First 2016 quarterly results of German Bayer Group
The Bayer Group got off to a successful start in the new fiscal year. “All segments posted gains in their operating performance,” said CEO Dr. Marijn Dekkers when he presented the interim report for the first quarter on Tuesday. At Pharmaceuticals, Bayer again benefited from the very good development of its recently launched products. The Consumer Health business also developed positively. Crop Science outperformed the prior-year quarter despite a weak market environment. Animal Health posted substantial gains. Thus the Life Science businesses showed encouraging development. Sales at Covestro declined as anticipated, while earnings rose significantly. Dekkers remains optimistic for the year as a whole: “We confirm our outlook for 2016.”
Sales of the Bayer Group moved ahead in the first quarter of 2016 by 0.5 percent to EUR 11941 million (Q1 2015: EUR 11879 million). After adjusting for currency and portfolio effects, the increase was 3.2 percent. EBITDA before special items advanced by a substantial 15.7 % to EUR 3404 million (Q1 2015: EUR 2941 million), despite higher research and development expenses at Pharmaceuticals and Crop Science and negative currency effects of around EUR 60 million. EBIT climbed by a robust 20.1 % to EUR 2335 million (Q1 2015: EUR 1944 million) after special charges of EUR 272 million (Q1 2015: EUR 244 million). These mainly comprised impairment losses on intangible assets, costs for the integration of acquired businesses and costs associated with efficiency improvement measures. Net income grew 13.3 % to EUR 1,511 million (Q1 2015: EUR 1,334 million). Core earnings per share from continuing operations advanced by 13.9 percent to EUR 2.37 (Q1 2015: EUR 2.08).
Substantial earnings growth at Covestro
Sales of the high-tech polymer materials business (Covestro) fell by 4.7 % (Foreign Exchange & portfolio adjusted) to EUR 2850 million. Selling prices were down significantly, due mainly to the raw material price development and primarily at Polyurethanes. Volumes were above the level of the prior-year quarter overall. EBITDA before special items improved by a considerable 18.9 % to EUR 504 million. Higher volumes and decreased raw material prices outweighed the lower selling prices to deliver a net increase in earnings.
Ongoing weak market environment at Crop Science
First-quarter sales of the agricultural business (Crop Science) moved ahead by 1.2 % (Foreign Exchanchex & portfolio adjusted) to EUR 3023 million. “We slightly expanded business at CropProtection/Seeds despite an ongoing weak market environment,” explained Dekkers. In regional terms, the Crop Science business developed positively in North America in particular. In Latin America/Africa/Middle East, sales increased slightly by 1.0 % whereas sales in Europe were level year on year (Fx adj. plus 0.7 %). Business in the Asia/Pacific region declined by 2.5 %.
At Crop Protection, the SeedGrowth business grew by 5.4 %. The Fungicides business also developed positively (plus 2.9 %), whereas sales of Insecticides and Herbicides declined (minus 12.2 % and minus 3.8 %, respectively). Sales of Seeds grew by a substantial 11.9 % Business at Environmental Science advanced by 3.0 %.
EBITDA before special items of the Crop Science Division improved by 6.3 % to EUR 1106 million. Earnings contributions from higher selling prices and lower cost of goods sold stood against higher research and development spending and a negative currency effect of EUR 15 million.
Outlook for 2016 confirmed
Bayer is confirming the forecast for the full year it published in February. According to this, sales of approximately EUR 35 billion are planned for the Life Science businesses, i.e. the Bayer Group excluding Covestro (2015 pro forma: EUR 34342 million). This corresponds to a mid-single-digit percentage increase on a currency- and portfolio-adjusted basis. Bayer also plans to increase EBITDA before special items of the Life Science businesses by a mid-single-digit percentage (2015 pro forma: EUR 8607 million). The company aims to increase core earnings per share from continuing operations including Covestro by a mid-single-digit percentage as well (2015: EUR 6.83).