Statements of Income
Overview of Sales, Earnings and Financial Position
Bayer Links
Gratifying trend sustained in the third quarter of 2007
Bayer continues on a successful path
- Sales grow 4.5 percent to €7.8 billion
- EBITDA before special items advances 6.9 percent to €1.6 billion
- EBIT before special items climbs 23.9 percent to €1.0 billion
- All subgroups contribute to increases
- Positive outlook: 2007 to set a new record
Overview of Sales, Earnings and Financial Position
Third quarter of 2007
The Bayer Group continued the positive performance reported for the first half of 2007 with a gratifying set of results for the third quarter. Sales rose by 4.5 percent to €7,793 million (Q3 2006: €7,459 million). Adjusted for currency and portfolio changes, business expanded by 7.0 percent, with HealthCare sales increasing by 8.8 percent, CropScience by 12.1 percent and MaterialScience by 3.5 percent.
Despite adverse shifts in exchange rates and high raw material prices, EBITDA before special items increased in the third quarter by 6.9 percent to €1,559 million (Q3 2006: €1,459 million). HealthCare registered an 8.0 percent improvement to €953 million (Q3 2006: €882 million). CropScience posted a 16.8 percent advance to €167 million (Q3 2006: €143 million), due mainly to higher volumes. MaterialScience succeeded in growing EBITDA before special items by 10.5 percent to €421 million (Q3 2006: €381 million). After special items, third-quarter EBITDA of the Bayer Group moved ahead 28.0 percent to €1,439 million.
The Bayer Group continued the positive performance reported for the first half of 2007 with a gratifying set of results for the third quarter. Sales rose by 4.5 percent to €7,793 million (Q3 2006: €7,459 million). Adjusted for currency and portfolio changes, business expanded by 7.0 percent, with HealthCare sales increasing by 8.8 percent, CropScience by 12.1 percent and MaterialScience by 3.5 percent.
Despite adverse shifts in exchange rates and high raw material prices, EBITDA before special items increased in the third quarter by 6.9 percent to €1,559 million (Q3 2006: €1,459 million). HealthCare registered an 8.0 percent improvement to €953 million (Q3 2006: €882 million). CropScience posted a 16.8 percent advance to €167 million (Q3 2006: €143 million), due mainly to higher volumes. MaterialScience succeeded in growing EBITDA before special items by 10.5 percent to €421 million (Q3 2006: €381 million). After special items, third-quarter EBITDA of the Bayer Group moved ahead 28.0 percent to €1,439 million.
| Net Sales by Market |
| EBITDA Before Special Items |
EBIT before special items increased by 23.9 percent in the third quarter, to €953 million (Q3 2006: €769 million). Net special charges amounted to €276 million (Q3 2006: €139 million). Included here are €119 million in expenses arising from the acquisition and integration of Schering, Berlin, Germany, and a €152 million impairment of intangible assets from a Betaferon®/Betaseron® development project (BEYOND). Despite the substantially higher special charges, EBIT rose by 7.5 percent to €677 million (Q3 2006: €630 million).
After a non-operating result of minus €266 million (Q3 2006: minus €267 million), income before income taxes was €411 million (Q3 2006: €363 million). The non-operating result contained net interest expense of €180 million (Q3 2006: €214 million), which mainly reflected the financing costs for the Schering acquisition.
In the third quarter of 2007 we recorded net tax income of €769 million. This included €911 million in one-time non-cash tax income arising in connection with the corporate tax reform in Germany. This tax effect resulted mainly from the remeasurement of the deferred tax liabilities accrued in connection with the Schering acquisition, particularly in order to reflect the lower nominal rates of corporate income tax that will apply in Germany from 2008. Without this one-time effect, we had third-quarter tax expense of €142 million (Q3 2006: €109 million).
After taxes, income from continuing operations came to €1,180 million (Q3 2006: €254 million), while income from discontinued operations was minus €2 million (Q3 2006: €66 million). After minority stockholders’ interest, net income of the Bayer Group came in at €1,175 million (Q3 2006: €320 million). Earnings per share were €1.46 (Q3 2006: €0.42).
After a non-operating result of minus €266 million (Q3 2006: minus €267 million), income before income taxes was €411 million (Q3 2006: €363 million). The non-operating result contained net interest expense of €180 million (Q3 2006: €214 million), which mainly reflected the financing costs for the Schering acquisition.
In the third quarter of 2007 we recorded net tax income of €769 million. This included €911 million in one-time non-cash tax income arising in connection with the corporate tax reform in Germany. This tax effect resulted mainly from the remeasurement of the deferred tax liabilities accrued in connection with the Schering acquisition, particularly in order to reflect the lower nominal rates of corporate income tax that will apply in Germany from 2008. Without this one-time effect, we had third-quarter tax expense of €142 million (Q3 2006: €109 million).
After taxes, income from continuing operations came to €1,180 million (Q3 2006: €254 million), while income from discontinued operations was minus €2 million (Q3 2006: €66 million). After minority stockholders’ interest, net income of the Bayer Group came in at €1,175 million (Q3 2006: €320 million). Earnings per share were €1.46 (Q3 2006: €0.42).
| Gross Cash Flow |
| Net Cash Flow |
Gross cash flow increased by 2.6 percent year on year to €1,165 million (Q3 2006: €1,135 million). Net cash flow climbed to €1,623 million (Q3 2006: €1,515 million) due to a decline in cash tied up in working capital. The total net cash flow including discontinued operations was €1,621 million (Q3 2006: €1,495 million).
We reduced net debt by €0.8 billion in the third quarter, to €12.7 billion.
Provisions for pensions and other post-employment benefits declined by €0.3 billion compared with June 30, 2007 to €5.3 billion, mainly because of higher capital market interest rates.
We reduced net debt by €0.8 billion in the third quarter, to €12.7 billion.
Provisions for pensions and other post-employment benefits declined by €0.3 billion compared with June 30, 2007 to €5.3 billion, mainly because of higher capital market interest rates.
First nine months of 2007
In the first nine months of 2007, too, the Bayer Group posted a further significant improvement in operating performance. Sales from continuing operations increased by 16.0 percent to €24,345 million (9M 2006: €20,986 million). The year-on-year comparison should be viewed in light of the fact that in 2006 the acquired Schering business was included only pro rata temporis (from June 23, 2006). Currency- and portfolio-adjusted sales advanced by 6.6 percent.
EBITDA before special items grew by 23.8 percent in the first nine months of 2007, to €5,355 million (9M 2006: €4,326 million). EBIT before special items improved by 23.0 percent to €3,513 million (9M 2006: €2,857 million). Net special charges amounted to €744 million (9M 2006: €301 million), with the acquisition and integration of Schering accounting for more than half of this figure. After special items, EBIT of the Bayer Group advanced by 8.3 percent to €2,769 million (9M 2006: €2,556 million).
After a non-operating result of minus €741 million (9M 2006: minus €705 million), income before income taxes for the first nine months came in at €2,028 million (9M 2006: €1,851 million). The non-operating result contained net interest expense of €541 million (9M 2006: €486 million). After non-cash tax income of €911 million in connection with the corporate tax reform, the Bayer Group had net tax income of €221 million (9M 2006: tax expense of €584 million). Income from continuing operations after taxes thus came to €2,249 million (9M 2006: €1,267 million).
Income from discontinued operations after taxes was €2.4 billion, including divestment gains of €2.1 billion for the Diagnostics business and €0.1 billion for H.C. Starck in the first quarter and €0.2 billion for Wolff Walsrode in the second quarter.
After minority stockholders’ interest, the Bayer Group posted net income of €4,644 million for the first nine months of the year (9M 2006: €1,372 million). Earnings per share came to €5.73 (9M 2006: €1.82).
Gross cash flow in the first nine months of 2007 improved by 19.4 percent from the prior-year period, to €3,763 million (9M 2006: €3,152 million), due to the positive business performance and the inclusion of Schering, Berlin, Germany. Net cash flow moved ahead 15.6 percent to €2,814 million (9M 2006: €2,435 million). The total net cash flow including discontinued operations was €2,814 million (9M 2006: €2,625 million).
In the first nine months of 2007, too, the Bayer Group posted a further significant improvement in operating performance. Sales from continuing operations increased by 16.0 percent to €24,345 million (9M 2006: €20,986 million). The year-on-year comparison should be viewed in light of the fact that in 2006 the acquired Schering business was included only pro rata temporis (from June 23, 2006). Currency- and portfolio-adjusted sales advanced by 6.6 percent.
EBITDA before special items grew by 23.8 percent in the first nine months of 2007, to €5,355 million (9M 2006: €4,326 million). EBIT before special items improved by 23.0 percent to €3,513 million (9M 2006: €2,857 million). Net special charges amounted to €744 million (9M 2006: €301 million), with the acquisition and integration of Schering accounting for more than half of this figure. After special items, EBIT of the Bayer Group advanced by 8.3 percent to €2,769 million (9M 2006: €2,556 million).
After a non-operating result of minus €741 million (9M 2006: minus €705 million), income before income taxes for the first nine months came in at €2,028 million (9M 2006: €1,851 million). The non-operating result contained net interest expense of €541 million (9M 2006: €486 million). After non-cash tax income of €911 million in connection with the corporate tax reform, the Bayer Group had net tax income of €221 million (9M 2006: tax expense of €584 million). Income from continuing operations after taxes thus came to €2,249 million (9M 2006: €1,267 million).
Income from discontinued operations after taxes was €2.4 billion, including divestment gains of €2.1 billion for the Diagnostics business and €0.1 billion for H.C. Starck in the first quarter and €0.2 billion for Wolff Walsrode in the second quarter.
After minority stockholders’ interest, the Bayer Group posted net income of €4,644 million for the first nine months of the year (9M 2006: €1,372 million). Earnings per share came to €5.73 (9M 2006: €1.82).
Gross cash flow in the first nine months of 2007 improved by 19.4 percent from the prior-year period, to €3,763 million (9M 2006: €3,152 million), due to the positive business performance and the inclusion of Schering, Berlin, Germany. Net cash flow moved ahead 15.6 percent to €2,814 million (9M 2006: €2,435 million). The total net cash flow including discontinued operations was €2,814 million (9M 2006: €2,625 million).
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