Outlook and Targets

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Economic Outlook and Market Opportunities

Sales and Earnings Forecast

(published on July 30, 2014 in the Financial Report as of June 30, 2014)

The following forecast for 2014 is based on the business development described in this report, taking into account the potential risks and opportunities. Further details of the business forecast are given in Chapter 20.2 of the Annual Report 2013. We are adhering to the forecasts for 2016 given there and ­issued in March 2014.

Bayer Group

We have adjusted the exchange rate assumptions on which our forecast is based to reflect current developments. With respect to the second half of 2014, we are now using the exchange rates prevailing on June 30, 2014 (previously: average exchange rates for the fourth quarter of 2013). Based on these exchange rates, the negative currency impact on sales and earnings will increase. However, we are upholding the previous guidance for the Group in light of our good operational performance. This forecast does not take into account the planned acquisitions of Merck & Co., Inc.’s OTC business and ­Dihon Pharmaceutical Group Co., Ltd. or the divestiture of our Interventional devices business. We expect closing of these transactions to occur in the second half of 2014.

We now plan to grow sales by about 6% (previously: about 5%) on a currency- and portfolio-adjusted basis. Allowing for negative currency effects of about 4% (previously: about 2%) compared to the previous year, Group sales would be approximately €41 billion (previously: approximately €41 billion to €42 billion). As before, we plan to raise EBITDA before special items by a low- to mid-single-digit percentage, allowing for expected negative currency effects of about €550 million or roughly 6% (previously: about €450 million or roughly 5%). We continue to aim to increase core earnings per share (calculated as explained in Chapter 7 of the Financial Report as of June 30, 2014 “Core Earnings Per Share”) by a mid-single-digit percentage, allowing for expected negative currency ­effects of around 9% (previously: around 6%).


 

We anticipate an effective tax rate for 2014 of around 25%. We continue to expect net financial debt at year end to be less than €9 billion. Taking into account the planned acquisitions, net financial debt at year end would be around €19 billion.

HealthCare

We expect HealthCare sales to advance by a mid-single-digit percentage on a currency- and port­folio-adjusted basis. Allowing for expected negative currency effects of about 4% (previously: about 2%), sales would be approximately €19.5 billion (previously: approximately €19.5 billion to €20 billion). We predict EBITDA before special items to slightly exceed the prior-year level, allowing for negative currency effects of roughly €380 million (previously: roughly €250 million).

In the Pharmaceuticals segment, we expect sales to move ahead by about 10% (previously: a high-­single-digit percentage) on a currency- and portfolio-adjusted basis. We predict negative currency effects of around 4% (previously: around 2%). We intend to raise sales of our recently launched products to €2.8 billion. Additional marketing and R&D expenditures totaling €0.5 billion are expected for 2014. Against this background we continue to predict a low- to mid-single-digit percentage increase in EBITDA before special items, allowing for negative currency effects of about €310 million (previously: about €150 million). As ­before, we expect the EBITDA margin before special items to be level with the previous year.

In the Consumer Health segment, we are planning for a low-single-digit (previously: low- to mid-­single-digit) sales increase on a currency- and portfolio-adjusted basis. We expect negative currency effects of around 4% (previously: around 3%) compared to 2013. Mainly in view of the weak market environment for Diabetes Care, EBITDA before special items is anticipated to come in below (previously: slightly below) the level of the prior year, allowing for negative currency effects of about €70 million (previously: about €100 million).

CropScience

We expect to grow faster than the market and raise sales by a high-single-digit (previously: mid- to high-single-digit) percentage on a currency- and portfolio-adjusted basis. We anticipate negative currency effects of about 5% (previously: about 3%) compared to 2013. We continue to expect to increase EBITDA before special items by a low-single-digit percentage, allowing as before for negative currency effects of approximately €150 million.

MaterialScience

We continue to expect sales of MaterialScience to increase in 2014 by a mid-single-digit percentage on a currency- and portfolio-adjusted basis, allowing for negative currency effects of about 2% compared to 2013. We also continue to anticipate an increase in EBITDA before special items, allowing for negative currency effects of roughly €30 million (previously: roughly €50 million).

In the third quarter of 2014, we expect to raise sales and EBITDA before special items compared to the second quarter.

Reconciliation

For 2014 we continue to anticipate sales on a currency- and portfolio-adjusted basis to be level with the ­previous year. We expect EBITDA before special items to be roughly minus €0.2 billion.

Sales and Earnings Forecast

(published on April 28, 2014 in the Financial Report as of March 31, 2014)

The following forecast for 2014 is based on the business development described in this report, taking into account the potential risks and opportunities. Further details of the business forecast are given in Chapter 20.2 of the Annual Report 2013. We are adhering to the forecasts for 2016 given there and ­issued in March 2014.

Bayer Group

After the very encouraging first quarter, we confirm our guidance for 2014 issued at the end of February, which is based on average exchange rates for the fourth quarter of 2013. We experienced negative ­currency effects in the first quarter of 2014 compared to these assumptions, but so far these have been more than offset by the improvement in our operational performance and seasonal effects.

We plan to grow sales for the full year by about 5% on a currency- and portfolio-adjusted basis. Allowing for expected negative currency effects of about 2% compared to the previous year, Group sales would be approximately €41 billion to €42 billion. We plan to raise EBITDA before special items by a low- to mid-single-digit percentage, allowing for expected negative currency effects of about €450 million or roughly 5%. We aim to increase core earnings per share (calculated as explained in the Financial Report as of March 31, 2014, Chapter 7) by a mid-single-digit percentage, allowing for expected negative currency effects of around 6%.

We anticipate an effective tax rate for 2014 of around 25%. We expect net financial debt at year end to be less than €9.0 billion.

HealthCare

We expect HealthCare sales to advance by a mid-single-digit percentage on a currency- and port­folio-adjusted basis. Allowing for expected negative currency effects of about 2%, sales would be approximately €19.5 billion to €20 billion. We predict EBITDA before special items to slightly exceed the prior-year level, allowing for negative currency effects of roughly €250 million.

In the Pharmaceuticals segment, we expect sales to move ahead by a high-single-digit percentage on a currency- and portfolio-adjusted basis. We predict negative currency effects of around 2% compared to 2013. We intend to raise sales of our recently launched products to €2.8 billion and anticipate significantly higher investment in order to continue marketing them successfully. We will also intensify the ­activities aimed at exploiting the potential of our development pipeline. Additional marketing and R&D expenditures totaling €0.5 billion are expected for 2014. Against this background we predict a low- to mid-single-digit percentage increase in EBITDA before special items, allowing for negative currency ­effects of about €150 million. The EBITDA margin before special items is expected to be level with the previous year.

In the Consumer Health segment, we plan to raise sales by a low- to mid-single-digit percentage on a currency- and portfolio-adjusted basis. We expect negative currency effects of around 3% compared to 2013. EBITDA before special items is anticipated to come in slightly below the level of the prior year, ­allowing for negative currency effects of about €100 million.

CropScience

For 2014 we continue to predict favorable market conditions for our CropScience business, although we will not see quite such a positive environment as in 2013.

We expect to grow faster than the market and raise sales by a mid- to high-single-digit percentage on a currency- and portfolio-adjusted basis. We anticipate negative currency effects of about 3% compared to 2013. We expect to increase EBITDA before special items by a low-single-digit percentage, allowing for negative currency effects of approximately €150 million.

MaterialScience

We expect to increase sales of MaterialScience in 2014 by a mid-single-digit percentage on a currency- and portfolio-adjusted basis. We predict negative currency effects of about 2% compared to 2013. We anticipate an increase in EBITDA before special items, allowing for negative currency effects of roughly €50 million.

In the second quarter of 2014, we expect to raise sales compared to the first quarter. EBITDA before ­special items is likely to show a slight decrease due to scheduled maintenance shutdowns.

Reconciliation

For 2014 we continue to anticipate sales on a currency- and portfolio-adjusted basis to be level with the previous year. We expect EBITDA before special items to be roughly minus €0.2 billion.

Sales and Earnings Forecast

(published on February 28, 2014 in the Annual Report 2013)

The following forecasts are based on the business development described in the Annual Report 2013, taking into account the potential risks and opportunities.

Bayer Group

Our forecast for fiscal 2014 is based on average exchange rates for the fourth quarter of 2013, including a rate of US$1.36 to the euro. A 1% appreciation (depreciation) of the euro against all other currencies would decrease (increase) sales on an annual basis by some €260 million and EBITDA before special items by about €70 million.

In 2014 we plan to grow sales by about 5% on a currency- and portfolio-adjusted basis. Allowing for expected negative currency effects of about 2% compared to the previous year, Group sales would be approximately €41 billion to €42 billion. We plan to raise EBITDA before special items by a low- to mid-single-digit percentage, allowing for expected negative currency effects of about €450 million or roughly 5%. We aim to increase core earnings per share (calculated as explained in the Annual Report 2013, Chapter 16.3 “Core Earnings Per Share”) by a mid-single-digit percentage, allowing for expected negative currency effects of around 6%.

We expect to take special charges of approximately €200 million for restructuring in 2014.

 

We intend to increase our research and development expenses to €3.5 billion in 2014. We have planned capital expenditures of about €2.1 billion for property, plant and equipment and €0.3 billion for intangible ­assets. Depreciation and amortization are estimated at about €2.6 billion, including €1.3 billion in amortization of intangible assets.

We predict the financial result to come in at around minus €0.8 billion. The effective tax rate is likely to be around 25%. Taking into account the planned acquisition of Algeta ASA, Norway, we expect net financial debt to be below €9 billion at the end of 2014.

HealthCare

The main priority for HealthCare in 2014 continues to be the successful commercialization of the ­recently launched pharmaceutical products. We expect sales to advance by a mid-single-digit percentage on a currency- and portfolio-adjusted basis. Allowing for expected negative currency effects of about 2%, sales would be approximately €19.5 billion to €20 billion. We predict EBITDA before special items to slightly exceed the prior-year level, allowing for negative currency effects of roughly €250 million.

In the Pharmaceuticals segment, we expect sales to move ahead by a high-single-digit percentage on a currency- and portfolio-adjusted basis. We predict negative currency effects of around 2% compared to 2013. We intend to raise sales of our recently launched products to about €2.8 billion and are planning significantly higher investment in order to continue marketing them successfully. We will also intensify the activities aimed at exploiting the potential of our development pipeline. Additional marketing and R&D expenditures totaling €0.5 billion are planned for 2014. Against this background we expect a low-to mid-single-digit percentage increase in EBITDA before special items, allowing for negative currency effects of about €150 million. The EBITDA margin before special items is expected to be level with the previous year.

In 2016 we plan to achieve an EBITDA margin before special items of at least 33%. We have increased our estimate for the peak sales potential of our recently launched products to at least €7.5 billion.

In the Consumer Health segment, we predict sales to rise by a low- to mid-single-digit percentage on a currency- and portfolio-adjusted basis. We anticipate negative currency effects of around 3% compared to 2013. We expect EBITDA before special items to come in slightly below the level of the prior year, ­allowing for negative currency effects of about €100 million.

CropScience

For 2014 we continue to predict favorable market conditions for our CropScience business, although we will not see quite such a positive environment as in 2013.

We expect to grow faster than the market and raise sales by a mid- to high-single-digit percentage on a currency- and portfolio-adjusted basis. We anticipate negative currency effects of about 3% compared to 2013. We plan to increase EBITDA before special items by a low-single-digit percentage, allowing for negative currency effects of approximately €150 million.

MaterialScience

We plan to raise sales in 2014 by a mid-single-digit percentage on a currency- and portfolio-adjusted ­basis. We predict negative currency effects of about 2% compared to 2013. We anticipate an increase in EBITDA before special items, allowing for negative currency effects of roughly €50 million.

For the first quarter of 2014, we expect sales to increase on a currency- and portfolio-adjusted basis against the prior-year period and EBITDA before special items to gain significantly.

Reconciliation

For 2014 we expect sales on a currency- and portfolio-adjusted basis to be level with the previous year. We are planning EBITDA before special items of roughly minus €0.2 billion.

Bayer AG

As the holding company for the Bayer Group, Bayer AG derives most of its income from its subsidiaries. The earnings of the major subsidiaries in Germany are transferred directly to Bayer AG under profit and loss transfer agreements. The earnings of Bayer AG are therefore expected to reflect the positive business development anticipated in the Bayer Group. A concerted dividend policy within the Group ensures the availability of sufficient distributable income. We anticipate that the net interest position will remain steady in light of the continuing low level of interest rates. Based on these factors, we expect Bayer AG to report a distributable profit that will again enable our stockholders to adequately participate in the Bayer Group’s earnings. 

Last updated: July 30, 2014 Copyright © Bayer AG