Investor Handout Q Results

Transcription

1 Investor Handout Q Results

2 Table Of Contents Safe Harbour 1 Performance 2 A Far-Reaching Transformation 12 Strategic Priorities 19 Financials 29 2

3 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. 21

4 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) 22

5 Group Quarterly Performance (cont.) million Sales 6,714 6,957 7,271 7,249 21,530! General economic weakness! Decreasing pressure on selling prices YoY -6.9% OPI (pre-except.) % % % % 862! Significant volume growth (+ 5% in Q3)! Increasing raw material costs! 400m ACS-related charges and costs YoY Except % -41.7% % % % % 109! Tight cost management generated savings of 475m pre-except. (3/4 year) Q3'01 Q1'02 Q2'02 Q3'02 3/4Year'02 23

6 HealthCare Quarterly Performance million Sales 2,397 2,410 2,350 2,279 7,039! Weak Cipro and Adalat sales! Avelox growing strongly (Q % y-o-y) YoY -13.7% -6.1% -15.3% -4.9% -9.0%! Biologicals improving but still loss-making OPI (pre-except.) ! Warning letter on Kogenate closed! Consumer Care heavily impacted by LA economic crisis and soft U.S. markets YoY Except % -307 Q3' % -14 Q1' % 55 Q2' % -48 Q3' % -7 3/4 Year'02! Diagnostics continues to show significant improvement! Animal Health performing strongly 24

7 Pharmaceuticals/Biologicals Top 10 Products million 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

8 CropScience Quarterly Performance million Sales 3,262 YoY % OPI (pre-except.) % % 1, % % 1, % % -52! 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) YoY Except ! Approx. 200m D&A in Q4 expected Q3'01 Q1'02 Q2'02 Q3'02 3/4 Year'02 26

9 CropScience: Comparable Sales Development million 3, % 3/4 Year Q3 Q1 2,237 2, % -8.6% Q % 1, % % 866! Business nearly maintained in declining markets %! World market Development trend by region: + 6.4% West Europe " NAFTA # LA $ Far East # excl. ACS 2002 incl. ACS! Including 804m from ACS in Q3 27

10 CropScience: Comparable OPI Development (pre-except.) million 60m Latin A. 80m Acq. Costs! Underlying Q3 performance encouraging 3/4 Year 369 Q m D&A 110m ACS OPI! Strong net cash flow performance Q m Acq. Costs Dilution % % -58.0% -52! 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 2002 incl. ACS 28

11 Polymers Quarterly Performance million Sales 2,713 2,648 2,765 2,694 8,160! Weak demand from key customer industries YoY -7.7% OPI (pre-except.) % % % % 380! Decreasing pressure on selling prices! Encouraging volume growth in Q3! Top & bottom line negatively affected by Fx YoY Except % -65 Q3' % -102 Q1'02* -29.1% -128 Q2' % -69 Q3'02! Raw material prices -24.5% rising but still below previous year -299! Significant cost savings achieved 3/4 Year'02 *) Fibers in discont. operations 2 9

12 Polymers Raw material and selling price development Raw materials Prices Q Q Q Q Q Q Q Q Q Q Q3 210

13 Chemicals Quarterly Performance million Sales ,496! Encouraging performance of basic, fine and specialty chemicals YoY +3.5% % -14.4%! Op. margin 10% in Q3 excluding H.C. Starck OPI (pre-except.) YoY % % % %! 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 211

14 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 212

15 Efficiency Improvement Program million 400 Planned savings after exceptionals , One-time charges Total 213

16 Headcount Reduction 15,000 Positions 1,400 1,300 5,300 3,000 4,000 8,800 6,200 BHC BCS BPO BCH Services Bayer AG Others 214

17 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 Q3'02 215

18 Strict Capital Discipline Enforced mill ,703 2, ,647 2,617 2,516 1,543 1, , E Target Capital Expenditures Depreciation & Amortization CapEx/D&A Ratio 216

19 Satisfying Progress of our Disposal Program Divestments Acquisitions/Joint Ventures 2002 Jan Febr April Company housing & Organic pigments & Generics (E) & Generics (F) & 2002 May Oct Nov Agfa stake & Haarmann & Reimer & Rhein Chemie & ¹ ) CropScience disposals &¹) Household insecticides & ¹) June Oct + Aventis CropScience & + Visible Genetics & pending PolymerLatex pending + Aventis Behring 2) & closed or binding agreement 1) Subject to regulatory approvals 217 2) non-binding letter of intend

20 On Target to Reduce Net Debt to Below 10bn Net debt bn Acquisition of Aventis CropScience ( 7.25bn) < 10 Target 0 Q1 Q2 Q3 Year end '02 218

21 Strategic Priorities Portfolio incl. ACS HealthCare Establish strategic partnership CropScience Successfully manage ACS integration 31% 21% 13% 35% Polymers Chemicals Participate in industry consolidation Expand global leadership 219

22 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 220

23 Bayer HealthCare: Strong Presence in Main Areas of the Business Sales 2001: 10.7 bn Consumer Care Pharma % Global # 5 in OTC % Strong brands % Sustainable growth % Focused business portfolio Diagnostics % Strong # 4 % Profitability improving 19% 20% 8% 9% 44% % Limited growth potential % Maturing top products % Avelox / Vardenafil opportunities % Structural difficulties % Very strong R&D-platform % Search for strategic partner continues % Excellent position in NAD % Pharmacogenomics opportunities * Animal Health business is part of HealthCare effective January 1, 2002 Animal Health* % Competitive # 4 position % Very stable business % Strong in companion animals Biologicals % Worldwide # 3 % Turnaround managed % Kogenate on track % Negotiations with Aventis Behring continue 221

24 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 222

25 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 223

26 Bayer CropScience: Become the Leading Crop Science Company Objectives Sales growth of 4 % p.a. (double estimated market growth) EBITDA of 29 % in 2006 Key drivers Exploit full potential of new portfolio Drive innovation with pipeline products Portfolio optimization and migration to new products Optimize asset management and supply chain processes Realize full synergy potential 224

27 Bayer Polymers Global Leadership Sales 2001: 11.0 bn Sales% ms% # Sales% ms% # Polycarbonate TDI Styrenics MDI Semicristalline thermoplastics 10 > 5 6 Polyoles Fabricated products 10 > 20 2 TPU 5 > % Rubber 31% Plastics 18% Coatings and Colorants 29% Polyurethanes Sales% ms% # Solid rubber % Fibers Sales% ms% # Isocyanates 39 > 50 1 Rubber chemicals Adhesives raw mat Polymer Latex 1) 9 RheinChemie 1) 13 MS = market share # = ranking 1) to be divested Colorants others

28 Strategic Challenges for Further Expansion of Global Leadership! Further site and plant consolidation! Implementation of competitive world-scale plants! Production partnerships for core products too! Improved asset management! Optimized raw-material purchasing ' Transformation of global leadership into excellent performance 226

29 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 Acquisitions Σ Headcount 10,000 2) 1) pending; subject to regulatory approval 2) including 3,800 of H & R 227

30 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 228

31 Appendix 229

32 2002 Financial Highlights million 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 ( )

33 Components of 3/4 Year Sales Trend million 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

34 Components of Q3 Sales Trend million Sales ( Discontinuing ( Continuing + Acquisitions/ Divestitures % 6, ,714 7, ( Aventis CropScience ( Others Currencies +Prices + Volumes ( Continuing ,

35 2002 Quarterly Sales Development million % 3/4 Year* H & R EC Continuing operations 3rd quarter* H & R EC Continuing operations 22, , ,249 22, ,007 6, , nd quarter* H & R EC Continuing operations 7, ,271 8, , st quarter H & R EC Fibers Continuing operations *) restated, Fibers in cont. operations 7, ,957 7, ,

36 3/4 Year Comparable Operating Income million % 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 234

37 2002 Quarterly OPI Development million % 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 235

38 3/4 Year 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 236

39 Q3 Exceptional Items million Charge Gain Net Charge Gain Net HealthCare CropScience Polymers Chemicals Reconciliation Continuing Discontinuing Total

40 3/4 Year Non-Operating Result million 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)

41 Q3 Non-Operating Result million 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)

42 3/4 Year 2002 Sales by Region Total 22,196 million, % Continuing operations: 21,530 million, % Germany -6.2 % 5,961 6,755 North America -7.6 % 10,030 Europe -0.5 % 1,778 2,967 Latin America 2.6 % Far East/ Asia/ Pacific 2.9 % point of origin 240

43 3/4 Year 2002 Overview by New Reporting Segments Sales Q1 Q2 1H Q3 9M Q1 % Q2 % 1H % Q3 % 9M % (Euro mill.) yoy 2002 yoy 2002 yoy 2002 yoy 2002 yoy 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.) Q Q H 2001 Q M 2001 Q % yoy Q % yoy 1H 2002 % yoy Q % yoy 9M 2002 % yoy PH + BP CC + DS Animal Health HealthCare Crop Science KA + KU PU + LS Polymers Chemicals * Fibers included in Polymers (PU + LS) effective April 1,