HealthCare strong – MaterialScience stabilized

2nd quarter:
Bayer robust in a difficult environment

Sales €8.0 billion (-5.9%)

EBITDA before special items €1.8 billion (-6.9%)

EBIT before special items €1.1 billion (-11.8%)

Net income €0.5 billion (-7.3%)

Net cash flow €1.4 billion (+57.4%)

Overview of Sales, Earnings and Financial Position

Second quarter of 2009

The Bayer Group’s businesses turned in a robust performance in the second quarter. HealthCare saw encouraging growth in sales and earnings. CropScience further increased sales and matched the good earnings level of the previous year. MaterialScience improved its performance compared with the first quarter of 2009 but remained well below the prior year.

Group sales came in at €8,009 million, down 5.9% from the €8,511 million recorded for the prior-year period. Adjusted for currency and portfolio effects (Fx & portfolio adj.), sales receded by 8.9%. Sales of HealthCare grew by 8.3% (Fx & portfolio adj. +4.8%), while business at CropScience expanded by 2.7% (Fx adj. +2.0%). At MaterialScience, the ongoing economic weakness in important customer industries led to a 30.2% drop in sales (Fx & portfolio adj. -34.4%).

EBITDA before special items in the second quarter of 2009 fell 6.9% to €1,765 million (Q2 2008: €1,896 million). HealthCare improved earnings by 11.9% to €1,112 million (Q2 2008: €994 million). Those of CropScience held steady year on year at €497 million (Q2 2008: €501 million.). At MaterialScience, EBITDA before special items came in at €121 million (Q2 2008: €372 million), well ahead of the first quarter (minus €116 million). Group EBITDA for the second quarter amounted to €1,709 million (-3.7%).

EBIT before special items in the second quarter of 2009 dropped by 11.8% to €1,101 million (Q2 2008: €1,248 million). Special items totaled minus €80 million (Q2 2008: minus €143 million). Of this amount, additional funding for the German corporate pension assurance association, necessitated by record bankruptcy losses, accounted for minus €70 million, restructuring at CropScience and MaterialScience for minus €64 million, and litigations for minus €35 million. These charges were partially offset by a net amount of €89 million in income from the integration of Schering, Berlin, Germany, consisting mainly of gains from divestments of business activities in the Schering portfolio. EBIT shrank by 7.6% to €1,021 million (Q2 2008: €1,105 million).

After a non-operating result of minus €292 million (Q2 2008: minus €262 million), income before income taxes came in at €729 million (Q2 2008: €843 million). The main components of the non-operating result were €154 million (Q2 2008: €187 million) in net interest expense, €107 million (Q2 2008: €67 million) in interest cost for pension and other provisions, and a €21 million (Q2 2008: €6 million) net loss from investments in affiliated companies. After tax expense of €199 million (Q2 2008: €262 million) and accounting for €2 million in losses (Q2 2008: €7 million in income) attributable to non-controlling interest, net income came in at €532 million (Q2 2008: €574 million). Earnings per share were €0.67 (Q2 2008: €0.73). Core earnings per share moved back to €1.05 (Q2 2008: €1.18). The calculation of core earnings per share is explained on Bayer Stock.

Gross Cash Flow and Net Cash Flow by Quarter

Gross cash flow declined by 5.6% year on year in the second quarter of 2009, to €1,248 million (Q2 2008: €1,322 million). Net cash flow climbed by 57.4% to €1,399 million (Q2 2008: €889 million) due to improvements in working capital. The increase was due mainly to a further reduction in cash tied up in inventories and to lower income tax payments. Net financial debt dropped to €11.7 billion as of June 30, 2009, compared with €14.0 billion on March 31, 2009, due largely to the conversion of the mandatory convertible bond. The net pension liability – the aggregate of pension obligations and plan assets – rose by €0.6 billion compared with March 31, 2009, to €6.4 billion, mainly because of lower long-term interest rates on the capital market.

First half of 2009

The Bayer Group’s business was hampered in the first half of 2009 by the effects of the financial and economic crisis. Sales from continuing operations receded by 6.7% to €15,904 million (H1 2008: €17,047 million). Adjusted for currency and portfolio effects, business was down by 9.3%. HealthCare posted 2.5% and CropScience 4.8% growth in sales. Business at MaterialScience fell by a substantial 36.4% in the wake of the economic crisis.

EBITDA before special items declined by 15.2% to €3,460 million (H1 2008: €4,081 million). First-half EBIT before special items receded by 22.8% to €2,118 million (H1 2008: €2,745 million). Special items totaled minus €124 million (H1 2008: minus €297 million) overall. EBIT of the Bayer Group fell by 18.5% to €1,994 million (H1 2008: €2,448 million).

After a non-operating result of minus €626 million (H1 2008: minus €537 million), income before income taxes for the first half came in at €1,368 million (H1 2008: €1,911 million). The non-operating result contained net interest expense of €333 million (H1 2008: €376 million) After tax expense of €414 million (H1 2008: €568 million), after-tax income was €954 million (H1 2008: €1,343 million).

After non-controlling interest, net income for the first half amounted to €957 million (H1 2008: €1,336 million). Earnings per share were €1.22 (H1 2008: €1.69). Core earnings per share moved back to €1.96 (H1 2008: €2.62). The calculation of core earnings per share is explained on Bayer Stock.

Gross cash flow fell by 17.4% compared with the first half of 2008, to €2,457 million (H1 2008: €2,973 million), mainly because of the weak business performance at MaterialScience. Net cash flow rose to €2,092 million (H1 2008: €1,417 million). Net financial debt dropped to €11.7 billion as of June 30, 2009, compared with €14.2 billion on December 31, 2008, due largely to the conversion of the mandatory convertible bond. The net pension liability – the aggregate of pension obligations and plan assets – rose by €0.4 billion compared with December 31, 2008, to €6.4 billion, mainly because of lower long-term interest rates on the capital market.

2nd quarter:Bayer robust in a difficult environment

Overview of Sales, Earnings and Financial Position

Second quarter of 2009

First half of 2009

2nd quarter:
Bayer robust in a difficult environment