Q1 2012 Investor Handout
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  • 1. Investor HandoutQ1 2012April 2012 I Leverkusen
  • 2. DisclaimerThis presentation may contain forward-looking statements based on currentassumptions and forecasts made by Bayer Group or subgroup management.Various known and unknown risks, uncertainties and other factors could lead tomaterial differences between the actual future results, financial situation,development or performance of the company and the estimates given here.These factors include those discussed in Bayer’s public reports which areavailable on the Bayer website at www.bayer.com. The company assumes noliability whatsoever to update these forward-looking statements or to conformthem to future events or developments.Page 2 • Investor Handout • Q1 2012
  • 3. Bayer –Science For A Better Life Market leading positions in vast majority of portfolio New product pipeline strength in Pharma, CropProtection & BioScience Strong and profitable growth in emerging markets, especially China Unique opportunity at the interfaces of human, animal and plant health Group wide excellence initiatives to further boost earnings and free-up growth resources Incentive systems aligned to business specific challenges Mid-term targets show significant further value generation potentialPage 3 • Investor Handout • Q1 2012
  • 4. 1st Quarter 2012 –Encouraging Start To The YearSales EBIT EBITDA Core EPSin € million adjusted*% currency & portfolio adj. in € million in € million in € 10,056 2,442 9,415 2,232 1.68 1,637 1.45 1,148 Q1’11 Q1’12 Q1’11 Q1’12 Q1’11 Q1’12 Q1’11 Q1’12 +5% +43% +9% +16% *before special items Page 4 • Investor Handout • Q1 2012
  • 5. 2007 – 2011A Period of Significant Progress Sales (€ billion) EBITDA before special items margin* (%) 22 36.5 35.1 21.1 32.4 32.9 31.2 21 20.9 20.8 20.8 20.2 20 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 EBITDA before special items* (€ billion) Core earnings per share* (€) 6 7.6 7.1 4.83 6.9 5 6.8 6.5 4.17 4.19 4 3.80 3.64 3 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 * 2007 - 2008 from continuing operationsPage 5 • Investor Handout • Q1 2012
  • 6. 2007 – 2011Consistent Strong Cash Generation Gross Cash Flow* (€ billion) Trade working capital to sales ratio (%) 5.3 40 5.2 35 31.2 4.8 4.8 30.4 4.7 29.6 30 26.4 26.4 25 20 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 Net Cash Flow* (€ billion) Net financial debt** (€ billion) 20 5.4 5.8 16 14.2 5.1 12.2 4.3 9.7 3.6 12 7.9 7.0 8 4 0 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 *2007 - 2008 from continuing operationsPage 6 • Investor Handout • Q1 2012 ** year-end data
  • 7. 2012 – Financial OutlookPage 7 • Investor Handout • Q1 2012
  • 8. Outlook 2012 –Planning Assumptions2011 Group sales break-down in %, growth estimates in % Expected 2012 Global Market Development 10 % OTC-pharma Low- to mid-single digit growth 3 % Diabetes care low-single digit growth 27 % Rx-pharma Mid-single digit growth, driven by emerging markets 3 % Animal Health Moderate growth 20 % Agrochemicals/Seeds Positive development 15 % Others 5 % Furniture/wood 6 % Automotive Robust growth Ongoing recovery, small growth 6 % Construction 5 % Electro/electronic Ongoing recovery Robust growthPage 8 • Investor Handout • Q1 2012
  • 9. Fiscal 2012 Outlook Projects Further GrowthAnd Higher EarningsSales ∆ Fx and portfolio adjusted, EBITDA before special items 2011 ∆ vs. 2010 2012E +~3% or Sales €36.5bn +6% ~€37bn* Adj. EBITDA €7.6bn +7% Slightly improve Core EPS €4.83 +15% Slightly improve *Assuming Fx rate of $1.40 per €Page 9 • Investor Handout • Q1 2012 Outlook depends on specific planning assumptions as detailed in the Annual Report
  • 10. Fiscal 2012 –Guidance By Subgroup Expect sales to increase by low- to mid-single-digit HealthCare percentage. Plan to slightly improve adj. EBITDA . Expect sales to remain stable or move slightly higher, and adj. Pharma EBITDA to approx. match prior year level. Consumer Anticipate mid-single-digit percentage growth of sales and Health adj. EBITDA. Plan to grow above market. Guidance (issued in February) projects an increase of sales and adj. EBITDA by mid-single- CropScience digit percentages. Up-date with publication of Q2 results – depending on future business development. Expect sales and adj. EBITDA to remain level with prior year. MaterialScience Q2’12: Expect an improvement in sales and significantly higher adj. EBITDA compared to Q1’12. Sales ∆ Fx and portfolio adjusted, EBITDA before special itemsPage 10 • Investor Handout • Q1 2012 Outlook depends on specific planning assumptions as detailed in the Annual Report
  • 11. Strategic PrioritiesPage 11 • Investor Handout • Q1 2012
  • 12. Building A World-Class InnovationCompany Portfolio Growth Productivity  Enhance competitive  Invest in innovation  Decomplex position capabilities structures and processes  Strengthen  Maximize value of LifeSciences new product pipeline  Implement two-year strength group restructuring  Intensify cooperation plan & licensing activities  Leverage competitive advantage of new  Further adjust  Exploit synergy TDI gas phase business processes potential of human, technology at MaterialScience to animal and plant ongoing health  Realize emerging commoditization market opportunityPage 12 • Investor Handout • Q1 2012
  • 13. Two Distinct Business Models LifeSciences MaterialScience Product innovation,  Process innovation, R&D-ratio ~11% of sales capital intensive COGS relatively low,  COGS high (~79%) 16% selling & distribution 31% marketing & selling relatively high relatively low (SAARE** High profitability, ~11%) adj. EBITDA-margins  Lower profitability, adj. 23-27%* 84% EBITDA margins ~11%* Increasing generic 69%  Few competitors, new competition & government entrants from Asia, Middle intervention East Structural risk: approvals,  Cyclical risk: demand and meta-analysis, product Sales Adj. EBITDA supply fluctuations liability 2011 2011 Breakdown excl. ReconciliationPage 13 • Investor Handout • Q1 2012 *EBITDA before special items in % of sales, 2011 **Selling, administration and R&D
  • 14. Mid-term TargetsPage 14 • Investor Handout • Q1 2012
  • 15. HealthCare –Building Growth Momentum Priority Target 2014  Accelerate growth  HealthCare sales of ~€20bn  Pharma: Successfully commercialize  Sales of ~€11.5bn late-stage pipeline and realize  High-single to low-double-digit % EM emerging markets (EM) opportunity growth  Consumer Health: Aspire to become  Sales of ~€8.5bn world-leading OTC company  HealthCare margin* of ≥28%  Improve profitability  Pharma margin* of >30%  Consumer Health margin* of ~25% *EBITDA before special items to sales in %Page 15 • Investor Handout • Q1 2012
  • 16. CropScience –Propelling Future Growth Priority Target 2014 (normal market conditions)  Above market growth  >€8bn sales  New crop protection product sales  Translate R&D effectively into sales (=launched since 2006) of ~ €1.5bn  Aspiration to grow business in-line with  Extend BioScience footprint average of last 3 years, i.e. CAGR ~20% p.a.  Improve profitability  Generate adj. EBITDA* margin of ~24% *EBITDA before special items to sales in %Page 16 • Investor Handout • Q1 2012
  • 17. MaterialScience –Earn A Premium Over Cost of Capital Priority Performance Targets  Grow business (volume) above global  Growth GDP  Defend #1 market positions in  Leadership polycarbonates and MDI  Leverage competitive advantage of  Increase market share of TDI business TDI gas-phase technology (2011: 23-24%*)  CapEx (PPE) budget of €1.5-2bn until  Closely monitor timing and necessity 2014 of capital investments  Expand Caojing, China site  Establish world-scale facilities in Germany  Earn a premium over cost of capital  CFRoI after reproduction > WACC *by volumePage 17 • Investor Handout • Q1 2012
  • 18. New Incentive Scheme Reflects BusinessSpecific Challenges Individual Subgroup Group Performance + Performance + Performance HealthCare  Sales growth & adj. EBITDA* margin, innovation CropScience Individual  Sales growth & adj. Business EBITDA* margin; relative Core EPS Targets performance vs. peers, innovation MaterialScience  CFRoI vs. cost of capital, process innovation *before special itemsPage 18 • Investor Handout • Q1 2012
  • 19. InnovationPage 19 • Investor Handout • Q1 2012
  • 20. Pharma Pipeline –Significant Progress Achieved Since 2011 Project Indication Peak Sales Status & Targets Potential Xarelto Cardiology / > €2bn  SPAF: launched (US, EU, J, others) Anticoagulation  DVT treatment and sec. prevention: launched  VTE prev. ORS: launched in US  Sec. prev. ACS: filed  PE treatment and sec. VTE prevention: filed (EU) VEGF Trap- Ophthalmology / ≥ €1bn  Filed for wet AMD in EU and Japan Eye Inhibition of blood  Phase III for DME and wet AMD (China) initiated vessel growth  Positive phase III data in CRVO Alpharadin Oncology / ≥ €1bn  CR prostate cancer: 44% improvement of OS Targeting of bone  Fast track designation by FDA metastases  Filing target: mid 2012 Regorafenib Oncology / ≥ €1bn  Metastatic colorectal cancer: 29% improvement of Oral multi-kinase OS inhibition  Fast track designation by FDA  Filing target: 1H 2012  Phase III study in mGIST met primary efficacy endopoint ACS: acute coronary syndrome; AMD: age-related macular degeneration; CR: castration refractory; CRVO: central retina vein occlusion; DME: diabetic macular edema; DVT: deep vein thrombosis; mGIST: metastaticPage 20 • Investor Handout • Q1 2012 gastrointestinal stromal tumor; ORS: orthopedic surgery; OS: overall survival; PE: pulmonary embolism; SPAF: stroke prevention in atrial fibrillation; VTE: venous thromboembolism
  • 21. Crop Protection –Pipeline with €2bn Sales PotentialSales in €bn from launches 2011-2015e Launches 2011–2015e* ~ 2.0 Fungicide Seed Treatment Herbicide Fungicide Seed Treatment ~ 0.2 Sivanto Insecticide Peak sales 2011 potential Triafamone Herbicide * subject to regulatory approvalPage 21 • Investor Handout • Q1 2012
  • 22. New LifeSciences’ Technologies Allow For AStronger Cross-Fertilization From a species-oriented research … … to a multi-species research approach Human Health Animal Health Plant Health Human Health Animal Health Plant Health New Technologies New PerspectivesParadigm: Paradigm: Mammals and crops differ substantially from each  There is more common ground between mammals and other crops than assumed before► Strong silo mentality in research ► Growing interest of researchers in different species („cross fertilization“)Page 22 • Investor Handout • Q1 2012
  • 23. Opportunity Emerging MarketsPage 23 • Investor Handout • Q1 2012
  • 24. Emerging Markets –Sales Growth Well Above Global AverageIn € million, ∆% yoy Fx adjusted FY2011 Group Sales by Region Emerging Economies +5% USA Emerging +3% Economies¹ ~5,100 +9% +12% 19% ~4,300 36% +12% +9% ~2,100 34% 11% ~1,800 Western Europe Others² +4% +4% Emerging Latin Eastern Africa & Group €36,528m; +6% Asia³ America Europe Middle East ¹ Emerging economies include: Latin America, Asia w/o Japan, Australia, New Zealand, Africa and Middle East incl. Turkey, Eastern Europe ² Others = Japan, Australia, New Zealand, CanadaPage 24 • Investor Handout • Q1 2012 ³ Emerging Asia = Asia w/o Japan, Australia, New Zealand
  • 25. Emerging Markets –All Subgroups Have Strong FootholdFY 2011 Group sales breakdown; ∆% yoy Fx adjusted HealthCare CropScience MaterialScience 32% 43% 42% +10% +11% +7% = Developed Markets = Emerging Markets1 ¹ Emerging markets: Latin America; Asia/Pacific w/o Japan, Australia,Page 25 • Investor Handout • Q1 2012 New Zealand; Africa and Middle East incl. Turkey; Eastern Europe
  • 26. All BRIC-Countries in Our MostImportant Country PortfolioFY 2011 sales in € billion; ∆% yoy Fx adjusted +3% +5%4.03.0 +4%2.0 +3% +13% +2% +1%1.0 +5% +5% +10% -2% +15% +11% +14% * * Greater China includes PR China, Hong Kong, Macau and TaiwanPage 26 • Investor Handout • Q1 2012
  • 27. Bayer in Greater China – Key Facts Sales Bayer FY 2011 In € million 37% BHC 8% China: €2,957m €2,957m €36,528m 58% 5% BMS BCS Employees Sales Development Bayer Greater China (FTE) Bayer Greater China (in € billion) 10,924 10,001 8,350 2.9 3.0 1.9 2.1 1.8 1.5 2009 2010 2011 2006 2007 2008 2009 2010 2011 Greater China: PR China, Hongkong, Macao, TaiwanPage 27 • Investor Handout • Q1 2012
  • 28. EfficiencyPage 28 • Investor Handout • Q1 2012
  • 29. Restructuring Program Fully On Track Contribution by Subgroup  Target: €800m annual cost savings by 2013 Holding & HealthCare  Reinvestment of ~50% Admin. ~12%  One-time-charges of approx. €1bn of ~54% which €842m booked until end Q1’12  Plans include staff reductions of 4,500 €800m €800m ~34%  2,500 new hires in growth and innovation, particularly in emerging markets CropScience Measures with €649m annualized savings already implemented until end Q1’12Page 29 • Investor Handout • Q1 2012
  • 30. Full Year 2012 –R&D And CapEx Budgets R&D 2012e: ~€3.0bn CapEx (PPE) 2012e: ~€1.5bn HealthCare MaterialScience HealthCare MaterialScience 2.0bn 0.2bn 0.5bn 0.5bn thereof Pharma 1.5bn 8% 8% 33% 34% CropScience 0.8bn 25% 24% 66% 67% 1% 13% 20% Reconciliation Reconciliation CropScience 0.05bn 0.2bn 0.3bnPage 30 • Investor Handout • Q1 2012
  • 31. AppendixPage 31 • Investor Handout • Q1 2012
  • 32. Financial Performance – Q1 2012Page 32 • Investor Handout • Q1 2012
  • 33. 1st Quarter 2012 –Encouraging Start To The Year( ) = Fx & portfolio adjusted Q1‘11 Q1‘12 ∆% Highlights of Financial Results € million € million Sales 9,415 10,056 +7 (+5)  Organic sales growth of +5%, reported EBIT up 43%, Core EPS +16% EBITDA - reported 1,866 2,377 +27  Strong start to the season at - adjusted* 2,232 2,442 +9 CropScience, increases at HealthCare, continuing margin pressure at EBIT MaterialScience - reported 1,148 1,637 +43 - adjusted* 1,590 1,806 +14  Continued innovation pipeline progress Net income 684 1,050 +54 NCF 801 271 -66  Outlook for 2012 reiterated oFCF 563 15 -97 EPS - reported 0.83 1.27 +53 - core 1.45 1.68 +16 *before special itemsPage 33 • Investor Handout • Q1 2012
  • 34. 1st Quarter 2012 –HealthCare: Increase In All DivisionsIn € million, ∆% yoy, () = Fx & portf. adjusted Q1’12 Sales Earnings Consumer Pharma Adj. Adj. Health 36% +4% (+2%) EBIT* EBITDA* +4% (+3%) 1,825 2,517 1,181 +4% 1,140 861 +7% 724 740 +2% 806 493 520 +5% 416 441 +6% HealthCare €4,342m; +4% (+2%) 313 341 +9% Price Volume Fx Portfolio 0% +2% +2% 0% Q1‘11 Q1‘12 Q1‘11 Q1‘12 *before special itemsPage 34 • Investor Handout • Q1 2012
  • 35. 1st Quarter 2012 –CropScience: Good Start To The SeasonIn € million, ∆% yoy, () = Fx & portf. adjusted Q1’12 Sales Earnings Environmental Crop Protection Adj. Adj. Science 36% +16% (+15%) EBITDA* EBIT* +5% (+3%) 187 1,937 981 +32% 861 +38% 486 745 624 BioScience+21% (+17%) CropScience €2,610m; +16% (+14%) Price Volume Fx Portfolio +1% +14% +2% -1% Q1‘11 Q1‘12 Q1‘11 Q1‘12 *before special itemsPage 35 • Investor Handout • Q1 2012
  • 36. 1st Quarter 2012 –MaterialScience: Continuing Margin PressureIn € million, ∆% yoy, () = Fx & portf. adjusted Q1’12 Sales Earnings Polycarbonates Polyurethanes Adj. Adj. -1% (-4%) 36% +7% (+5%) EBITDA* EBIT* 706 1,443 CAS** 345 462 0% (+4%) 278 -19% 177 205 IO*** +13% (+9%) 127 -38% MaterialScience €2,788m; +4% (+3%) Price Volume Fx Portfolio 0% +3% +2% -1% Q1‘11 Q1‘12 Q1‘11 Q1‘12 *before special itemsPage 36 • Investor Handout • Q1 2012 **CAS: Coatings, Adhesives, Specialties *** IO: Industrial Operations
  • 37. 1st Quarter 2012 –Cash Flow And Net Debt DevelopmentCash Flow in € million, Net Debt in € billion, Q1’12 Cash Flow Net Debt Development GCF NCF Invest- oFCF -€162m cont. ments 7.0 6.9 1,595 271 256 15 ∆% y-o-y +22 -66 +8 -97 Q4´11 Q1´12Page 37 • Investor Handout • Q1 2012