Business Development by Segment

Crop Science

Key Data – Crop Science

 

 

Q2 2017

 

Q2 2018

 

Change1

 

H1 2017

 

H1 2018

 

Change1

 

 

€ million

 

€ million

 

Reported %

Fx & p adj. %

 

€ million

 

€ million

 

Reported %

Fx & p adj. %

Fx & p adj. = currency- and portfolio-adjusted

1

For definition see Annual Report 2017, Chapter “Alternative Performance Measures Used by the Bayer Group.”

Sales

 

2,163

 

3,011

 

+39.2

+21.4

 

5,283

 

5,872

 

+11.1

+8.1

Change in sales1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Volume

 

−13.7%

 

+22.0%

 

 

 

 

−4.3%

 

+8.6%

 

 

 

Price

 

−2.1%

 

−0.6%

 

 

 

 

−1.1%

 

−0.5%

 

 

 

Currency

 

+1.7%

 

−7.2%

 

 

 

 

+2.3%

 

−7.3%

 

 

 

Portfolio

 

0.0%

 

+25.0%

 

 

 

 

0.0%

 

+10.3%

 

 

 

Sales by region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe / Middle East / Africa

 

908

 

986

 

+8.6

+5.5

 

2,370

 

2,280

 

−3.8

−3.3

North America

 

865

 

1,076

 

+24.4

−1.9

 

1,907

 

2,045

 

+7.2

+1.6

Asia / Pacific

 

459

 

508

 

+10.7

+10.2

 

825

 

876

 

+6.2

+10.4

Latin America

 

(69)

 

441

 

.

.

 

181

 

671

 

.

.

EBITDA1

 

233

 

353

 

+51.5

 

 

1,324

 

1,334

 

+0.8

 

Special items1

 

(84)

 

(278)

 

 

 

 

(108)

 

(339)

 

 

 

EBITDA before special items1

 

317

 

631

 

+99.1

 

 

1,432

 

1,673

 

+16.8

 

EBITDA margin before special items1

 

14.7%

 

21.0%

 

 

 

 

27.1%

 

28.5%

 

 

 

EBIT1

 

117

 

154

 

+31.6

 

 

1,087

 

1,046

 

−3.8

 

Special items1

 

(95)

 

(280)

 

 

 

 

(132)

 

(341)

 

 

 

EBIT before special items1

 

212

 

434

 

+104.7

 

 

1,219

 

1,387

 

+13.8

 

Net cash provided by operating activities

 

1,170

 

1,653

 

+41.3

 

 

491

 

950

 

+93.5

 

Second quarter of 2018

Sales

In the second quarter of 2018, Crop Science posted sales of €3,011 million. The businesses being divested accounted for €468 million of this figure. Sales increased by 39.2% on a reported basis, thanks mainly to a positive portfolio effect of 25.0% (€543 million) from the acquisition of Monsanto. There was also a negative currency effect of 7.2%. On a currency- and portfolio-adjusted basis, sales increased by 21.4%. This development was largely attributable to significantly higher provisions for crop protection product returns recognized in the prior-year quarter due to high inventory levels in Brazil. Inventories in the distribution channel there have normalized as a result of the measures undertaken.

We considerably expanded our seed business through the acquisition of Monsanto as of June 7, 2018, particularly for corn and soybeans. In addition, our existing herbicides business was significantly enlarged. Against this backdrop, we have adjusted the reporting structure of the Crop Science segment as explained in the section “Changes in corporate structure” at the beginning of this interim report. In terms of regions, the transaction primarily expands our business in North America and Latin America.

Sales by Business Unit

 

 

Q2 2017

 

Q2 2018

 

Change1

 

H1 2017

 

H1 2018

 

Change1

 

 

€ million

 

€ million

 

Reported %

Fx & p adj. %

 

€ million

 

€ million

 

Reported %

Fx & p adj. %

Fx & p adj. = currency- and portfolio-adjusted

1

For definition see Annual Report 2017, Chapter “Alternative Performance Measures Used by the Bayer Group.”

Crop Science

 

2,163

 

3,011

 

+39.2

+21.4

 

5,283

 

5,872

 

+11.1

+8.1

Herbicides

 

741

 

1,028

 

+38.7

+12.7

 

1,653

 

1,828

 

+10.6

+2.1

Corn Seed & Traits

 

19

 

134

 

.

0.0

 

70

 

172

 

+145.7

−11.4

Soybean Seed & Traits

 

37

 

147

 

.

+37.8

 

105

 

206

 

+96.2

+13.3

Fungicides

 

502

 

709

 

+41.2

+47.8

 

1,289

 

1,437

 

+11.5

+17.4

Insecticides

 

256

 

329

 

+28.5

+37.1

 

557

 

628

 

+12.7

+21.4

Environmental Science

 

192

 

183

 

−4.7

−14.1

 

339

 

297

 

−12.4

−14.2

Vegetable Seeds

 

85

 

128

 

+50.6

+5.9

 

247

 

272

 

+10.1

−2.0

Other

 

331

 

353

 

+6.6

+12.7

 

1,023

 

1,032

 

+0.9

+9.9

Sales by region

  • Sales in the Europe / Middle East / Africa region climbed by 12.7% (Fx adj.) to €986 million. The acquired Monsanto business contributed €65 million to this figure. Sales increased by 5.5% on a currency- and portfolio-adjusted basis. Fungicides performed particularly well, benefiting from catch-up effects from the delayed start to the season in France and a successful product launch in Germany. Sales also increased at Herbicides. By contrast, there was a decline at Environmental Science.
  • Sales in North America advanced by 31.0% (Fx adj.) to €1,076 million. The contribution of the acquired Monsanto business was €284 million. Sales fell by 1.9% on a currency- and portfolio-adjusted basis, due chiefly to intensified competitive pressure at Herbicides in the United States and to a significant decline at Environmental Science as a result of planned lower product deliveries to the company that acquired our consumer business in 2016. These effects were partly offset by higher license revenues for soybean seed in the United States.
  • In the Asia / Pacific region, sales increased by 18.7% (Fx adj.) to €508 million. The contribution by the acquired Monsanto business was €38 million. We posted an encouraging 10.2% sales increase on a currency- and portfolio-adjusted basis. We registered double-digit-percentage increases in sales at Insecticides, due particularly to the weak prior-year quarter in India, and at Fungicides, due to a product launch in China. We also considerably expanded business at Herbicides, especially in Australia.
  • Sales in the Latin America region increased to €441 million (Q2 2017: minus €69 million). The contribution by the acquired Monsanto business was €155 million. After a negative currency effect of €25 million, the currency- and portfolio-adjusted sales increase was largely attributable to the significantly higher provisions for crop protection product returns recognized in Brazil in the prior-year period due to high inventory levels. The related measures undertaken to normalize inventories of crop protection products were successfully completed at the end of the season during the second quarter. Excluding Brazil, the other countries in the region registered a slight increase overall.

Earnings

EBITDA before special items of Crop Science increased by 99.1% to €631 million in the second quarter of 2018 (Q2 2017: €317 million). The substantial increase is largely down to the aforementioned situation in Brazil in the prior-year quarter, when earnings were impacted by the recognition of provisions for product returns, impairment losses on receivables and inventory write-offs. The newly acquired business also provided a positive contribution of €70 million to earnings. By contrast, earnings were diminished by a negative currency effect of €52 million (excluding the acquired business).

EBIT climbed by 31.6% to €154 million. Included in this figure is additional depreciation and amortization in the amount of €55 million resulting from remeasurements or the first-time recognition of assets in the course of the purchase price allocation. Earnings were also held back by special charges of €280 million (Q2 2017: €95 million), primarily in connection with the acquisition of Monsanto. Of this figure, €126 million pertained to the sale of acquired inventories that were remeasured at fair value in the course of the purchase price allocation.

Special Items1 Crop Science

 

 

EBIT Q2 2017

EBIT Q2 2018

 

EBIT H1 2017

EBIT H1 2018

 

EBITDA Q2 2017

EBITDA Q2 2018

 

EBITDA H1 2017

EBITDA H1 2018

 

 

€ million

€ million

 

€ million

€ million

 

€ million

€ million

 

€ million

€ million

1

For definition see Annual Report 2017, Chapter “Alternative Performance Measures Used by the Bayer Group.”

Restructuring

 

(6)

(4)

 

(22)

(6)

 

(5)

(4)

 

(8)

(6)

Litigations

 

(2)

(2)

 

(2)

(3)

 

(2)

(2)

 

(2)

(3)

Acquisition costs

 

(47)

(275)

 

(68)

(333)

 

(47)

(273)

 

(68)

(331)

Divestments

 

(40)

1

 

(40)

1

 

(30)

1

 

(30)

1

Total special items

 

(95)

(280)

 

(132)

(341)

 

(84)

(278)

 

(108)

(339)

First half of 2018

Sales

In the first half of 2018, Crop Science posted sales of €5,872 million. The businesses being divested accounted for €1,359 million of this figure. Sales increased by 11.1% on a reported basis, thanks mainly to a positive portfolio effect of 10.3% (€543 million) from the acquisition of Monsanto. There was also a negative currency effect of 7.3%. On a currency- and portfolio-adjusted basis, sales increased by 8.1%, in a development that was mainly attributable to the Latin America region because of the aforementioned effect in Brazil, and to positive performance in the Asia / Pacific region. This was partly offset by a decline in the Europe / Middle East / Africa region that was mainly the result of unfavorable weather conditions in Western Europe and regulatory changes in France.

Earnings

EBITDA before special items of Crop Science increased by 16.8% to €1,673 million in the first half of 2018 (H1 2017: €1,432 million). The substantial increase is primarily due to the aforementioned effects in Brazil and the earnings contribution provided by the newly acquired business as detailed above. By contrast, earnings were diminished by slightly lower selling prices in the United States, a minor decline in volumes in Europe, and a negative currency effect of €96 million (excluding the acquired business).

EBIT declined by 3.8% to €1,046 million. This figure included the above-mentioned depreciation and amortization as well as special charges in the amount of €341 million (H1 2017: €132 million), primarily in connection with the acquisition of Monsanto.

Pro forma sales by strategic business entity (unaudited)

Due to the scope of the acquired activities and the seasonality of the business, we are presenting sales by strategic business entity on an unaudited, pro forma basis, to better show the operational business development for the combined business of Crop Science and Monsanto, among other reasons. In this context, sales are presented as if both the acquisition of Monsanto and the associated divestments had taken place as of January 1, 2017.

Pro Forma Sales by Business Unit1

 

 

Q2 2017

 

Q2 2018

 

Change2

 

H1 2017

 

H1 2018

 

Change2

 

 

€ million

 

€ million

 

Reported %

Fx adj. %

 

€ million

 

€ million

 

Reported %

Fx adj. %

Fx & p adj. = currency-adjusted

1

The unaudited pro forma data are presented as if both the acquisition of Monsanto and the associated divestments had taken place as of January 1, 2017. Sales of Monsanto are presented in periods as per the Bayer fiscal year. One-time effects of business operations, the accounting for discontinued operations and the recognition and measurement of sales from certain business transactions have been adjusted in line with our accounting. Due to this simplified procedure, they explicitly do not reflect sales according to IFRS or IDW RH HFA 1.004.

2

For definition see Annual Report 2017, Chapter “Alternative Performance Measures Used by the Bayer Group.”

Crop Science

 

5,013

 

5,095

 

+1.6

+10.0

 

11,980

 

11,243

 

−6.2

+3.2

Herbicides

 

1,402

 

1,454

 

+3.7

+11.4

 

2,954

 

2,757

 

−6.7

+0.9

Corn Seed & Traits

 

989

 

961

 

−2.8

+7.7

 

3,518

 

3,235

 

−8.0

+3.7

Soybean Seed & Traits

 

805

 

686

 

−14.8

−6.6

 

1,652

 

1,352

 

−18.2

−7.8

Fungicides

 

502

 

710

 

+41.4

+47.7

 

1,290

 

1,437

 

+11.4

+17.3

Insecticides

 

256

 

329

 

+28.5

+37.2

 

559

 

627

 

+12.2

+20.8

Environmental Science

 

320

 

283

 

−11.6

−4.6

 

617

 

521

 

−15.6

−6.7

Vegetable Seeds

 

185

 

175

 

−5.4

+0.3

 

382

 

351

 

−8.1

−1.1

Other

 

553

 

497

 

−10.1

−0.3

 

1,008

 

961

 

−4.7

+6.4

Second quarter of 2018

Sales in the second quarter of 2018 increased by 10.0% (Fx adj.) on a pro forma basis.

  • The increase in sales at Corn Seed & Traits was predominantly attributable to a one-time effect and associated higher license revenues in Brazil, as well as expanded volumes due to a late start to the season in North America and eastern Europe.
  • Sales at Soybean Seed & Traits were down, primarily as a result of a challenging market environment in the United States. This was partly offset by the higher level of market penetration achieved by Roundup Ready 2 Xtend™ in North America and by Intacta RR2 PRO™ in Latin America.
  • Sales growth at Herbicides, Fungicides and Insecticides was largely attributable to the significantly higher provisions for crop protection product returns in Brazil recognized in the prior year, as previously outlined. Higher prices at Herbicides also had a positive impact.
  • We registered a decline in sales at Environmental Science as a result of planned lower product deliveries to the acquirer of our consumer business.

First half of 2018

Sales in the first half of 2018 increased by 3.2% (Fx adj.) on a pro forma basis. Growth was driven by Fungicides and Insecticides due to the afformentioned effect in Brazil. Corn Seed & Traits also delivered encouraging performance, benefiting in particular from the positive development in the second quarter as well as catch-up effects from the prior year in the United States. This was partly offset by the decline at Soybean Seed & Traits and Environmental Science.

Compare to Last Year