 2.2 |
| North America | 155 | 160 | + 3.2 |
| Asia / Paci fi c |
30 | 26 | – 13.3 |
| Latin America /Africa / Middle East | 28 | 28 | 0.0 |
| 1 EBITDA |
123 | 99 | – 19.5 |
| Special items | 0 | (7) | |
| 2 EBITDA before special items |
123 | 106 | – 13.8 |
| EBITDA margin before special items | 34.9 % | 29.8 % | |
| 1 EBIT |
104 | 78 | – 25.0 |
| Special items | 0 | (7) | |
| 2 EBIT before special items |
104 | 85 | – 18.3 |
| 1 Gross cash flow |
87 | 73 | – 16.1 |
| 1 Net cash flow |
(125) | (46) | + 63.2 |
for definition see Bayer Group Key Data on page 2
for definition see also page 21
Financial Report as of March 31, 2008
Group Management Report
MaterialScience posted fi rst-quarter sales of €2,512 million, down 3.7 percent compared to the same period of 2007. When adjusted for portfolio and currency effects, sales edged up by 0.6 percent, thanks to higher selling prices that were only partly offset by a slight decline in volumes due to lower sales of raw materials, particularly styrene. If raw material sales are disregarded, volumes rose slightly.
Regional trends varied. While sales in North America receded by about 6 percent on a currency-adjusted basis due to the slowdown in the u.s. economy, business in Asia-Pacifi c and Latin America /Africa / Middle East improved strongly. Adjusted for the lower raw material sales, business in Europe held steady year on year.
First-quarter ebitda before special items came to €407 million, virtually matching the previous year's level of €409 million. A signifi cant earnings decline in Materials was compensated by a gratifying improvement in underlying ebitda in Systems. For the subgroup as a whole, the selling price increases implemented and the fi rst earnings contributions from the restructuring program launched at the end of last year offset the higher costs for raw materials and energies. ebit before special items fell by 3.4 percent to €281 million. There were no special items in the quarter.
Sales in the Systems segment slipped 1.6 percent to €1,839 million (q1 2007: €1,869 million), due mainly to the weak u.s. dollar. Adjusted for currency and portfolio changes, sales grew by 1.6 percent, thanks to selling price increases. By contrast, volumes were down slightly year on year as a result of much lower raw material sales. Sales performance varied by region, with business down in North America but substantially improved in Asia-Pacifi c and Latin America /Africa / Middle East. Disregarding raw material sales, sales in Europe showed a slight increase.
The Polyurethanes business unit had sales of €1,259 million, down 5.5 percent from the prior-year period. Even after adjusting for currency and portfolio effects, sales did not quite reach the prior-year level, declining by 1.2 percent.
Our Coatings, Adhesives, Specialties business unit improved sales by 7.6 percent to €423 million, or by 7.3 percent on a currency- and portfolio-adjusted basis.
Inorganic Basic Chemicals boosted sales by 10.4 percent (currency-adjusted: +13.6 percent) to €117 million, due primarily to higher volumes.
ebitda before special items came in at €368 million, up 11.9 percent year on year. This earnings improvement was chiefl y attributable to selling price increases that more than offset the higher costs for raw materials and energies. ebit before special items advanced by 11.1 percent to €281 million.
| Bayer MaterialScience | 1st Quarter 2007 |
1st Quarter 2008 |
Change |
|---|---|---|---|
| € million | € million | % | |
| Sales | 2,608 | 2,512 | – 3.7 |
| Systems | 1,869 | 1,839 | – 1.6 |
| Materials | 739 | 673 | – 8.9 |
| Sales by Region | |||
| Europe | 1,185 | 1,135 | – 4.2 |
| North America | 631 | 521 | – 17.4 |
| Asia / Paci fi c |
506 | 529 | + 4.5 |
| Latin America /Africa / Middle East | 286 | 327 | + 14.3 |
| 1 EBITDA |
409 | 407 | – 0.5 |
| Special items | 0 | 0 | |
| 2 EBITDA before special items |
409 | 407 | – 0.5 |
| EBITDA margin before special items | 15.7 % | 16.2 % | |
| 1 EBIT |
285 | 281 | – 1.4 |
| Special items | (6) | 0 | |
| 2 EBIT before special items |
291 | 281 | – 3.4 |
| 1 Gross cash flow |
304 | 310 | + 2.0 |
| 1 Net cash flow |
37 | 146 | • |
1 for definition see Bayer Group Key Data on page 2
for definition see also page 21
| Systems | 1st Quarter 2007 |
1st Quarter 2008 |
Change |
|---|---|---|---|
| € million | € million | % | |
| Sales | 1,869 | 1,839 | – 1.6 |
| Polyurethanes | 1,332 | 1,259 | – 5.5 |
| Coatings, Adhesives, Specialties | 393 | 423 | + 7.6 |
| Inorganic Basic Chemicals | 106 | 117 | + 10.4 |
| Other | 38 | 40 | + 5.3 |
| Sales by Region | |||
| Europe | 902 | 863 | – 4.3 |
| North America | 482 | 401 | – 16.8 |
| Asia / Paci fi c |
266 | 316 | + 18.8 |
| Latin America /Africa / Middle East | 219 | 259 | + 18.3 |
| 1 EBITDA |
329 | 368 | + 11.9 |
| Special items | 0 | 0 | |
| 2 EBITDA before special items |
329 | 368 | + 11.9 |
| EBITDA margin before special items | 17.6 % | 20.0 % | |
| 1 EBIT |
247 | 281 | + 13.8 |
| Special items | (6) | 0 | |
| 2 EBIT before special items |
253 | 281 | + 11.1 |
| 1 Gross cash flow |
235 | 273 | + 16.2 |
| 1 Net cash flow |
62 | 63 | + 1.6 |
for definition see Bayer Group Key Data on page 2
2 for definition see also page 21
Financial Report as of March 31, 2008
Group Management Report
In the Materials segment, sales fell by 8.9 percent to €673 million (q1 2007: €739 million). On a portfolio- and currency-adjusted basis, business shrank by 2.1 percent from the prior-year period. The main reason for the lower sales was a decline in volumes, while selling prices were steady. Adjusted sales were down in the Europe, North America and Asia-Pacifi c regions, but rose in Latin America /Africa / Middle East.
In an expectedly diffi cult market environment, sales of our Polycarbonates business unit fell by 10.7 percent to €610 million (currency- and portfolio-adjusted: -2.4 percent).
Sales of our Thermoplastic Polyurethanes business unit moved ahead 12.5 percent to €63 million (currency- and portfolio-adjusted: +2.6 percent).
ebitda before special items of the Materials segment dropped by 51.3 percent to €39 million. This decline in earnings resulted from lower volumes and higher costs for raw materials and energies, which were not offset by selling price increases. ebit before special items moved back to €0 million (q1 2007: €38 million).
| Materials | 1st Quarter 2007 |
1st Quarter 2008 |
Change |
|---|---|---|---|
| € million | € million | % | |
| Sales | 739 | 673 | – 8.9 |
| Polycarbonates | 683 | 610 | – 10.7 |
| Thermoplastic Polyurethanes | 56 | 63 | + 12.5 |
| Sales by Region | |||
| Europe | 283 | 272 | – 3.9 |
| North America | 149 | 120 | – 19.5 |
| Asia / Pacifi c | 240 | 213 | – 11.3 |
| Latin America /Africa / Middle East | 67 | 68 | + 1.5 |
| EBITDA1 | 80 | 39 | – 51.3 |
| Special items | 0 | 0 | |
| EBITDA before special items 2 | 80 | 39 | – 51.3 |
| EBITDA margin before special items | 10.8 % | 5.8 % | |
| EBIT1 | 38 | 0 | • |
| Special items | 0 | 0 | |
| EBIT before special items 2 | 38 | 0 | • |
| Gross cash flow 1 | 69 | 37 | – 46.4 |
| Net cash flow 1 | (25) | 83 | • |
1 for definition see Bayer Group Key Data on page 2 for definition see also page 21
To permit a more accurate assessment of business operations, ebit and ebitda are also stated "before special items." The special items concerned are detailed in the table below. "ebitda," "ebitda before special items" and "ebit before special items" are not defi ned in the International Financial Reporting Standards and should therefore be regarded only as supplementary information.
| Special Items Reconciliation | EBIT 1st Quarter 2007 |
EBIT 1st Quarter 2008 |
EBITDA 1st Quarter 2007 |
EBITDA 1st Quarter 2008 |
|---|---|---|---|---|
| € million | ||||
| After special items | 1,175 | 1,343 | 1,774 | 2,055 |
| HealthCare | 139 | 100 | 165 | 80 |
| Schering PPA effects* | 20 | 51 | 64 | 51 |
| Schering integration costs | 119 | 49 | 101 | 29 |
| CropScience | 39 | 54 | 36 | 50 |
| Restructuring | 39 | 54 | 36 | 50 |
| MaterialScience | 6 | 0 | 0 | 0 |
| Restructuring | 6 | 0 | 0 | 0 |
| Reconciliation | 16 | 0 | 15 | 0 |
| Restructuring | 16 | 0 | 15 | 0 |
| Total special items | 200 | 154 | 216 | 130 |
| Before special items | 1,375 | 1,497 | 1,990 | 2,185 |
* The purchase price paid for Schering AG, Germany, was allocated among the acquired assets and assumed liabilities in accordance with the International Financial Reporting Standards (IFRS). To ensure comparability with future earnings data, the expected long-term effects of the step-up are refl ected in EBIT and EBITDA before special items, whereas temporary, non-cash effects of the purchase price allocation are eliminated. In this connection we recognized a €51 million special charge when calculating EBIT before special items for the fi rst quarter.
Gross cash fl ow in the fi rst quarter of 2008 rose by 17.0 percent, from €1,411 million in the prior-year period to €1,651 million, as a result of the strong business performance. Net cash fl ow improved by €153 million to €528 million (q1 2007: €375 million) despite an increase in cash tied up in working capital.
| Bayer Group Summary Cash Flow Statements | 1st Quarter 2007 |
1st Quarter 2008 |
|---|---|---|
| € million | ||
| Gross cash flow* | 1,411 | 1,651 |
| Changes in working capital / other non-cash items | (1,036) | (1,123) |
| Net cash provided by (used in) operating activities (net cash flow), continuing operations |
375 | 528 |
| Net cash provided by (used in) operating activities (net cash fl ow), discontinued operations |
38 | 0 |
| Net cash provided by (used in) operating activities (net cash flow) (total) | 413 | 528 |
| Net cash provided by (used in) investing activities (net cash flow) (total) | 4,589 | (464) |
| Net cash provided by (used in) financing activities (net cash flow) (total) | (1,764) | 131 |
| Change in cash and cash equivalents due to business activities (total) | 3,238 | 195 |
| Cash and cash equivalents at beginning of period | 2,915 | 2,531 |
| Change due to exchange rate movements and to changes in scope of consolidation | (10) | (9) |
| Cash and cash equivalents at end of period | 6,143 | 2,717 |
* for definition see Bayer Group Key Data on page 2
Financial Report as of March 31, 2008
Group Management Report
In the fi rst three months of 2008, there was a net cash outfl ow of €464 million for investing activities (q1 2007: €4,589 million infl ow). This amount mainly comprised €203 million – net of acquired cash – in payments relating to the purchase of 91.8 percent of the shares of Possis Medical, Inc. along with tax payments of €40 million in connection with the divestiture of the diagnostics business. The prior-year fi gure consisted primarily of the net proceeds totaling €4.7 billion from the divestitures of the diagnostics business and H.C. Starck.
Cash outfl ows for property, plant and equipment in the fi rst quarter of 2008 came to €239 million (q1 2007: €193 million) and those for intangible assets to €49 million (q1 2007: €8 million), giving a total of €288 million (q1 2007: €201 million). This fi gure included the expenditures for the expansion of our polymers production facilities in Caojing, near Shanghai, China.
Net cash infl ow for fi nancing activities in the fi rst quarter of 2008 amounted to €131 million (q1 2007: €1,764 million outfl ow). Payments to minority stockholders of consolidated companies amounted to €9 million (q1 2007: €9 million).
As of March 31, 2008 the Bayer Group held cash and cash equivalents of €2,717 million, including €750 million deposited in escrow accounts. This amount is earmarked for payments to be made in connection with the squeeze-out of the remaining minority stockholders of Bayer Schering Pharma AG and civil law settlements of antitrust proceedings. Pursuant to a resolution of the Extraordinary Stockholders' Meeting of Bayer Schering Pharma AG on January 17, 2007, the shares of that company that are still held by minority stockholders will be transferred to the main stockholder, Bayer Schering GmbH, a wholly owned subsidiary of Bayer AG, in return for cash compensation of €98.98 per share. Dissenting stockholders are seeking to have the stockholder resolution set aside or to have it declared null and void. As of March 31, 2008, we held a 96.3 percent interest in Bayer Schering Pharma AG. In view of the restriction on its use, the liquidity held in escrow accounts was not deducted when calculating net debt.
| Dec. 31, 2007 | March 31, 2008 |
|---|---|
| 12,911 | 12,648 |
| 2,285 | 2,288 |
| 1,237 | 1,237 |
| 1,287 | 1,757 |
| (230) | (301) |
| 13,968 | 14,104 |
| (1,776) | (1,967) |
| (8) | (35) |
| 12,184 | 12,102 |
| - | - |
| 12,184 | 12,102 |
* In view of the restriction on its use, the €750 million liquidity in escrow accounts in the first quarter 2008 (Dec. 31, 2007: €755 million) was not deducted when calculating net debt. March 31, 2008: €1,967 million = €2,717 million - €750 million (Dec. 31, 2007: €1,776 million = €2,531 million - €755 million).
In the fi rst quarter we reduced net debt (total) by €0.1 billion to €12.1 billion. As of March 31, 2008 we had noncurrent fi nancial liabilities of €12.6 billion, including the €1.2 billion subordinated hybrid bond issued in July 2005 and the €2.3 billion mandatory convertible bond issued in April 2006. Net debt should be viewed against the fact that Moody's and Standard & Poor's treat 75 percent and 50 percent, respectively, of the hybrid bond as equity. Both rating agencies consider the mandatory convertible bond wholly as equity. Unlike conventional borrowings, the hybrid bond thus has only a limited effect on the Group's rating-specifi c debt indicators, while the mandatory convertible bond has no effect.
Standard & Poor's has given Bayer a long-term issuer rating of bbb+ with positive outlook, while Moody's has assigned the company an a3 rating with negative outlook. The short-term ratings are a-2 (Standard & Poor's) and p-2 (Moody's). These investmentgrade ratings document good creditworthiness.
The net pension liability fell in the fi rst quarter from €5.0 billion to €4.1 billion, mainly due to the increase in capital market interest rates. Provisions for pensions and other post-employment benefi ts declined from €5.5 billion to €5.0 billion. At the same time prepaid benefi t assets, refl ected in the balance sheet as other receivables, rose from €0.5 billion to €0.9 billion.
| Net pension liability | Dec. 31, 2007 | March 31, 2008 | |
|---|---|---|---|
| € million | |||
| Provisions for pensions and other post-employment benefi ts | 5,501 | 4,970 | |
| Prepaid benefi t assets | (533) | (882) | |
| Net pension liability | 4,968 | 4,088 |
The number of employees has been converted to full-time equivalents, which means parttime employees are included in proportion to their contractual working hours.
On March 31, 2008, the Bayer Group had 106,000 employees, 200 less than on December 31, 2007. We employed 17,000 people in North America, including for the fi rst time the employees in the United States transferred to Bayer in connection with the acquisition of Possis Medical, Inc. Bayer had 19,200 employees in the Asia-Pacifi c region and 14,500 in Latin America /Africa / Middle East. The number of employees in Europe was 55,300. This includes 37,900 people in Germany, which thus accounts for 35.8 percent of the Group's total workforce. Personnel expenses in the fi rst quarter of 2008 amounted to €1,988 million (q1 2007: €1,898 million).
Financial Report as of March 31, 2008
Group Management Report
As a global enterprise with a diverse business portfolio, the Bayer Group is exposed to numerous risks. We therefore have an appropriate risk management system in place. Apart from fi nancial risks there are also business-specifi c selling market, procurement market, product development, patent, production, environmental and regulatory risks.
Legal risks exist particularly in the areas of product liability, competition and antitrust law, patent disputes, tax assessments and environmental matters. The outcome of any current or future proceedings cannot be predicted with certainty. It is therefore possible that legal or regulatory judgments or settlements could give rise to expenses that are not covered, or not fully covered, by insurers' compensation payments and could signifi cantly affect our revenues and earnings.
Information on the Bayer Group's risk situation is provided in the Bayer Annual Report 2007 on pages 80 - 88 and 188 - 193. The Bayer Annual Report 2007 can be downloaded free of charge at www.bayer.com. The following signifi cant changes have occurred in respect of the legal risks since publication of the Bayer Annual Report 2007:
As reported on page 190 of the Bayer Annual Report 2007, Bayer expects that civil antitrust lawsuits for damages concerning the products rubber chemicals, butadiene rubber, styrene butadiene rubber, polychloroprene rubber and nitrile butadiene rubber will be fi led against Bayer in Europe. At the end of February 2008, a group of plaintiffs who are primarily producers of tires brought an action for damages before the High Court of Justice in the United Kingdom against Bayer and other producers of butadiene rubber and styrene butadiene rubber based on alleged violations of antitrust law.
Yasmin®: On page 191 of the Bayer Annual Report 2007, we reported that, in April 2005, Bayer Schering Pharma fi led suit against Barr Pharmaceuticals Inc. and Barr Laboratories Inc. in u.s. federal court alleging patent infringement by Barr for the intended generic version of Bayer Schering Pharma's Yasmin® oral contraceptive product in the United States. In June 2005 Barr fi led its counterclaim seeking to invalidate Bayer Schering Pharma's patent. In March 2008, the u.s. federal court invalidated Bayer Schering Pharma's '531 patent for Yasmin®. Bayer has appealed this ruling.
In March 2008 Bayer HealthCare Pharmaceuticals Inc. and Bayer Schering Pharma AG received two notices of an Abbreviated New Drug Application with a Paragraph iv certifi cation (an "anda iv") pursuant to which Watson Laboratories Inc. and Sandoz Inc. seek approval to market a generic version of Bayer Schering Pharma's oral contraceptive Yasmin® in the United States. Bayer has fi led suit against Watson and Sandoz in u.s. federal court alleging patent infringement by Watson and Sandoz for the intended generic version of Yasmin®.
yaz®: On page 191 of the Bayer Annual Report 2007, we reported that, in January 2007, Barr Laboratories Inc. fi led an anda iv application with the u.s. fda seeking approval of a generic version of Bayer Schering Pharma's yaz® oral contraceptive. In October 2007 Bayer Schering Pharma received also notice from Watson Laboratories Inc. that it has fi led an anda iv application with the u.s. fda seeking approval of a generic version of yaz®. Both applications claim that Bayer Schering Pharma's patents are invalid and/ or that the respective generic product does not infringe them. Bayer has fi led a patent infringement suit against Watson claiming, inter alia, that Bayer's '531 patent has been infringed. Bayer's '531 patent is also at issue in the patent infringement suit against Barr, mentioned in the previous paragraph, relating to the Yasmin® oral contraceptive.
24
Bayer is currently evaluating the impact of the court's decision regarding Yasmin® on yaz®. However, regardless of the outcome of the court decision invalidating the company's '531 patent with regard to Yasmin®, Bayer retains marketing exclusivity for yaz® as an oral contraceptive in the u.s. until March 16, 2009. No generic manufacturer can lawfully market a generic version of yaz® for an oral contraceptive indication until after March 16, 2009.
The Yasmin® and yaz® oral contraceptive products are very important to the business. Bayer is deeply committed to maintaining its leadership in oral contraception and intends to continue to vigorously defend its position.
On page 192 of the Bayer Annual Report 2007, we reported that Abbott Laboratories commenced a lawsuit in the United States against Bayer and another party alleging infringement of two of Abbott's patents relating to blood glucose monitoring devices. The devices concerned are sold by Bayer as part of its Ascensia® Contour® system and its dex® and Autodisc® system. In April 2008 the court granted summary judgement in favor of Bayer with regard to one of the two patents on the basis that the patent's claims that were asserted by Abbott against Bayer are invalid. On the second patent, the court found that Bayer did not literally infringe Abbott's patent, but left for trial the question of whether Bayer infringed that patent under the so-called doctrine of equivalents. A jury trial on this second patent is scheduled to begin in May 2008. Bayer believes it has meritorious defenses in this matter and intends to defend itself vigorously.
On page 192 of the Bayer Annual Report 2007, we reported that Bayer has fi led suit against several companies in the u.s. alleging patent infringement in connection with moxifl oxacin (Avelox®). In the two proceedings still pending Bayer has reached agreement with Teva Pharmaceuticals usa, Inc., the adverse party, to settle their patent litigation with regard to the two Bayer patents. Under the settlement terms agreed upon, Teva will obtain a license to sell its generic moxifl oxacin tablet product in the u.s. shortly before the second of the two Bayer patents expires in March 2014. The impact on the Avelox® business in the u.s. is expected to be immaterial. Teva acknowledges the validity and enforceability of the two Bayer patents.
At present, no potential risks have been identifi ed that either individually or in combination could endanger the continued existence of the Bayer Group.
Since March 31, 2008, no events of special signifi cance have occurred that we expect to have a material impact on the fi nancial position or results of operations of the Bayer Group.
25
Financial Report as of March 31, 2008
Financial Report as of March 31, 2008
Bayer stock could not escape the turbulence on the international stock markets in the fi rst quarter, closing on March 31, 2008, at €50.76, down 18.8 percent from the closing price on December 31, 2007.
The dax lost 19.0 percent in the same period, closing at 6,535 points on March 31. The European reference index Euro Stoxx 50 also fell by 17.4 percent from the beginning of the year, fi nishing the quarter at 5,362 points.
| Bayer Stock Key Data | 1st Quarter 2007 |
1st Quarter 2008 |
Full Year 2007 |
||
|---|---|---|---|---|---|
| High for the period | € | 47.84 | 65.68 | 62.53 | |
| Low for the period | € | 40.20 | 45.90 | 40.20 | |
| Average daily share turnover on German stock exchanges |
million | 5.5 | 7.4 | 5.7 | |
| March 31, 2007 |
March 31, 2008 |
Dec. 31, 2007 |
Change March 31, 2008 / Dec. 31, 2007 % |
||
| Share price | € | 47.84 | 50.76 | 62.53 | – 18.8 |
| Market capitalization | € million | 36,566 | 38,798 | 47,794 | – 18.8 |
| Stockholders' equity | € million | 15,906 | 17,605 | 16,821 | + 4.7 |
| Number of shares entitled to the dividend | million | 764.34 | 764.34 | 764.34 | |
| DAX | 6,917 | 6,535 | 8,067 | – 19.0 |
XETRA closing price; source: Bloomberg
(indexed; 100 = Xetra closing price on March 31, 2007)
Earnings per share according to ifrs are affected by the purchase price allocation for Schering, Berlin, Germany, and other special factors. To enhance comparability, we also determine core net income from continuing operations after elimination of the amortization of intangible assets, asset write-downs (including any impairment losses), special items in ebitda including the related tax effects, and one-time tax income or expense.
The calculation of earnings per share in accordance with ifrs is explained in the notes to the consolidated fi nancial statements on page 34. Adjusted core net income, core earnings per share and core ebit are not defi ned in the International Financial Reporting Standards. Therefore they should be regarded as supplementary information rather than stand-alone indicators.
| Calculation of Core EBIT and Core Earnings per Share | 1st Quarter 2007 |
1st Quarter 2008 |
|---|---|---|
| € million | ||
| EBIT as per income statement | 1,175 | 1,343 |
| Amortization and write-downs of intangible assets | 293 | 407 |
| Write-downs of property, plant and equipment | 24 | 31 |
| Special items (other than write-downs) | 216 | 130 |
| Core EBIT | 1,708 | 1,911 |
| Non-operating result (as per income statement) | (218) | (275) |
| Income taxes (as per income statement) | (301) | (306) |
| Tax adjustment | (177) | (173) |
| Income after taxes attributable to minority interest | ||
| (as per income statement) | (1) | 0 |
| Core net income from continuing operations | 1,011 | 1,157 |
| Financing expenses for the mandatory convertible bond, net of tax effects |
24 | 28 |
| Adjusted core net income | 1,035 | 1,185 |
| Shares | ||
| Weighted average number of issued ordinary shares | 764,341,920 | 764,341,920 |
| Potential shares to be issued upon conversion of the mandatory convertible bond |
59,523,810 | 59,582,699 |
| Adjusted weighted average total number of issued and potential ordinary shares |
823,865,730 | 823,924,619 |
| Core earnings per share from continuing operations (€) | 1.26 | 1.44 |
Financial Report as of March 31, 2008
Consolidated Financial Statements
| 1st Quarter 2007 |
1st Quarter 2008 |
|
|---|---|---|
| € million | ||
| Net sales | 8,335 | 8,536 |
| Cost of goods sold | (4,134) | (4,103) |
| Gross profit | 4,201 | 4,433 |
| Selling expenses Research and development expenses |
(1,807) (625) |
(1,902) (633) |
| General administration expenses | (436) | (419) |
| Other operating income | 143 | 287 |
| Other operating expenses | (301) | (423) |
| Operating result [EBIT] | 1,175 | 1,343 |
| Equity-method loss | (14) | (10) |
| Non-operating income | 242 | 135 |
| Non-operating expenses | (446) | (400) |
| Non-operating result | (218) | (275) |
| Income before income taxes | 957 | 1,068 |
| Income taxes | (301) | (306) |
| Income from continuing operations after taxes | 656 | 762 |
| Income from discontinued operations after taxes | 2,154 | - |
| Income after taxes | 2,810 | 762 |
| of which attributable to minority interest | 1 | 0 |
| of which attributable to Bayer AG stockholders (net income) | 2,809 | 762 |
| Earnings per share (€) | ||
| From continuing operations | ||
| Basic* | 0.82 | 0.96 |
| Diluted* | 0.82 | 0.96 |
| From discontinued operations | ||
| Basic* | 2.62 | - |
| Diluted* | 2.62 | - |
| From continuing and discontinued operations | ||
| Basic* | 3.44 | 0.96 |
| Diluted* | 3.44 | 0.96 |
* The ordinary shares to be issued upon conversion of the mandatory convertible bond are treated as already issued shares.
| March 31, 2007 |
March 31, 2008 |
Dec. 31, 2007 |
|
|---|---|---|---|
| € million | |||
| Noncurrent assets | |||
| Goodwill | 8,183 | 8,190 | 8,215 |
| Other intangible assets | 15,448 | 14,221 | 14,555 |
| Property, plant and equipment | 8,740 | 8,561 | 8,819 |
| Investments in associates | 517 | 457 | 484 |
| Other fi nancial assets | 1,177 | 995 | 1,127 |
| Other receivables | 184 | 996 | 667 |
| Deferred taxes | 1,005 | 611 | 845 |
| 35,254 | 34,031 | 34,712 | |
| Current assets | |||
| Inventories | 6,327 | 6,218 | 6,217 |
| Trade accounts receivable | 6,817 | 6,689 | 5,830 |
| Other fi nancial assets | 238 | 570 | 335 |
| Other receivables | 1,613 | 1,494 | 1,461 |
| Claims for income tax refunds | 235 | 195 | 208 |
| Cash and cash equivalents | 6,143 | 2,717 | 2,531 |
| Assets held for sale and discontinued operations | 346 | 82 | 84 |
| 21,719 | 17,965 | 16,666 | |
| Total assets | 56,973 | 51,996 | 51,378 |
| Stockholders' equity | |||
| Capital stock of Bayer AG | 1,957 | 1,957 | 1,957 |
| Capital reserves of Bayer AG | 4,028 | 4,028 | 4,028 |
| Other reserves | 9,855 | 11,543 | 10,749 |
| 15,840 | 17,528 | 16,734 | |
| Equity attributable to minority interest | 66 | 77 | 87 |
| 15,906 | 17,605 | 16,821 | |
| Noncurrent liabilities | |||
| Provisions for pensions and other post-employment benefi ts | 6,156 | 4,970 | 5,501 |
| Other provisions | 1,506 | 1,273 | 1,166 |
| Financial liabilities | 14,626 | 12,648 | 12,911 |
| Other liabilities | 402 | 515 | 501 |
| Deferred taxes | 4,397 | 3,893 | 3,866 |
| 27,087 | 23,299 | 23,945 | |
| Current liabilities | |||
| Other provisions | 4,571 | 3,995 | 3,754 |
| Financial liabilities | 3,673 | 1,757 | 1,287 |
| Trade accounts payable | 2,296 | 2,220 | 2,466 |
| Income tax liabilities | 170 | 99 | 56 |
| Other liabilities | 3,112 | 2,892 | 2,873 |
| Liabilities directly related to assets held for sale | |||
| and discontinued operations | 158 | 129 | 176 |
| 13,980 | 11,092 | 10,612 | |
| Total stockholders' equity and liabilities | 56,973 | 51,996 | 51,378 |
2007 figures reclassified
Financial Report as of March 31, 2008
Consolidated Financial Statements
| 1st Quarter 2007 |
1st Quarter 2008 |
|
|---|---|---|
| € million | ||
| Income from continuing operations after taxes | 656 | 762 |
| Income taxes | 301 | 306 |
| Non-operating result | 218 | 275 |
| Income taxes paid | (343) | (364) |
| Depreciation and amortization | 599 | 712 |
| Change in pension provisions | (96) | (94) |
| (Gains) losses on retirements of noncurrent assets | 12 | 3 |
| Non-cash effects of the remeasurement of acquired assets (inventory work-down) |
64 | 51 |
| Gross cash flow | 1,411 | 1,651 |
| Decrease (increase) in inventories | (213) | (251) |
| Decrease (increase) in trade accounts receivable | (1,011) | (1,038) |
| (Decrease) increase in trade accounts payable | (114) | (196) |
| Changes in other working capital, other non-cash items | 302 | 362 |
| Net cash provided by (used in) operating activities (net cash flow), continuing operations |
375 | 528 |
| Net cash provided by (used in) operating activities (net cash fl ow), discontinued operations |
38 | 0 |
| Net cash provided by (used in) operating activities (net cash flow) (total) | 413 | 528 |
| Cash outfl ows for additions to property, plant, equipment and intangible assets |
(201) | (288) |
| Cash infl ows from sales of property, plant, equipment and other assets | 18 | 16 |
| Cash infl ows (outfl ows) from divestitures less divested cash | 4,673 | (40) |
| Cash infl ows (outfl ows) from acquisitions less acquired cash | (22) | (246) |
| Cash infl ows (outfl ows) from noncurrent fi nancial assets | 5 | 27 |
| Interest and dividends received | 93 | 74 |
| Cash infl ows (outfl ows) from current fi nancial assets | 23 | (7) |
| Net cash provided by (used in) investing activities (total) | 4,589 | (464) |
| Capital contributions | 0 | 0 |
| Bayer AG dividend, dividend payments to minority stockholders, reimbursements of advance capital gains tax payments |
(9) | (9) |
| Issuances of debt | 444 | 397 |
| Retirements of debt | (1,954) | (120) |
| Interest paid | (245) | (137) |
| Net cash provided by (used in) financing activities (total) | (1,764) | 131 |
| Change in cash and cash equivalents due to business activities (total) | 3,238 | 195 |
| Cash and cash equivalents at beginning of period | 2,915 | 2,531 |
| Change in cash and cash equivalents due to changes in scope of consolidation | (1) | 0 |
| Change in cash and cash equivalents due to exchange rate movements | (9) | (9) |
| Cash and cash equivalents at end of period | 6,143 | 2,717 |
| 1st Quarter 2007 |
1st Quarter 2008 |
|
|---|---|---|
| € million | ||
| Changes in fair values of derivatives designated as hedges and available-for-sale fi nancial assets, recognized in stockholders' equity |
1 | 42 |
| Changes in actuarial gains / losses on defi ned benefi t obligations for pensions and other post-employment benefi ts and effects of the limitation on pension plan assets, recognized in stockholders' equity |
331 | 817 |
| Exchange differences on translation of operations outside the euro zone, recognized in stockholders' equity |
36 | (552) |
| Deferred taxes on valuation adjustments offset directly against stockholders' equity | (134) | (261) |
| Changes due to changes in scope of consolidation | 31 | 1 |
| Revaluation surplus (IFRS 3) | - | 4 |
| Minority interest in partnerships, recognized in liabilities | - | (20) |
| Valuation adjustments recognized directly in stockholders' equity | 265 | 31 |
| Income after taxes | 2,810 | 762 |
| Total income and expense recognized in the financial statements | 3,075 | 793 |
| of which attributable to minority interest | 2 | (1) |
| of which attributable to Bayer AG stockholders | 3,073 | 794 |
Financial Report as of March 31, 2008
Consolidated Financial Statements
Notes
Notes to the Consolidated Interim Financial Statements of the Bayer Group as of March 31, 2008
Key Data by Segment
| Segment | HealthCare | ||||
|---|---|---|---|---|---|
| Pharmaceuticals | Consumer Health | ||||
| € million | 1st Quarter 2007 |
1st Quarter 2008 |
1st Quarter 2007 |
1st Quarter 2008 |
|
| Sales (external) | 2,495 | 2,614 | 1,115 | 1,117 | |
| Change | +117.3% | + 4.8% | + 5.7% | + 0.2% | |
| Currency-adjusted change | +122.2% | + 9.9% | + 11.4% | + 6.1% | |
| Intersegment sales | 12 | 19 | 3 | 0 | |
| Operating result (EBIT) | 281 | 341 | 204 | 222 | |
| Depreciation, amortization and write-downs | 265 | 373 | 33 | 34 | |
| Gross cash fl ow * | 390 | 544 | 167 | 193 | |
| Net cash fl ow * | 279 | 415 | 104 | 162 | |
| Number of employees at end of period * | 39,400 | 39,400 | 11,500 | 12,600 |
* for definition see Bayer Group Key Data on page 2
| Region | Europe | North America | |||
|---|---|---|---|---|---|
| € million | 1st Quarter 2007 |
1st Quarter 2008 |
1st Quarter 2007 |
1st Quarter 2008 |
|
| Sales (external) – by market | 3,848 | 4,072 | 2,226 | 2,026 | |
| Change | + 27.5% | + 5.8% | + 15.0% | – 9.0% | |
| Currency-adjusted change | + 27.5% | + 6.5% | + 25.4% | + 1.5% | |
| Sales (external) – by point of origin | 4,153 | 4,393 | 2,220 | 2,033 | |
| Change | + 28.7% | + 5.8% | + 13.7% | – 8.4% | |
| Currency-adjusted change | + 28.7% | + 6.4% | + 24.2% | + 2.3% | |
| Interregional sales | 1,374 | 1,601 | 516 | 504 | |
| Operating result (EBIT) | 724 | 880 | 357 | 341 | |
| Number of employees at end of period * | 56,800 | 55,300 | 16,700 | 17,000 |
* number of employees in full-time equivalents
| CropScience | MaterialScience | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Crop Protection | Environmental Science, BioScience |
Systems | Materials | Reconciliation | Continuing Operations |
||||||||
| 1st Quarter 2007 |
1st Quarter 2008 |
1st Quarter 2007 |
1st Quarter 2008 |
1st Quarter 2007 |
1st Quarter 2008 |
1st Quarter 2007 |
1st Quarter 2008 |
1st Quarter 2007 |
1st Quarter 2008 |
1st Quarter 2007 |
1st Quarter 2008 |
||
| 1,434 | 1,622 | 352 | 356 | 1,869 | 1,839 | 739 | 673 | 331 | 315 | 8,335 | 8,536 | ||
| + 1.5% | + 13.1% | – 1.7% | + 1.1% | + 5.2% | – 1.6% | + 4.1% | – 8.9% | + 22.7% | + 2.4% | ||||
| + 5.5% | + 17.8% | + 3.7% | + 4.1% | + 9.6% | + 3.0% | + 9.0% | – 3.4% | + 27.3% | + 7.2% | ||||
| 18 | 14 | 2 | 5 | 38 | 34 | 4 | 5 | (77) | (77) | ||||
| 304 | 446 | 104 | 78 | 247 | 281 | 38 | 0 | (3) | (25) | 1,175 | 1,343 | ||
| 121 | 118 | 19 | 21 | 82 | 87 | 42 | 39 | 37 | 40 | 599 | 712 | ||
| 282 | 416 | 87 | 73 | 235 | 273 | 69 | 37 | 181 | 115 | 1,411 | 1,651 | ||
| (113) | (266) | (125) | (46) | 62 | 63 | (25) | 83 | 193 | 117 | 375 | 528 | ||
| 14,900 | 14,700 | 2,900 | 3,200 | 10,200 | 10,300 | 4,900 | 4,700 | 21,300 | 21,100 | 105,100 | 106,000 |
| Asia / Pacific | Africa / Middle East | Latin America / | Reconciliation | Continuing Operations |
||||
|---|---|---|---|---|---|---|---|---|
| 1st 1st Quarter Quarter 2007 2008 |
1st Quarter 2007 |
1st Quarter 2008 |
1st Quarter 2007 |
1st Quarter 2008 |
1st Quarter 2007 |
1st Quarter 2008 |
||
| 1,200 | 1,276 | 1,061 | 1,162 | 8,335 | 8,536 | |||
| + 19.3% | + 6.3% | + 27.7% | + 9.5% | + 22.7% | + 2.4% | |||
| + 27.8% | + 12.9% | + 38.7% | + 13.9% | + 27.3% | + 7.2% | |||
| 1,137 | 1,207 | 825 | 903 | 8,335 | 8,536 | |||
| + 17.9% | + 6.2% | + 27.1% | + 9.5% | + 22.7% | + 2.4% | |||
| + 26.9% | + 13.1% | + 40.8% | + 17.0% | + 27.3% | + 7.2% | |||
| 53 | 53 | 57 | 32 | (2,000) | (2,190) | |||
| 73 | 85 | 63 | 92 | (42) | (55) | 1,175 | 1,343 | |
| 17,800 | 19,200 | 13,800 | 14,500 | 105,100 | 106,000 |
Financial Report as of March 31, 2008
Consolidated Financial Statements
Notes
Pursuant to Section 315a of the German Commercial Code, the consolidated interim fi nancial statements as of March 31, 2008 have been prepared according to the International Financial Reporting Standards (ifrs) – including ias 34 – of the International Accounting Standards Board (iasb), London, which are endorsed by the European Union, and the Interpretations of the International Financial Reporting Interpretations Committee (ifric), in effect at the closing date.
Reference should be made as appropriate to the notes to the consolidated fi nancial statements for the 2007 fi scal year, particularly with regard to recognition and valuation principles.
The ordinary shares to be issued upon conversion of the mandatory convertible bond are treated as already issued shares. Diluted earnings per share are therefore equal to basic earnings per share.
| Calculation of Earnings per Share | 1st Quarter 2007 |
1st Quarter 2008 |
|
|---|---|---|---|
| € million | |||
| Income after taxes | 2,810 | 762 | |
| Income attributable to minority interest | 1 | 0 | |
| Income attributable to Bayer AG stockholders | 2,809 | 762 | |
| Income from discontinued operations | 2,154 | - | |
| Financing expenses for the mandatory convertible bond, | |||
| net of tax effects | 24 | 28 | |
| Adjusted income from continuing operations after taxes | 679 | 790 | |
| Adjusted net income | 2,833 | 790 | |
| Shares | |||
| Weighted average number of issued ordinary shares | 764,341,920 | 764,341,920 | |
| Potential shares to be issued upon conversion | |||
| of the mandatory convertible bond | 59,523,810 | 59,582,699 | |
| Adjusted weighted average total number | |||
| of issued and potential ordinary shares | 823,865,730 | 823,924,619 | |
| Basic earnings per share (€) | |||
| from continuing operations | 0.82 | 0.96 | |
| from discontinued operations | 2.62 | - | |
| from continuing and discontinued operations | 3.44 | 0.96 | |
| Diluted earnings per share (€) | |||
| from continuing operations | 0.82 | 0.96 | |
| from discontinued operations | 2.62 | - | |
| from continuing and discontinued operations | 3.44 | 0.96 |
As of March 31, 2008, the Bayer Group comprised 321 fully consolidated companies, compared with 326 companies as of December 31, 2007. Three joint ventures were included by proportionate consolidation according to ias 31 (Interests in Joint Ventures). In addition, fi ve associated companies were included in the consolidated fi nancial statements by the equity method according to ias 28 (Investments in Associates).
Expenses for acquisitions in the fi rst quarter of 2008 totaled €247 million. Bayer subsidiary Medrad, Inc. has completed its tender offer for the outstanding shares of common stock of Possis Medical, Inc. As of March 31, 2008, Medrad had acquired 91.8 percent of the shares for us\$ 309 million (approx. €208 million). As of the expiration of the subsequent offer period on Tuesday, April 1, 2008, a total of approximately 93.0 percent of Possis Medical shares had been validly tendered in the offer. Medrad, through its wholly owned subsidiary Phoenix Acquisition Corp., accepted for purchase all of these validly tendered shares. The merger of Phoenix Acquisition Corp. with and into Possis Medical took place immediately thereafter. In the merger, each outstanding Possis Medical share not tendered and purchased in the offer (other than those as to which holders properly exercised appraisal rights) was automatically canceled and converted pursuant to Minnesota law into the right to receive the same us\$ 19.50 per share, net to the seller in cash, without interest thereon and subject to reduction for any applicable withholding taxes, that was paid in the tender offer. As a result of the merger, Possis Medical became a wholly owned subsidiary of Medrad. Following the merger, Possis Medical's common stock ceased to be traded on the nasdaq.
The diagnostics activities, along with H.C. Starck and Wolff Walsrode, were recognized as discontinued operations in 2007. The information on discontinued operations, which is provided from the standpoint of the Bayer Group, is to be regarded as part of the reporting for the entire Bayer Group by analogy with our segment reporting and is not intended to portray either the discontinued operations or the remaining operations of Bayer as separate entities. This presentation is thus in line with the principles for reporting discontinued operations.
| Discontinued Operations | Diagnostics | H.C. Starck | Wolff Walsrode | Total | ||||
|---|---|---|---|---|---|---|---|---|
| € million | 1st Quarter 2007 |
1st Quarter 2008 |
1st Quarter 2007 |
1st Quarter 2008 |
1st Quarter 2007 |
1st Quarter 2008 |
1st Quarter 2007 |
1st Quarter 2008 |
| Sales | 0 | - | 74 | - | 85 | - | 159 | - |
| Operating result (EBIT)* | 2,778 | - | 109 | - | 13 | - | 2,900 | - |
| Income after taxes | 2,044 | - | 103 | - | 7 | - | 2,154 | - |
| Gross cash fl ow* | (10) | - | 14 | - | 10 | - | 14 | - |
| Net cash fl ow* | 7 | - | 26 | - | 5 | - | 38 | - |
| Net investing cash fl ow | 3,748 | (40) | 922 | - | (2) | - | 4,668 | (40) |
| Net fi nancing cash fl ow | (3,755) | 40 | (948) | - | (3) | - | (4,706) | 40 |
* for definition see Bayer Group Key Data on page 2
Financial Report as of March 31, 2008
Notes
Our business partners include companies in which an interest is held, and companies with which members of the Supervisory Board of Bayer AG are associated. Transactions with these companies are carried out on an arm's-length basis. Business with such companies was not material from the viewpoint of the Bayer Group. The Bayer Group was not a party to any transaction of an unusual nature or structure that was material to it or to companies or persons closely associated with it. Business transactions with companies included in the consolidated fi nancial statements at equity, or at cost less impairment charges, mainly comprised trade in goods and services. The value of these transactions was, however, immaterial from the point of view of the Bayer Group. The same applies to fi nancial receivables and payables vis-à-vis related parties.
Leverkusen, April 22, 2008 Bayer Aktiengesellschaft
Board of Management
Werner Wenning Klaus Kühn Dr. Wolfgang Plischke Dr. Richard Pott
| Q2 2008 Interim Report | July 30, 2008 |
|---|---|
| Q3 2008 Interim Report | October 29, 2008 |
| 2008 Annual Report | March 3, 2009 |
| Q1 2009 Interim Report | April 29, 2009 |
| Annual Stockholders' Meeting 2009 | May 12, 2009 |
| Payment of Dividend 2009 | May 13, 2009 |
| Q2 2009 Interim Report | July 29, 2009 |
| Q3 2009 Interim Report | October 27, 2009 |
Ute Bode, phone +49 214 30 58992, email: [email protected]
CURRENTA GmbH & Co. OHG, Language Service
Peter Dahlhoff, phone +49 214 30 33022, email: [email protected]
Michael Heinrich, phone +49 214 30 57546, email: [email protected]
April 24, 2008
Many business and financial terms are explained on the Bayer Investor Relations website at www.investor.bayer.com>Stock>Glossary
If you would like to receive the Bayer Stockholders' Newsletter in electronic rather than print form in future, please email the editor.
This Annual Report contains forward-looking statements based on current assumptions and forecasts made by Bayer Group or subgroup management. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual assets, financial position, earnings, 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 www.bayer.com. The company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments.
This is neither an offer to purchase nor a solicitation of an offer to sell shares or American depositary shares of Bayer Schering Pharma AG (formerly Schering AG). Bayer Schering GmbH (formerly Dritte BV GmbH) filed a tender offer statement with the U.S. Securities and Exchange Commission (SEC) with respect to the mandatory compensation offer on November 30, 2006, the time of commencement of the mandatory compensation offer. Simultaneously Bayer Schering Pharma AG (formerly Schering AG) filed a solicitation/recommendation statement on Schedule 14D-9 with the SEC with respect to the mandatory compensation offer. Investors and holders of shares and American depositary shares of Bayer Schering Pharma AG (formerly Schering AG) are strongly advised to read the tender offer statement and other relevant documents regarding the mandatory compensation offer that have been filed or will be filed with the SEC because they contain important information. Investors and holders of shares and American depositary shares of Bayer Schering Pharma AG (formerly Schering AG) will be able to receive these documents free of charge at the SEC's website (www.sec.gov), or at the website www.bayer.com
These documents and information contain forward-looking statements based on assumptions and forecasts made by Bayer Group management as of the respective dates of such documents. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual assets, financial position, earnings, development or performance of the Bayer Group and/or Bayer Schering Pharma AG (formerly Schering AG) and the estimates contained in these documents and to differences between actions taken by the Bayer Group with respect to its investment in Bayer Schering Pharma AG (formerly Schering AG) and the intentions described in these documents. These factors include those discussed in Bayer's public reports, which are available on the Bayer website at www.bayer.com. Except as otherwise required by law, the company assumes no obligation to update or revise any forward-looking statement to reflect new information, events or circumstances after the applicable dates thereof.
The names "Bayer Schering Pharma" or "Schering" as used in this publication always refer to Bayer Schering Pharma AG, Berlin, Germany, or its predecessor, Schering AG, Berlin, Germany, respectively.
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