Download - Q1 2012 Investor Handout
Q1 2012April 2012 I Leverkusen
Investor Handout
Disclaimer
This 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.
• Investor Handout • Q1 2012Page 2
Bayer –Science For A Better Life
• Investor Handout • Q1 2012Page 3
Mid-term targets show significant further value generation potential
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
1st Quarter 2012 –Encouraging Start To The Year
• Investor Handout • Q1 2012Page 4
EBITin € million
+43%
1,637
1,148
Salesin € million% currency & portfolio adj.
+5%
10,0569,415
EBITDAadjusted*in € million
+9%
2,4422,232
Core EPSin €
+16%
1.681.45
*before special items
Q1’12Q1’11 Q1’12Q1’11 Q1’12Q1’11 Q1’12Q1’11
2007 – 2011A Period of Significant Progress
• Investor Handout • Q1 2012Page 5* 2007 - 2008 from continuing operations
6.8 6.96.5
7.1
2007 2008 2009 2010 2011
7.6
Sales (€ billion)
3.804.17
3.644.19
3
4
5
6
2007 2008 2009 2010 2011
4.83
EBITDA before special items* (€ billion) Core earnings per share* (€)
20.921.1
20.8
20.2
20
21
22
2007 2008 2009 2010 2011
20.832.4 32.9
31.2
35.1
2007 2008 2009 2010 2011
36.5
EBITDA before special items margin* (%)
2007 – 2011Consistent Strong Cash Generation
• Investor Handout • Q1 2012Page 6
Trade working capital to sales ratio (%)
Net financial debt** (€ billion)
*2007 - 2008 from continuing operations ** year-end data
4.33.6
5.4 5.8
2007 2008 2009 2010 2011
5.1
29.631.2 30.4
26.4
20
25
30
35
40
2007 2008 2009 2010 2011
26.4
4.8
5.3
4.74.8
2007 2008 2009 2010 2011
5.2
Gross Cash Flow* (€ billion)
12.214.2
9.7 7.9
0
4
8
12
16
20
2007 2008 2009 2010 2011
7.0
Net Cash Flow* (€ billion)
• Investor Handout • Q1 2012Page 7
2012 –
Financial Outlook
Outlook 2012 –Planning Assumptions
• Investor Handout • Q1 2012Page 8
Expected 2012 Global Market Development
5% Electro/electronicRobust growth
27% Rx-pharmaMid-single digit growth, driven by emerging markets
10% OTC-pharmaLow- to mid-single digit growth 3% Diabetes care
low-single digit growth
3% Animal HealthModerate growth
20% Agrochemicals/SeedsPositive development
6% AutomotiveRobust growth
6 % ConstructionOngoing recovery
5% Furniture/woodOngoing recovery,small growth
15% Others
2011 Group sales break-down in %, growth estimates in %
Fiscal 2012 Outlook Projects Further Growth And Higher Earnings
• Investor Handout • Q1 2012Page 9
2011 ∆ vs. 2010 2012E
Sales €36.5bn +6% +~3% or~€37bn*
Adj. EBITDA €7.6bn +7% Slightly improve
Core EPS €4.83 +15% Slightly improve
Sales ∆ Fx and portfolio adjusted, EBITDA before special items
*Assuming Fx rate of $1.40 per €Outlook depends on specific planning assumptions as detailed in the Annual Report
Fiscal 2012 –Guidance By Subgroup
• Investor Handout • Q1 2012Page 10Sales ∆ Fx and portfolio adjusted, EBITDA before special items
Outlook depends on specific planning assumptions as detailed in the Annual Report
HealthCare Expect sales to increase by low- to mid-single-digit percentage. Plan to slightly improve adj. EBITDA .
Pharma Expect sales to remain stable or move slightly higher, and adj. EBITDA to approx. match prior year level.
Consumer Health
Anticipate mid-single-digit percentage growth of sales and adj. EBITDA.
CropSciencePlan to grow above market. Guidance (issued in February) projects an increase of sales and adj. EBITDA by mid-single-digit percentages. Up-date with publication of Q2 results –depending on future business development.
MaterialScienceExpect sales and adj. EBITDA to remain level with prior year.
Q2’12: Expect an improvement in sales and significantly higher adj. EBITDA compared to Q1’12.
• Investor Handout • Q1 2012Page 11
Strategic Priorities
Building A World-Class Innovation Company
• Investor Handout • Q1 2012Page 12
Portfolio ProductivityGrowth
Enhance competitive position
Strengthen LifeSciences
Intensify cooperation & licensing activities
Exploit synergy potential of human, animal and plant health
Invest in innovation capabilities
Maximize value of new product pipeline strength
Leverage competitive advantage of new TDI gas phase technology
Realize emerging market opportunity
Decomplexstructures and processes
Implement two-year group restructuring plan
Further adjust business processes at MaterialScience to ongoing commoditization
Two Distinct Business Models
• Investor Handout • Q1 2012Page 13
LifeSciences Product innovation,
R&D-ratio ~11% of sales
COGS relatively low,selling & distribution relatively high
High profitability,adj. EBITDA-margins23-27%*
Increasing generic competition & government intervention
Structural risk: approvals, meta-analysis, product liability
MaterialScience
Breakdown excl. Reconciliation*EBITDA before special items in % of sales, 2011
**Selling, administration and R&D
Sales2011
Process innovation,capital intensive
COGS high (~79%) marketing & selling relatively low (SAARE** ~11%)
Lower profitability, adj. EBITDA margins ~11%*
Few competitors, new entrants from Asia, Middle East
Cyclical risk: demand and supply fluctuationsAdj. EBITDA
2011
31%
69%
16%
84%
• Investor Handout • Q1 2012Page 14
Mid-term Targets
HealthCare –Building Growth Momentum
• Investor Handout • Q1 2012Page 15
Priority Target 2014
Accelerate growth HealthCare sales of ~€20bn
Pharma: Successfully commercialize late-stage pipeline and realize emerging markets (EM) opportunity
Sales of ~€11.5bn High-single to low-double-digit % EM
growth
Consumer Health: Aspire to become world-leading OTC company Sales of ~€8.5bn
Improve profitability HealthCare margin* of ≥28% Pharma margin* of >30% Consumer Health margin* of ~25%
*EBITDA before special items to sales in %
CropScience –Propelling Future Growth
• Investor Handout • Q1 2012Page 16
Priority Target 2014 (normal market conditions)
Above market growth >€8bn sales
Translate R&D effectively into sales New crop protection product sales (=launched since 2006) of ~ €1.5bn
Extend BioScience footprint Aspiration to grow business in-line with
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 %
MaterialScience –Earn A Premium Over Cost of Capital
• Investor Handout • Q1 2012Page 17
Priority Performance Targets
Growth Grow business (volume) above global GDP
Leadership Defend #1 market positions in polycarbonates and MDI
Leverage competitive advantage of TDI gas-phase technology
Increase market share of TDI business (2011: 23-24%*)
Closely monitor timing and necessity of capital investments
CapEx (PPE) budget of €1.5-2bn until 2014
Expand Caojing, China site Establish world-scale facilities in Germany
Earn a premium over cost of capital CFRoI after reproduction > WACC
*by volume
New Incentive Scheme Reflects Business Specific Challenges
• Investor Handout • Q1 2012Page 18
Group
Performance
Subgroup
Performance
Individual
Performance
IndividualBusinessTargets
HealthCare Sales growth & adj.
EBITDA* margin, innovation
CropScience Sales growth & adj.
EBITDA* margin; relative performance vs. peers, innovation
MaterialScience CFRoI vs. cost of capital,
process innovation
Core EPS
++
*before special items
• Investor Handout • Q1 2012Page 19
Innovation
Pharma Pipeline –Significant Progress Achieved Since 2011
• Investor Handout • Q1 2012Page 20
Project Indication Peak Sales Potential
Status & Targets
Xarelto Cardiology / Anticoagulation
> €2bn SPAF: launched (US, EU, J, others) 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-Eye
Ophthalmology / Inhibition of blood vessel growth
≥ €1bn Filed for wet AMD in EU and Japan Phase III for DME and wet AMD (China) initiated Positive phase III data in CRVO
Alpharadin Oncology / Targeting of bone metastases
≥ €1bn CR prostate cancer: 44% improvement of OS Fast track designation by FDA Filing target: mid 2012
Regorafenib Oncology / Oral multi-kinase inhibition
≥ €1bn Metastatic colorectal cancer: 29% improvement of OS
Fast track designation by FDA Filing target: 1H 2012 Phase III study in mGIST met primary efficacy
endopointACS: 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: metastaticgastrointestinal stromal tumor; ORS: orthopedic surgery; OS: overall survival; PE: pulmonary embolism; SPAF:
stroke prevention in atrial fibrillation; VTE: venous thromboembolism
Crop Protection –Pipeline with €2bn Sales Potential
• Investor Handout • Q1 2012Page 21
Launches 2011–2015e*
2011 Peak salespotential
Insecticide
Fungicide
Fungicide
Herbicide
SeedTreatment
Herbicide
Seed Treatment
Triafamone
Sivanto~ 0.2
~ 2.0
* subject to regulatory approval
Sales in €bn from launches 2011-2015e
New LifeSciences’ Technologies Allow For A Stronger Cross-Fertilization
• Investor Handout • Q1 2012Page 22
Paradigm: Mammals and crops differ substantially from each
other► Strong silo mentality in research
Paradigm: There is more common ground between mammals and
crops than assumed before► Growing interest of researchers in different species
(„cross fertilization“)
New Technologies
New Perspectives
… to a multi-species research approachFrom a species-oriented research …
Animal Health Plant Health Animal Health Plant HealthHuman HealthHuman Health
• Investor Handout • Q1 2012Page 23
OpportunityEmerging Markets
Emerging Markets –Sales Growth Well Above Global Average
• Investor Handout • Q1 2012Page 24
Africa & Middle East
EasternEurope
Emerging Economies
EmergingEconomies¹
+9%
Others²+4%
USA+3%
Western Europe+4%
FY2011 Group Sales by Region
Group €36,528m; +6%
~4,300
+12%~5,100
+5%
~1,800
+9%~2,100
+12%
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, Canada³ Emerging Asia = Asia w/o Japan, Australia, New Zealand
In € million, ∆% yoy Fx adjusted
36%
11%34%
19%
Latin America
Emerging Asia³
Emerging Markets –All Subgroups Have Strong Foothold
• Investor Handout • Q1 2012Page 25
= Developed Markets
HealthCare CropScience MaterialScience
+10% +11% +7%= Emerging Markets1
FY 2011 Group sales breakdown; ∆% yoy Fx adjusted
¹ Emerging markets: Latin America; Asia/Pacific w/o Japan, Australia,New Zealand; Africa and Middle East incl. Turkey; Eastern Europe
43%32% 42%
All BRIC-Countries in Our Most Important Country Portfolio
• Investor Handout • Q1 2012Page 26* Greater China includes PR China, Hong Kong, Macau and Taiwan
FY 2011 sales in € billion; ∆% yoy Fx adjusted
*
+3%+5%
+4%
+3%
+13%
+5%+5%
2.0
1.0+10%
+11% +14%+15%
3.0
4.0
+2%
-2%
+1%
Bayer in Greater China – Key Facts
• Investor Handout • Q1 2012Page 27
Sales Bayer FY 2011In € million
€2,957m58%BMS
5%BCS
37%BHC
€36,528m
8%China: €2,957m
EmployeesBayer Greater China (FTE)
Sales DevelopmentBayer Greater China (in € billion)
2009 2010
10,0018,350
10,924
2011 2006
1.5
20102009
2.1
2008
1.9
2007
1.8
3.0
2011
2.9
Greater China: PR China, Hongkong, Macao, Taiwan
• Investor Handout • Q1 2012Page 28
Efficiency
Restructuring Program Fully On Track
• Investor Handout • Q1 2012Page 29
Contribution by Subgroup Target: €800m annual cost savings by 2013
Reinvestment of ~50%
One-time-charges of approx. €1bn of which €842m booked until end Q1’12
Plans include staff reductions of 4,500
2,500 new hires in growth and innovation, particularly in emerging markets
Measures with €649m annualized savings already implemented
until end Q1’12
CropScience
HealthCareHolding & Admin.
~54%
~34%
~12%
€800m€800m
Full Year 2012 –R&D And CapEx Budgets
• Investor Handout • Q1 2012Page 30
1%
MaterialScience0.2bn
HealthCare2.0bnthereof Pharma 1.5bn
MaterialScience0.5bn
HealthCare0.5bn
Reconciliation0.05bn
67%
24%
8%
Reconciliation0.2bn
CropScience0.8bn
CropScience0.3bn
CapEx (PPE) 2012e: ~€1.5bnR&D 2012e: ~€3.0bn
25%
66%
8% 34%
20%
33%
13%
• Investor Handout • Q1 2012Page 31
Appendix
• Investor Handout • Q1 2012Page 32
Financial Performance –
Q1 2012
1st Quarter 2012 –Encouraging Start To The Year
• Investor Handout • Q1 2012Page 33
Q1‘11 Q1‘12 ∆%€ million € million
Sales 9,415 10,056 +7 (+5)
EBITDA- reported 1,866 2,377 +27
- adjusted* 2,232 2,442 +9
EBIT- reported 1,148 1,637 +43
- adjusted* 1,590 1,806 +14
Net income 684 1,050 +54
NCF 801 271 -66
oFCF 563 15 -97
EPS- reported 0.83 1.27 +53
- core 1.45 1.68 +16
Highlights of Financial Results
Organic sales growth of +5%, reported EBIT up 43%, Core EPS +16%
Strong start to the season at CropScience, increases at HealthCare, continuing margin pressure at MaterialScience
Continued innovation pipeline progress
Outlook for 2012 reiterated
( ) = Fx & portfolio adjusted
*before special items
1st Quarter 2012 –HealthCare: Increase In All Divisions
• Investor Handout • Q1 2012Page 34*before special items
Pharma+4% (+2%)
ConsumerHealth
+4% (+3%)36%
Q1’12 Sales
HealthCare €4,342m; +4% (+2%)
2,5171,825
Price0%
Volume+2%
Fx+2%
Portfolio0%
In € million, ∆% yoy, () = Fx & portf. adjusted
Earnings
Q1‘11 Q1‘12 Q1‘11 Q1‘12
724 740
416 441
+2%
+6%
1,1401,181 +4%
313 +9%
806 861 +7%
493 520 +5%
341
Adj.EBITDA*
Adj.EBIT*
1st Quarter 2012 –CropScience: Good Start To The Season
• Investor Handout • Q1 2012Page 35
Crop Protection+16% (+15%)
EnvironmentalScience
+5% (+3%)36%
CropScience €2,610m; +16% (+14%)
1,937187
745
981 +32%
Q1‘11 Q1‘12 Q1‘11 Q1‘12Price+1%
Volume+14%
Fx+2%
Portfolio-1%
624
861
Adj.EBITDA*
Adj.EBIT*
+38%
Q1’12 Sales In € million, ∆% yoy, () = Fx & portf. adjusted
Earnings
*before special items
486
BioScience+21% (+17%)
1st Quarter 2012 –MaterialScience: Continuing Margin Pressure
• Investor Handout • Q1 2012Page 36
36%
MaterialScience €2,788m; +4% (+3%)
1,443706
462
177
**CAS: Coatings, Adhesives, Specialties*** IO: Industrial Operations
Polyurethanes+7% (+5%)
Polycarbonates-1% (-4%)
CAS**0% (+4%)
Price0%
Volume+3%
Fx+2%
Portfolio-1%
IO***+13% (+9%)
Q1’12 Sales In € million, ∆% yoy, () = Fx & portf. adjusted
Earnings
*before special items
345278 -19%
Q1‘11 Q1‘12 Q1‘11 Q1‘12
205
127
Adj.EBITDA*
Adj.EBIT*
-38%
1st Quarter 2012 –Cash Flow And Net Debt Development
• Investor Handout • Q1 2012Page 37
-€162m
Q1’12 Cash Flow Net Debt Development
6.9
GCF oFCF
1,595
Invest-ments
256 15
∆ %y-o-y +22 -97
NCFcont.
271
-66 +8Q4´11 Q1´12
7.0
Cash Flow in € million, Net Debt in € billion,