Investor Handout Q Results

Transcription

1 Investor Handout Q3 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. Agenda Review of Q3 results and outlook Q4 Status report on the change process Update on Baycol litigation Realignment of pharma strategy 1

3 Major items affecting Q3 performance General economic weakness Decreasing but ongoing pressure on selling prices 570m sales (cont.) lost through Fx 280m charges following the ACS acquisition Significant restructuring charges ( 140m in Q3) Increasing raw material costs + Significant volume growth (+ 5 in Q3) Major savings achieved due to tight cost management 909m gain from H&R divestment Strong working capital performance ( 2.5bn since project start) Financial Highlights Q3'02 3/4'02 Sales 7, , Sales (cont.) 7, , Operating income , Operating income (cont.) (74) Operating income pre-exceptionals (cont.) Non-operating result (231) 23.5 (340) Pre-tax income , After-tax income , Net income , Earnings/share ( )

4 Quarterly Sales Development 3/4 Year* H & R EC Continuing operations 3rd quarter* H & R EC Continuing operations 2nd quarter* H & R EC Continuing operations 1st quarter H& R EC Fibers Continuing operations *) restated, Fibers in cont. operations 22, , ,249 7, ,271 7, ,957 22, ,007 6, ,714 8, ,790 7, , Components of 3/4 Year Sales Trend Sales Discontinuing Continuing + Acquisitions/ Divestitures + Currencies + Prices + Volumes Continuing 22, ,007 22, , Aventis CropScience ChemDesign - 51 Covexx - 42 Bayer Classics - 11 H-acid - 8 Tectrade + 8 3

5 Components of Q3 Sales Trend Sales Discontinuing Continuing + Acquisitions/ Divestitures 6, ,714 7, Aventis CropScience Others Currencies + Prices + Volumes Continuing , /4 Year Comparable Operating Income OPI reported 1,936 1, Segments 762 1,228 Reconciliation 209 (264) Discontinuing operations H&R (OPI) H&R (sale) 909 Erdölchemie (OPI + sale) 333 OPI continuing Exceptional items (cont.) 109 (525) OPI underlying 862 1, continuing operations 4

6 Quarterly OPI Development 3rd quarter* H & R (OPI & sale) EC (OPI + sale) Exceptional items OPI underlying - continuing operations (128) 54 (316) 20 (374) 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 Group Quarterly Performance (cont.) Sales 6,714 6,957 7,271 7,249 21,530 General economic weakness Decreasing pressure on selling prices OPI (pre-except.) Except Significant volume growth (+ 5 in Q3) Increasing raw material costs 400m ACS-related charges and costs Tight cost management generated savings of 475m pre-except. (3/4 year) Q3'01 Q1'02 Q2'02 Q3'02 3/4Year'02 5

7 3/4 Year Exceptional Items Charge Gain Net Charge Gain Net HealthCare CropScience Polymers* Chemicals Reconciliation Continuing Discontinuing* Total *) Restated, (17) in Q1/ for Fibers in Polymers Q3 Exceptional Items Charge Gain Net Charge Gain Net HealthCare CropScience Polymers Chemicals Reconciliation Continuing Discontinuing Total

8 3/4 Year Sales by Region Total 22,196 million, Continuing operations: 21,530 million, Germany ,030 5,961 6,755 North America -7.6 Europe ,778 2,967 Latin America 2.6 Far East/ Asia/ Pacific 2.9 point of origin HealthCare Quarterly Performance Sales 2,397 2,410 2,350 2,279 7,039 Weak Cipro and Adalat sales Avelox growing strongly (Q y-o-y) Biologicals improving but still loss-making OPI (pre-except.) Except Q3' Q1' Q2' Q3' /4 Year'02 Warning letter on Kogenate closed Consumer Care heavily impacted by LA economic crisis and soft U.S. markets Diagnostics continues to show significant improvement Animal Health performing strongly 7

9 Pharmaceuticals/Biologicals Top 10 Products Q3 02 3/4 Year 02 (1) Cipro ,113 9 (2) Adalat (3) Kogenate* (4) Gamimune (5) Glucobay (6) Avelox (7) Prolastin* (8) Nimotop (9) Trasylol (10) Fraction V* *) Biological Products CropScience Quarterly Performance Sales 3,262 OPI (pre-except.) Except , , Business nearly maintained in declining markets Goodwill & inventory D&A 329m ( 243m in Q3 only) 80m carve-out and integration costs No additional bad debt write-offs required in Q3 (1H: 60m) Approx. 200m D&A in Q4 expected Q3'01 Q1'02 Q2'02 Q3'02 3/4 Year'02 8

10 CropScience: Comparable Sales Development 3, /4 Year Q3 Q1 2,237 2, Q , Business nearly maintained in declining markets World market Development trend by region: West Europe NAFTA LA Far East excl. ACS incl. ACS Including 804m from ACS in Q3 CropScience: Comparable OPI Development (pre-except.) 3/4 Year 369 Q3-6 Q m Latin A. 80m Acq. Costs 40m Acq. Costs m D&A 110m ACS OPI 219 Dilution Underlying Q3 performance encouraging Strong net cash flow performance No additional bad debt write-offs required in Q3 (1H: 60m) n.m. Goodwill & inventory D&A 329m ( 243m in Q3) Q ACS profit contribution 110m ( 72m in Q3) Approx. 200m D&A in Q expected excl. ACS incl. ACS 9

11 Polymers Quarterly Performance Sales 2,713 2,648 2,765 2,694 8,160 Weak demand from key customer industries -7.7 OPI (pre-except.) Decreasing pressure on selling prices Encouraging volume growth in Q3 Top & bottom line negatively affected by Fx Raw material prices rising but still below previous year Except. -65 Q3' Q1'02* -128 Q2'02-69 Q3' Significant cost savings achieved 3/4 Year'02 *) Fibers in discont. operations Polymers Raw material and selling price development Raw materials Prices Q Q Q Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 10

12 Chemicals Quarterly Performance Sales ,496 Encouraging performance of basic, fine and specialty chemicals Op. margin 10 in Q3 excluding H.C. Starck OPI (pre-except.) H.C. Starck suffering from weak demand from electronic industries Caustic soda prices under severe pressure Except. -2 Q3'01-6 Q1'02-17 Q2'02-2 Q3' /4 Year'02 Operating costs significantly reduced 3/4 Year Non-Operating Result 3/4 Year 02 3/4 Year 01 Non-operating result (340) ( 417) Income from affiliated companies net Interest expense net (310) (282) 9.9 Interest portion of pension provisions (204) (209) Exchange gain net Miscellaneous net (43) 18 11

13 Q3 Non-Operating Result Q3 02 Q3 01 Non-operating result (231) (187) 23.5 Income (expenses) from affiliated companies net (20) (14) 42.9 Interest expense net (132) (93) 41.9 Interest portion pension provisions (67) (75) Exchange gain net Miscellaneous net (17) (12) 41.7 A Far-Reaching Transformation Focus Portfolio Management Efficiency Improvement Asset Management Balance Sheet Outcome Optimization of business mix Implement countermeasures Strict capital discipline Reduction of debt Organization Management holding structure... to significantly increase corporate value 12

14 Efficiency Improvement Program 400 Planned savings after exceptionals , One-time charges Total Headcount Reduction 15,000 Positions 1,400 1,300 3,000 6,200 5,300 4,000 8,800 BHC BCS BPO BCH Services Bayer AG Others 13

15 Working Capital Performance mill. Objectives: Reduction of 1 bn Additional 1 bn 1,821 1,207 1,093 Working Capital Initiative Launched 441 1, Q , Net cash flow Gross cash flow Change in net working capital 822 1, W. Cap. Improvement (prev. year) Q3 01 Q4 01 Q1 02 Q2'02 Q3'02 Strict Capital Discipline Enforced mill ,703 2, ,811 1,543 2,647 2,617 2,516 2, E Target Capital Expenditures Depreciation & Amortization CapEx/D&A Ratio 14

16 Satisfying Progress of our Disposal Program Divestments Acquisitions/Joint Ventures Jan Febr April May Oct Nov Company housing Organic pigments Generics (E) Generics (F) Agfa stake Haarmann & Reimer Rhein Chemie ¹ ) CropScience disposals ¹) Household insecticides ¹) Mrch Oct + Aventis CropScience + Visible Genetics pending PolymerLatex pending + Aventis Behring 2) closed or binding agreement 1) Subject to regulatory approvals 2) non-binding letter of intend On Target to Reduce Net Debt to Below 10bn Net debt bn Acquisition of Aventis CropScience ( 7.25bn) < 10 Target 0 Q4 Q1 Q2 Q3 Year end '02 15

17 Monthly Baycol litigation update Realignment of HealthCare Strategy HealthCare is and continues to be a significant value driver of our portfolio. Most business segments are in good shape and well positioned for future growth. Structural problem in pharmaceuticals addressed strategic guidelines realigned: - Full potential of the business can only be exploited with a partner. - Possible partnership will not be prevented by insisting on a certain shareholding. - Majority interest for Bayer in a partnership no longer a priority. - Active approach to participation in a joint venture. - Restructuring initiatives extended to maximize the value of our pharmaceutical business in a partnership 16

18 3/4 Year Overview by New Reporting Segments Sales (Euro mill.) Q1 Q2 1H Q3 9M Q1 Q2 1H Q3 9M PH + BP CC + DS Animal Health HealthCare 1, ,566 1,510 1, ,775 2,932 1, ,341 1,143 1, ,397 4,075 3, ,738 1, , , , ,424 1, , , , ,540 2, , Crop Science , , , , ,313 3, KA + KU PU + LS Polymers 1,522 1,324 2,846 1,467 1,416 2,883 2,989 2,803 5,792 1,343 1,370 2,713 4,332 4,173 8,505 1,308 1,340 2, ,415 1,350 2, ,723 2,743 5, ,359 1,335 2, ,082 4,078 8, Chemicals 1,023 1,027 2, , , , OPI pre exc. (Euro mill.) Q1 Q2 1H Q3 9M Q1 Q2 1H Q3 9M PH + BP CC + DS Animal Health HealthCare Crop Science KA + KU PU + LS Polymers Chemicals * Fibers included in Polymers (PU + LS) effective April 1, 17