The second quarter 2015 for German Bayer Group
The Bayer Group continued to grow sales in the second quarter of 2015 and significantly increased earnings
“All three subgroups contributed to the gratifying improvement in earnings,” said Bayer CEO Dr. Marijn Dekkers when the interim report was published on Wednesday. HealthCare posted considerable sales and earnings gains that were attributable to the further gratifying expansion of business with the recently launched pharmaceutical products and to the positive sales development at Consumer Health. At CropScience, sales matched the strong level of the prior-year quarter, while earnings improved. At MaterialScience, sales were level with the prior-year quarter. Earnings of this subgroup, however, posted a sharp improvement of almost 90 percent, mainly as a result of the improved demand situation and lower raw material costs. The preparations for the planned stock market flotation of MaterialScience are on schedule. Dekkers expressed his continued optimism for the year as a whole: “We are confirming our Group forecast for the operational performance of continuing operations.” The Group forecast has been adjusted to take account of the changes in exchange rates as of June 30, 2015.
CropScience improves earnings despite difficult conditions in Latin America. Sales of the agriculture business (CropScience) increased by 10.2 percent to EUR 2723 million (Q2 2014: EUR 2470 million). After adjusting for currency and portfolio effects, sales were level with the strong prior-year quarter (minus 0.6 percent). “CropScience held its own in what remained a difficult market environment, particularly in Latin America,” said Dekkers. The subgroup achieved its highest sales growth in the Asia/Pacific region, at 4.9 percent (Fx adj.). Business grew by 2.0 percent (Fx adj.) in North America and 0.9 percent (Fx adj.) in Europe. Sales in the Latin America/Africa/Middle East region moved back by 8.8 percent (Fx adj.).
In Crop Protection, business in the Herbicides unit grew by 5.6 percent (Fx & portfolio adj.). The 11.0 percent (Fx & portfolio adj.) increase in sales of the Seeds unit was due to positive development for vegetables and rice in particular. By contrast, sales at Insecticides showed a considerable decline of 17.7 percent (Fx & portfolio adj.). The SeedGrowth (seed treatments) and Fungicides units also saw their sales decline by 5.1 and 2.4 percent (Fx & portfolio adj.), respectively. On the other hand, sales at Environmental Science advanced by 6.6 percent (Fx & portfolio adj.), mainly as a result of robust growth in products for professional users.
EBITDA before special items of CropScience came in 19.2 percent above the prior-year period at EUR 733 million (Q2 2014: EUR 615 million). This increase was driven by a positive currency effect of about EUR 70 million.
CropScience expects to continue growing faster than the market and aims to raise sales to approximately EUR 10.5 billion (previously: around EUR 11 billion). This corresponds to a low-single-digit percentage increase (previously: a low- to mid-single-digit percentage increase) on a currency- and portfolio-adjusted basis. In view of the weakened market environment, CropScience now plans to improve EBITDA before special items by a mid- to high-single-digit percentage (previously: a low- to mid-teens percentage).
Improved demand and lower raw material prices at MaterialScience. Sales of the high-tech polymers business (MaterialScience) rose by 11.2 percent in the second quarter to EUR 3,185 million (Q2 2014: EUR 2,864 million). After adjusting for currency and portfolio effects, sales were flat with the prior-year quarter (plus 0.6 percent). “Volumes at MaterialScience expanded in all regions. On the other hand, there were negative price effects, particularly for Polyurethanes,” Dekkers explained. Raw material prices were down steeply overall against the prior-year period.
Sales of the Polyurethanes unit (foam raw materials) fell by 2.9 percent (Fx & portfolio adj.). Volume increases did not fully offset the sharp decline in selling prices. The Polycarbonates unit (high-tech plastics) raised sales by 5.3 percent (Fx & portfolio adj.) thanks to considerably higher volumes in all regions, which mainly resulted from improved demand in the automotive industry. Selling prices fell overall compared with the prior-year period. Sales in the Coatings, Adhesives, Specialties business unit moved forward by 6.0 percent (Fx & portfolio adj.) as a result of higher volumes. Selling prices as a whole were somewhat below the level of the prior-year period. Sales in the Industrial Operations area receded by 2.6 percent (Fx & portfolio adj.) due to slightly lower selling prices and volumes.
EBITDA before special items of MaterialScience improved significantly by 87.4 percent to EUR 506 million (Q2 2014: EUR 270 million). Appreciable falls in raw material prices more than offset the drop in selling prices. Earnings were additionally buoyed by higher volumes and positive currency effects of around EUR 80 million.
MaterialScience continues to plan further volume growth in 2015 accompanied by declining selling prices. This will lead to lower sales on a currency- and portfolio-adjusted basis. However, the subgroup continues to expect to see a significant increase in EBITDA before special items and aims to return to earning the full cost of capital in 2015. After adjusting for currency and portfolio effects, MaterialScience expects sales in the third quarter of 2015 to come in below the level of the prior-year quarter and expects EBITDA before special items to be above the level of the prior-year quarter but below the preceding quarter.
Sales of the Bayer Group increased by 16.5 percent (Fx & portfolio adj. 3.2 percent) to EUR 23969 million (H1 2014: EUR 20580 million). HealthCare was the driver of this growth, while CropScience and MaterialScience matched the prior-year levels. EBITDA before special items increased by a significant 19.7 percent to EUR 5840 million (H1 2014: EUR 4879 million), with all subgroups, particularly HealthCare and MaterialScience, contributing to this improvement. EBIT climbed by 7.9 percent to EUR 3777 million (H1 2014: EUR 3500 million) and net income by 3.3 percent to EUR 2455 million (H1 2014: EUR 2376 million).