Investor Handout 1st Half The Transformation has begun 1st Half 2002 Results

Transcription

1 The Transformation has begun 1st Half 2002 Results

2 Safe Harbor This presentation contains forward-looking statements based on current assumptions and forecasts made by Bayer Group management. Various known and unknown risks, uncertainties and other factors could lead to material 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 our public reports filed with the Frankfurt Stock Exchange and with the U.S. Securities and Exchange Commission (including our Form 20-F). The company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments. 2

3 A Far-Reaching Transformation... Focus Portfolio management Outcome Optimization of business mix Capital allocation Strict capital discipline Efficiency improvement Ideally prepared for next upswing Organization Management holding structure Corporate culture Entrepreneurship, performance orientation... to significantly increase corporate value 3

4 Portfolio Optimization Continues Acquisitions/Joint Ventures Divestitures 2001 Jan + Mikado 2001 May Erdölchemie Aug + Aventis CropScience Dec 2002 Jan Haarmann & Reimer¹ ) PolymerLatex¹ ) Rhein Chemie¹ ) Generics¹ ) (F, SA, E) Real estate Organic pigments¹ ) 2002 Feb + Aventis Behring 2) Mar May Household insecticides¹ ) Agfa stake July + Visible Genetics¹ ) June CropScience: antitrust requirements Dates of announcement 1) Pending 2) Non-binding letter of intent to establish a joint venture, Subject to due diligence, the negotiation 4 of a final agreement, approval by the boards of both companies and regulatory authorities

5 Strategic Priorities HealthCare CropScience Polymers Chemicals Find strategic partner Successfully manage ACS integration Expand global leadership Participate in industry consolidation Life cycle management of established products Successful launch of new products Build the pipeline Establish new business group Biologicals" Achieve Diagnostics restructuring targets Gain market share Optimize regional presence Exploit full synergy potential Achieve margin target Develop position of Agbio Optimize business mix Concentrate on high-valueadded polymers Exploit growth potential in Asia Research new areas of applications Achieve specific efficiency improvements Streamline portfolio rigorously Strengthen specialty business Consider all options for cooperations Achieve targeted cost savings Find long-term solutions for Basic, Fine and Specialty Chemicals 5

6 Bayer HealthCare: Strong Presence in Main Areas of the Business Consumer Care Global # 5 in OTC Strong brands Sustainable growth Focused business portfolio Diagnostics Strong # 3 / 4 Profitability improving Excellent position in NAD Pharmacogenomics opportunities Sales 2001: 10.7 bn 19% 20% 8% 9% Animal Health* Competitive # 4 position Very stable business Strong in companion animals 44% Pharma Limited growth potential Maturing top products Avelox / Vardenafil opportunities Structural difficulties Very strong R&D-platform Search for strategic partner continues Biologicals Worldwide # 3 Turnaround managed Kogenate on track Negotiations with Aventis Behring continue * Animal Health business is part of HealthCare 6 effective January 1, 2002

7 Building a New Biologicals Company* million Bayer Biologicals Sales 2001: 945 million Albumin Prolastin Others % % % % % Gamimune Kogenate Combination of Bayer s Biologicals with Aventis Behring Bayer would own a substantial majority interest Option of acquiring the remaining interest at a later date Attractive long-term growth prospects Reliable and steady plasma supply Potential to optimize plasma utilization Potential to increase efficiency in quality assurance and manufacturing processes Stronger pipeline and technology platform * Non-binding letter of intent to establish a joint venture, subject to due diligence, the negotiation of a final agreement, approval by the boards of both companies and regulatory authorities. 7

8 A World Class Drug Discovery Platform pathomechanism molecular target screening optimization Genomics Functional Genomics Proteomics Bioinformatics High Throughput Screening Combinatorial Chemistry Substance Libraries Millennium CuraGen Myriad Genome Therap. Incyte Nova DX Affymetrix Dynax Onyx Oxford Glyco Science Lion Bioscience CyBio Novalon Receptron Pharmacopeia ArQule ComGenex Oxford Asymmetry Genzyme Genetics Institute Morphosys More than 1bn investment committed US $ 465 million genomics cooperation with Millennium Bioinformatics alliance with Lion Bioscience First risk/reward sharing agreement with CuraGen Toxicogenomics CuraGen 8

9 Substantial Growth of the Pipeline Research Development Number of candidates/year Number of candidates/stage * Preclinical *objective Phase I Phase II Phase III Phase III / NDAs Vardenafil: highly selective and potent PDE 5 inhibitor, filed in US, EU and Japan Cipro OD: innovative once daily formulation, filed in US Acarbose IGT:new indication for Glucobay/Precose Repinotan: intravenous drug for the treatment of acute stroke Faropenem: new broad spectrum antibiotic 9

10 Vardenafil: The New Blockbuster Peak sales potential > EUR 1 bn A highly selective and potent PDE 5 inhibitor Significant improvement in key efficiency parameters irrespective of age, severity and etiology A very favorable safety profile Global co-promotion partner (except Japan): GSK NDA submission: 9/2001 US, Mexico 12/2001 Europe, Japan NDA review status: 7/2002 US (approvable letter) / Mexico (approved) Improvement of erections after treatment with Vardenafil %Yes General Population Diabetics / Prostatectomized men 65% 80% 85% 72% 57% 59% 65% 28% 13% 13% Placebo 5 mg 10 mg 20 mg Placebo 10 mg 20 mg 10

11 Strategic Priorities HealthCare CropScience Polymers Chemicals Find strategic partner Successfully manage ACS integration Expand global leadership Participate in industry consolidation Life cycle management of established products Successful launch of new products Build the pipeline Establish new business group Biologicals" Achieve Diagnostics restructuring targets Gain market share Optimize regional presence Exploit full synergy potential Achieve margin target Develop position of Agbio Optimize business mix Concentrate on high-valueadded polymers Exploit growth potential in Asia Research new areas of applications Achieve specific efficiency improvements Streamline portfolio rigorously Strengthen specialty business Consider all options for cooperations Achieve targeted cost savings Find long-term solutions for Basic, Fine and Specialty Chemicals 11

12 Leading AG Companies Turnover 2001 million (including Seeds & Biotechnology) Syngenta Bayer CropScience* Monsanto DuPont BASF Dow MAI Sumitomo FMC Nufarm m estimated divestments * Pro-forma basis without divestments Source: Phillips McDougall 12

13 EU/FTC-Approval of the ACS Acquisition The European Commission and the U.S. FTC approved the acquisition of Aventis CropScience < 10 percent of the combined business ( m) to be divested Insecticides Global business for fipronil based products for agro-chemical applications. Option to license back ex USA and EU Business for certain specialty insecticides Fungicides EU business for ACS fungicides, mainly used for seed treatment Herbicides EU business for metamitron (Goltix ), flucarbazone business (Everest ) Strategic rationale for the acquisition remains intact 13

14 Bayer CropScience: Combination of Two Strong Companies % of total* 2001 Sales: 6.5 bn Market Share: ~ 20% BioScience 3% Environmental Science Insecticides 12% (24% ms) 32% (26% ms) 1 1 Herbicides 31% (14% ms) 3 Fungicides 22% (22% ms) 2 ( ) market share market ranking * Pro-forma combination 2001 including Bayer s Environmental Health business and including estimated post divestment impact 14

15 Bayer CropScience: Matching the Critical Success Factors Economy of scale Cost structure Bundling capabilities Environmental Science Seed treatment A leading player in input traits (LibertyLink, Bt) Seed business (breeding know-how) Output trait know-how Competitive pricing Speciality applications Ag bio solutions Complete product portfolio Strong presence in key regions Innovative chemistry Strong position in all segments Herbicide #3 Fungicide #2 Insecticide #1 Env. Science #1 North America #3 Europe #1 Latin America #2 Asia #2 Excellent research platform 2-3 new launches per year 15

16 Bayer CropScience: Become the Leading Crop Science Company Objectives Sales growth of 4 % p.a. (double estimated market growth) EBIT margin of 20 % in 2006 Key drivers Exploit full potential of new portfolio Execute divestments Analyse and streamline remaining portfolio Drive innovation with pipeline products Turnaround in BioScience Optimize asset management and supply chain processes Realize full synergy potential 16

17 Strategic Priorities HealthCare CropScience Polymers Chemicals Find strategic partner Successfully manage ACS integration Expand global leadership Participate in industry consolidation Life cycle management of established products Successful launch of new products Build the pipeline Establish new business group Biologicals" Achieve Diagnostics restructuring targets Gain market share Optimize regional presence Exploit full synergy potential Achieve margin target Develop position of Agbio Optimize business mix Concentrate on high-valueadded polymers Exploit growth potential in Asia Research new areas of applications Achieve specific efficiency improvements Streamline portfolio rigorously Strengthen specialty business Consider all options for cooperations Achieve targeted cost savings Find long-term solutions for Basic, Fine and Specialty Chemicals 17

18 Customer Structure Sales 2001: 14.5 bn (Polymers & Chemicals) Health Care* Polymers 20 % 13 % Automotive Electronics 38% 39% 12 % Construction 16 % Chemicals 10% CropScience* 13% Chemicals 8 % 6 % 25 % Furniture Textile, Leather & Footwear Others * Animal Health business included in Health Care 18

19 Global Leadership in High-Value-Added Polymers Sales 2001: 11.0 bn 20% Rubber 2% Fibers ms = Market share # = Ranking 31% Plastics 18% Coatings and Colorants 29% Polyurethanes Isocyanates 38 > 50 1 Adhesives Colorants Others 23 sales% ms% # Polycarbonates Styrenics Semicrystalline Thermoplastics 10 > 5 6 Fabricated Products 10 > 20 2 TPU 5 > 20 2 sales% ms% # sales% ms% # TDI MDI Polyols

20 Strategic Priorities HealthCare CropScience Polymers Chemicals Find strategic partner Successfully manage ACS integration Expand global leadership Participate in industry consolidation Life cycle management of established products Successful launch of new products Build the pipeline Establish new business group Biologicals" Achieve Diagnostics restructuring targets Gain market share Optimize regional presence Exploit full synergy potential Achieve margin target Develop position of Agbio Optimize business mix Concentrate on high-valueadded polymers Exploit growth potential in Asia Research new areas of applications Achieve specific efficiency improvements Streamline portfolio rigorously Strengthen specialty business Consider all options for cooperations Achieve targeted cost savings Find long-term solutions for Basic, Fine and Specialty Chemicals 20

21 Chemicals Business Portfolio and Operational Performance Substantially Improved Sales EUR 4,898 m Inorganics Organic Chemicals Specialty Products H.C. Starck EC Erdölchemie H-acid Solar-grade silicon Titanium dioxide Silicones Citric acid Enamels Abrasives & Refractory Organic Pigments ChemDesign divested Cytec Sybron Sales EUR 3,748 m Basic & Fine Chemicals Specialty Products DyStar divested CSM H.C. Starck Haarmann & Reimer divested 1) regrouped Wolff Walsrode 1996 Divestitures Σ 2,800 Headcount 1) pending; subject to regulatory approval 2) including 3,800 of H & R Acquisitions Σ ,000 2)

22 Bayer Chemicals Attractive Opportunities in Specialist Applications Sales 2001: 3.7 bn H.C. Starck Metallic powders Ceramic powders 22% 27% Basic & Fine Chemicals Basic Chemicals Fine chemicals Inorganic basic chemicals 12% 39% Specialty Products Textiles auxiliaries Wolff Walsrode Cellulose derivatives Plastic films Leather chemicals Paper chemicals Polymer additives Ion exchange Material protection 22

23 Strategic Priorities* Sales (cont.) 2001: 28,938 m Health Care Find strategic partner(s) 38% 10% CropScience Successfully manage ACS integration 13% 39% Polymers Expand global leadership Chemicals Participate in industry consolidation * Animal Health business included in Health Care Sales of Aventis CropScience not included 23

24 A Far-Reaching Transformation... Focus Portfolio management Outcome Optimization of business mix Capital allocation Strict capital discipline Efficiency improvement Ideally prepared for next upswing Organization Management holding structure Corporate culture Entrepreneurship, performance orientation... to significantly increase corporate value 24

25 Strict Capital Spending Discipline Enforced million 1.8 2,703 2, ,647 2,617 2,516 2,139 1,543 1, Target CapEx: Capital Expenditure CapEx/D&A-Ratio D&A: Depreciation & Amortization 25

26 R & D and CapEx. Budgets for 2002 million CapEx. R & D Polymers 37% Chemicals 16% 15% Central 6% 58% Health Care 7% 25% Chemicals 7% 13% 16% CropScience Health Care Polymers CropScience 2,335 (cont.) ( 8.5 % to 2001) 2,440 (cont.) ( 1.9 % to 2001) Animal Health included in CropScience 26

27 A Far-Reaching Transformation... Focus Portfolio management Outcome Optimization of business mix Capital allocation Strict capital discipline Efficiency improvement Ideally prepared for next upswing Organization Management holding structure Corporate culture Entrepreneurship, performance orientation... to significantly increase corporate value 27

28 Efficiency Improvement Program Planned savings of 1.8 bn by 2005 Number of projects: 9 Total one-time charges: 640 m Headcount reduction: 5, ,734 million Identified Net Savings (after excep.) Total 28

29 Working Capital Performance million Objectives: Reduction of 1 bn Additional bn 1,821 1, , , Net cash flow Gross cash flow , Change in net working capital , W. Cap. Improvement (prev. year) Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Q2'02 29

30 A Far-Reaching Transformation... Focus Portfolio management Outcome Optimization of business mix Capital allocation Strict capital discipline Efficiency improvement Ideally prepared for next upswing Organization Management holding structure Corporate culture Entrepreneurship, performance orientation... to significantly increase corporate value 30

31 The New Bayer Principle of new corporate structure Most effective possible support for businesses and sufficient flexibility for mastering strategic challenges Group Management Board Corporate Center-Dep. Services Bayer Business Services GmbH Bayer Health Care AG Bayer Crop Science AG Bayer Polymers AG Bayer Chemicals AG Bayer Technology Services GmbH Bayer Standort Dienste GmbH & Co. OHG 31

32 Building a Highly Competitive Business Platform Stronger focus on markets, core competencies and business performance Strengthen entrepreneurial approach, direct management and direct responsibility for earnings Reduce complexity of corporate organization and governance Achieve necessary flexibility for strategic partnerships and integration of acquisitions Exploit cross-business-group synergies in business area companies more efficiently Enhance visibility and competitive stance of service functions 32

33 A Far-Reaching Transformation... Focus Portfolio management Outcome Optimization of business mix Capital allocation Strict capital discipline Efficiency improvement Ideally prepared for next upswing Organization Management holding structure Corporate culture Entrepreneurship, performance orientation... to significantly increase corporate value 33

34 Stock Option Plan Value Creation Incentivized Authorized Prerequisite Maturity Exercise hurdle I Excercise hurdle II Excercise hurdle III Introduction Board members and first management level Individual investment in stock 3 5 years, revolving yearly 30 percent performance of shares Outperformance of EURO STOXX 50 Value creation through link to CVA January 1st

35 35 The Transformation has begun Financials

36 2002 Financial Highlights million Q2'02 % H1'02 % Sales 7, , Sales (cont.) 7, , Operating income , Operating income (cont.) , Operating income pre-exceptionals (cont.) Non-operating result Pre-tax income After-tax income Net income Earnings/share (Euro) ,

37 Components of 1H Sales Trend million Sales Discontinuing Continuing 15,293 + Acquisitions/ Divestitures + Currencies + Prices + Volumes % 15,972 14, Continuing 14, Aventis CropScience Covexx - 42 ChemDesign - 41 Bayer Classics - 8 H-acid - 8 other

38 2002 Quarterly Sales Development million % 1st half* H & R EC Continuing operations 14, ,281 15, , nd quarter* H & R EC Continuing operations 7, ,271 8, , st quarter H & R EC Fibers Continuing operations 7, ,957 7, , *) restated, Fibers in cont. operations 38

39 Group Quarterly Performance (cont.) million Sales 6,651 7,115 6,957 7,271 14,281 YoY -6.1% -4.7% -6.5% -6.7% -6.6% OPI (pre-except.) YoY % -41.7% -45.9% -40.7% -44.3% Except Q3'01* Q4'01* Q1'02 Q2'02 1H'02 * as reported 39

40 HealthCare Quarterly Performance million Sales 2,167 2,737 2,410 2,350 4,760 Pharmaceuticals below expectations Cipro: ongoing inventory reduction YoY -13.9% -0.9% -6.1% -15.3% -10.9% Adalat: intensified generic competition OPI (pre-except.) YoY % -27.4% % % % Kogenate: on track Gamimune: fierce price competition Consumer Care: economic / political crisis in Latin America Except Q3'01* Q4'01* Q1'02 Q2' H'02 Diagnostics: continuing improvement Animal Health: above budget 40 * as reported

41 Pharmaceuticals Top 10 Products 1H '02 million Q2 02 % 1H 02 % (1) Ciprobay (2) Adalat (3) Kogenate (4) Gamimune (5) Glucobay (6) Avelox (7) Prolastin (8) Nimotop (9) Trasylol (10) Fraction V

42 CropScience: Comparable Sales Development million 1, % 1H 1,680 1, % Business nearly maintained in declining markets Q % 1, % Trend by segment & region Insect. Europe Fungic. NAFTA Herbic. LA Env.Sci. Asia Q % % Including 313m from ACS excl. ACS 2002 incl. ACS 42

43 CropScience: Comparable OPI Development million OPI affected by situation in Argentina and Brazil: 60m in 1H 1H 375 Q % First-time integration of ACS dilutive by 50m. Amortization 80m in Q2 Acquisition / Carve-out / Integration costs of 40m in 1H % % % Q % % excl. ACS pre-exceptionals 2002 incl. ACS 43

44 Polymers Quarterly Performance million Sales 2,650 2,467 2,648 2,765 5,466 Weak demand from key customer industries YoY -5.6% -13.9% -7.0% -4.1% -5.6% Selling prices under continuing pressure OPI (pre-except.) Raw material prices rising but still below previous year YoY -68.0% % -60.0% -29.1% -46.7% Fibers reclassified as continuing but remain non-core Except Q3'01* * as reported -79 Q4'01* Q1'02 Q2'02 1H'02 44

45 Polymers Raw material and selling price development Raw materials Prices Q Q Q Q Q Q Q Q Q Q2 45

46 Chemicals Quarterly Performance million Sales ,700 YoY OPI (pre-except.) YoY Except. +3.5% % % % % % % % -23 Weak demand from key customer industries Caustic soda prices under severe pressure Top line affected by divestments of ChemDesign (- 41) and Covexx (- 42) during 1H Specialty Products significantly up YoY Q3'01* * as reported Q4'01* Q1'02 Q2'02 1H'02 46

47 1H Comparable Operating Income million % OPI reported 1,088 1, Segments 724 1,449 Reconciliation 321 (150) Discontinuing operations H&R Erdölchemie (OPI + Sale) 334 OPI continuing 1,045 1, Exceptional items (cont.) 237 (151) OPI underlying 808 1, continuing operations 47

48 2002 Quarterly OPI Development million % 1st half* H & R EC (OPI + Sale) Exceptional items OPI underlying - continuing operations 1, , (151) 1, nd quarter* H & R EC (OPI + Sale) Exceptional items OPI underlying - continuing operations (91) (46) st quarter H & R EC Fibers Exceptional items OPI underlying - continuing operations (3) (105)** *) restated, Fibers in cont. operations **) incl. (17) from Fibers 48

49 1H Exceptional Items million Charge Gain Net Charge Gain Net HealthCare CropScience Polymers* Chemicals Reconciliation Continuing Discontinuing* Total *) Restated, (17) in Q1/2001 for Fibers in Polymers 49

50 Q2 Exceptional Items million Charge Gain Net Charge Gain Net HealthCare CropScience Polymers Chemicals Reconciliation Continuing Discontinuing Total

51 1H'02 Sales by Region Total 14,737 million, % Continuing operations: 14,281 million, % Germany -9.5 % 4,059 4,588 North America -8.5 % Europe -6.0 % 1,023 1,950 Latin America -9.7 % Far East/ Asia/ Pacific -2.3 % point of origin 51

52 1H Non-Operating Result million 1H 02 1H 01 % Non-operating result Income (expenses) from affiliated companies net Interest expense net Interest portion pension provisions Exchange gain net Miscellaneous net

53 Q2 Non-Operating Result million Q2 02 Q2 01 % Non-operating result Income (expenses) from affiliated companies net Interest expense net Interest portion pension provisions Exchange gain net Miscellaneous net

54 1H'02 Overview by New Reporting Segments Sales. (Euro million) Q1/2001 Q2/2001 H1/2001 Q1/2002 % yoy Q2/2002 % yoy 1H/2002 % yoy Pharma CC + DS Animal Health HealthCare 1, ,566 1,510 1, ,775 2,932 1, ,341 1, , , Crop Protection KA + KU PU + LS * Polymers 1,522 1,324 2,846 1,467 1,416 2,883 2,989 2,803 5,792 1,308 1,340 2, ,415 1,350 2, Chemicals 1,023 1,027 2, OPE pre except. (Euro million) Q1/2001 Q2/2001 H1/2001 Q1/2002 % yoy Q2/2002 % yoy 1H/2002 % yoy Pharma CC + DS Animal Health HealthCare ,3 34,6 19, Crop Protection KA + KU PU + LS * Polymers Chemicals * FS included in Polymers (PU + LS) effective April 1,