Investor Handout Roadshow California July 2012
Science For A Better Life This presentation may contain forward-looking statements based on current assumptions and forecasts made by Bayer Group or subgroup 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 Bayer s public reports which are available on the Bayer website at www.bayer.com. The company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments. Disclaimer
Bayer Science For A Better Life Market leading positions in vast majority of portfolio New product pipeline strength in Pharma, CropProtection & BioScience Strong and profitable growth in emerging markets, especially China Unique opportunity at the interfaces of human, animal and plant health Group wide excellence initiatives to further boost earnings and free-up growth resources Incentive systems aligned to business specific challenges Mid-term targets show significant further value generation potential Page 1 Bayer Investor Presentation Roadshow California July 2012 1 st Quarter 2012 Encouraging Start To The Year Sales in million % currency & portfolio adj. EBIT in million EBITDA adjusted* in million Core EPS in 9,415 10,056 1,637 2,232 2,442 1.45 1.68 1,148 Q1 11 Q1 12 Q1 11 Q1 12 Q1 11 Q1 12 Q1 11 Q1 12 +5% +43% +9% +16% Page 2 Bayer Investor Presentation Roadshow California July 2012 *before special items
2007 2011 A Period of Significant Progress Sales ( billion) EBITDA before special items margin* (%) 32.4 32.9 31.2 35.1 36.5 22 21 20.9 21.1 20.8 20.8 20.2 2007 2008 2009 2010 2011 20 2007 2008 2009 2010 2011 EBITDA before special items* ( billion) Core earnings per share* ( ) 6 7.6 7.1 6.8 6.9 5 6.5 4.17 4.19 4 3.80 3.64 4.83 2007 2008 2009 2010 2011 3 2007 2008 2009 2010 2011 Page 3 Bayer Investor Presentation Roadshow California July 2012 * 2007-2008 from continuing operations 2012 Financial Outlook Page 4 Bayer Investor Presentation Roadshow California July 2012
Outlook 2012 Planning Assumptions 2011 Group sales break-down in %, growth estimates in % Expected 2012 Global Market Development 27% Rx-pharma Mid-single digit growth, driven by emerging markets 10% OTC-pharma Low- to mid-single digit growth 3%Diabetes care low-single digit growth 3%Animal Health Moderate growth 15% Others 20% Agrochemicals/Seeds Positive development 5%Furniture/wood Ongoing recovery, small growth 6 % Construction Ongoing recovery 5%Electro/electronic Robust growth 6%Automotive Robust growth Page 5 Bayer Investor Presentation Roadshow California July 2012 Fiscal 2012: Confirmed Guidance Projects Further Growth And Higher Earnings Sales Fx and portfolio adjusted, EBITDA before special items 2011 vs. 2010 2012E Sales 36.5bn +6% +~3% or ~ 37bn* Adj. EBITDA 7.6bn +7% Slightly improve Core EPS 4.83 +15% Slightly improve Page 6 Bayer Investor Presentation Roadshow California July 2012 *Assuming Fx rate of $1.40 per Outlook depends on specific planning assumptions as detailed in the Annual Report
Fiscal 2012 Guidance By Subgroup HealthCare Expect sales to increase by low- to mid-single-digit percentage. Plan to slightly improve adj. EBITDA. Pharma Consumer Health CropScience MaterialScience Expect sales to remain stable or move slightly higher, and adj. EBITDA to approx. match prior year level. Anticipate mid-single-digit percentage growth of sales and adj. EBITDA. Plan to grow above market. Guidance (issued in February) projects an increase of sales and adj. EBITDA by mid-singledigit percentages. Up-date with publication of Q2 results depending on future business development. Expect sales and adj. EBITDA to remain level with prior year. Q2 12: Expect an improvement in sales and significantly higher adj. EBITDA compared to Q1 12. Page 7 Bayer Investor Presentation Roadshow California July 2012 Sales Fx and portfolio adjusted, EBITDA before special items Outlook depends on specific planning assumptions as detailed in the Annual Report Building a World-Class Innovation Company Page 8 Bayer Investor Presentation Roadshow California July 2012
Building A World-Class Innovation Company Portfolio Growth Productivity Enhance competitive position Strengthen LifeSciences Intensify cooperation & licensing activities Exploit synergy potential of human, animal and plant health Invest in innovation capabilities Maximize value of new product pipeline strength Leverage competitive advantage of new TDI gas phase technology Realize emerging market opportunity Decomplex structures and processes Implement two-year group restructuring plan Further adjust business processes at MaterialScience to ongoing commoditization Page 9 Bayer Investor Presentation Roadshow California July 2012 Two Distinct Business Models LifeSciences MaterialScience Product innovation, R&D-ratio ~11% of sales Process innovation, capital intensive COGS relatively low, selling & distribution relatively high High profitability, adj. EBITDA-margins 23-27%* Increasing generic competition & government intervention 31% 69% 16% 84% COGS high (~79%) marketing & selling relatively low (SAARE** ~11%) Lower profitability, adj. EBITDA margins ~11%* Few competitors, new entrants from Asia, Middle East Structural risk: approvals, meta-analysis, product liability Sales 2011 Adj. EBITDA 2011 Cyclical risk: demand and supply fluctuations Page 10 Bayer Investor Presentation Roadshow California July 2012 Breakdown excl. Reconciliation *EBITDA before special items in % of sales, 2011 **Selling, administration and R&D
Innovation in LifeSciences Page 11 Bayer Investor Presentation Roadshow California July 2012 Pharma Pipeline Significant Progress Achieved Since 2011 Project Indication Peak Sales Potential Status & Targets Xarelto Cardiology / Anticoagulation > 2bn SPAF: launched (US, EU, J, others) DVT treatment and sec. prevention: launched VTE prev. ORS: launched in US Sec. prev. ACS: filed PE treatment and sec. VTE prevention: filed (EU) VTE treatment and sec. VTE prevention: filed (US) VEGF Trap- Eye Ophthalmology / Inhibition of blood vessel growth 1bn Filed for wet AMD in EU and Japan Phase III for DME and wet AMD (China) initiated Positive phase III data in CRVO Alpharadin Oncology / Targeting of bone metastases 1bn CR prostate cancer: 44% improvement of OS Fast track designation by FDA Filing target: 2H 2012 Regorafenib Oncology / Oral multi-kinase inhibition 1bn Metastatic colorectal cancer (mcrc): 29% improvement of OS Filed for mcrc Positive phase III data in mgist; US-filing targeted for 2H 2012 ACS: acute coronary syndrome; AMD: age-related macular degeneration; CR: castration refractory; CRVO: central retina vein occlusion; DME: diabetic macular edema; DVT: deep vein thrombosis; mgist: metastatic gastrointestinal stromal tumor; ORS: orthopedic surgery; OS: overall survival; PE: pulmonary embolism; SPAF: stroke prevention in atrial fibrillation; VTE: venous thromboembolism Page 12 Bayer Investor Presentation Roadshow California July 2012
Crop Protection Pipeline with 2bn Sales Potential Sales in bn from launches 2011-2015e Launches 2011 2015e* ~ 2.0 Fungicide Seed Treatment Herbicide Fungicide ~ 0.2 Sivanto Seed Treatment Insecticide 2011 Peak sales potential Triafamone Herbicide Page 13 Bayer Investor Presentation Roadshow California July 2012 * subject to regulatory approval New LifeSciences Technologies Allow For A Stronger Cross-Fertilization From a species-oriented research to a multi-species research approach Human Health Animal Health Plant Health Human Health Animal Health Plant Health New Technologies New Perspectives Paradigm: Mammals and crops differ substantially from each other Strong silo mentality in research Paradigm: There is more common ground between mammals and crops than assumed before Growing interest of researchers in different species ( cross fertilization ) Page 14 Bayer Investor Presentation Roadshow California July 2012
HealthCare Building Growth Momentum Priority Target 2014 Accelerate growth Pharma: Successfully commercialize late-stage pipeline and realize emerging markets (EM) opportunity Consumer Health: Aspire to become world-leading OTC company Improve profitability HealthCare sales of ~ 20bn Sales of ~ 11.5bn High-single to low-double-digit % EM growth Sales of ~ 8.5bn HealthCare margin* of 28% Pharma margin* of >30% Consumer Health margin* of ~25% Page 15 Bayer Investor Presentation Roadshow California July 2012 *EBITDA before special items to sales in % CropScience Propelling Future Growth Priority Target 2014 (normal market conditions) Above market growth Translate R&D effectively into sales Extend BioScience footprint > 8bn sales New crop protection product sales (=launched since 2006) of ~ 1.5bn Aspiration to grow business in-line with average of last 3 years, i.e. CAGR ~20% p.a. Improve profitability Generate adj. EBITDA* margin of ~24% Page 16 Bayer Investor Presentation Roadshow California July 2012 *EBITDA before special items to sales in %
Improving Returns at Material Science Page 17 Bayer Investor Presentation Roadshow California July 2012 MaterialScience - Cash Generation in Excess of Own Investment Need In million ~ 3.5bn FOCF in 10 years Free Operating Cash Flow 649 673 592 CapEx (cash-relevant) Net Cash Flow 206 166 277 345 265 210 1,108 1,113 498 1,388 1,281 1,147 782 110 849 763 775 332 464 715 690* 870* 672 504 498 565 902 2002 and 2003 as reported in 2004 excluding acquisitions or divestments 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Page 18 Bayer Investor Presentation Roadshow California July 2012
MaterialScience Earn A Premium Over Cost of Capital Priority Growth Leadership Leverage competitive advantage of TDI gas-phase technology Closely monitor timing and necessity of capital investments Earn a premium over cost of capital Performance Targets Grow business (volume) above global GDP Defend #1 market positions in polycarbonates and MDI Increase market share of TDI business (2011: 23-24%*) CapEx (PPE) budget of 1.5-2bn until 2014 Expand Caojing, China site Establish world-scale facilities in Germany CFRoI after reproduction > WACC Page 19 Bayer Investor Presentation Roadshow California July 2012 *by volume New Incentive Scheme Reflects Business Specific Challenges Individual Subgroup Group Performance + Performance + Performance Individual Business Targets HealthCare Sales growth & adj. EBITDA* margin, innovation CropScience Sales growth & adj. EBITDA* margin; relative performance vs. peers, innovation MaterialScience CFRoI vs. cost of capital, process innovation Core EPS Page 20 Bayer Investor Presentation Roadshow California July 2012 *before special items
Opportunity Emerging Markets Page 21 Bayer Investor Presentation Roadshow California July 2012 Emerging Markets Sales Growth Well Above Global Average In million, % yoy Fx adjusted FY2011 Group Sales by Region Emerging Economies USA +3% 19% 36% Emerging Economies¹ +9% +5% ~5,100 +12% ~4,300 34% 11% +12% ~2,100 +9% ~1,800 Western Europe +4% Group 36,528m; +6% Others² +4% Emerging Asia³ Latin America Eastern Europe Africa & Middle East Page 22 Bayer Investor Presentation Roadshow California July 2012 ¹ Emerging economies include: Latin America, Asia w/o Japan, Australia, New Zealand, Africa and Middle East incl. Turkey, Eastern Europe ² Others = Japan, Australia, New Zealand, Canada ³ Emerging Asia = Asia w/o Japan, Australia, New Zealand
Emerging Markets All Subgroups Have Strong Foothold FY 2011 Group sales breakdown; % yoy Fx adjusted HealthCare CropScience MaterialScience 43% 32% 42% +10% +11% +7% = Developed Markets = Emerging Markets 1 Page 23 Bayer Investor Presentation Roadshow California July 2012 ¹ Emerging markets: Latin America; Asia/Pacific w/o Japan, Australia, New Zealand; Africa and Middle East incl. Turkey; Eastern Europe Bayer in Greater China Key Facts Sales Bayer FY 2011 In million 36,528m 8% China: 2,957m 58% BMS 2,957m 37% BHC 5% BCS Employees Bayer Greater China (FTE) Sales Development Bayer Greater China (in billion) 8,350 10,001 10,924 1.5 1.8 1.9 2.1 2.9 3.0 2009 2010 2011 2006 2007 2008 2009 2010 2011 Page 24 Bayer Investor Presentation Roadshow California July 2012 Greater China: PR China, Hongkong, Macao, Taiwan
Efficiency Page 25 Bayer Investor Presentation Roadshow California July 2012 Restructuring Program Fully On Track Contribution by Subgroup Holding & Admin. ~34% CropScience ~12% 800m HealthCare ~54% Target: 800m annual cost savings by 2013 Reinvestment of ~50% One-time-charges of approx. 1bn of which 842m booked until end Q1 12 Plans include staff reductions of 4,500 2,500 new hires in growth and innovation, particularly in emerging markets Measures with 649m annualized savings already implemented until end Q1 12 Page 26 Bayer Investor Presentation Roadshow California July 2012
Efficient Use of Cash Page 27 Bayer Investor Presentation Roadshow California July 2012 2007 2011 Consistent Strong Cash Generation Gross Cash Flow* ( billion) Trade working capital to sales ratio (%) 4.8 5.3 4.7 4.8 5.2 40 35 30 29.6 31.2 30.4 26.4 26.4 25 2007 2008 2009 2010 2011 Net Cash Flow* ( billion) 4.3 5.4 5.8 3.6 5.1 2007 2008 2009 2010 2011 20 20 16 12 8 4 0 2007 2008 2009 2010 2011 Net financial debt** ( billion) 14.2 12.2 9.7 7.9 7.0 2007 2008 2009 2010 2011 Page 28 Bayer Investor Presentation Roadshow California July 2012 *2007-2008 from continuing operations ** year-end data
Full Year 2012 R&D And CapEx Budgets R&D 2012e: ~ 3.0bn CapEx (PPE) 2012e: ~ 1.5bn HealthCare 2.0bn thereof Pharma 1.5bn 8% MaterialScience 0.2bn CropScience 0.8bn 25% 24% HealthCare 0.5bn 33% MaterialScience 0.5bn 34% 66% 67% 1% 13% 20% Reconciliation 0.05bn Reconciliation 0.2bn CropScience 0.3bn Page 29 Bayer Investor Presentation Roadshow California July 2012 M&A Policy Strategic Direction Organic growth remains top priority complimented by ongoing bolt-on acquisitions Strategic investment focus is on HealthCare and CropScience Transaction Financing Balanced mix of debt, equity and portfolio if needed Maintaining single A credit rating category Probable Timing Constant monitoring Due to the excellent positions we have built, however, we feel no pressure and can wait for the right opportunity to arise at the right price Page 30 Bayer Investor Presentation Roadshow California July 2012
Dividend Policy 2007-2011* Dividend Policy 6 5 Target is to pay out 30 to 40% of core EPS 4 Successive history of dividend payment for 60 years 3 2 1 1.35 1,40 1,40 1,50 1.65 Dividend of 1.65 for 2011 corresponds to 34% payout ratio or 1,364m Dividend yield of 3.3% for 2011 # 0 2007 2008 2009 2010 2011 EPS (IFRS) Core EPS Dividend per share Page 31 Bayer Investor Presentation Roadshow California July 2012 *in Euro per share # based on year end 2011 stock price Appendix Page 32 Bayer Investor Presentation Roadshow California July 2012
1 st Quarter 2012 Encouraging Start To The Year ( ) = Fx & portfolio adjusted Q1 11 Q1 12 % million million Sales 9,415 10,056 +7 (+5) EBITDA - reported 1,866 2,377 +27 - adjusted* 2,232 2,442 +9 EBIT - reported 1,148 1,637 +43 - adjusted* 1,590 1,806 +14 Net income 684 1,050 +54 NCF 801 271-66 ofcf 563 15-97 EPS - reported 0.83 1.27 +53 -core 1.45 1.68 +16 Highlights of Financial Results Organic sales growth of +5%, reported EBIT up 43%, Core EPS +16% Strong start to the season at CropScience, increases at HealthCare, continuing margin pressure at MaterialScience Continued innovation pipeline progress Outlook for 2012 reiterated Page 33 Bayer Investor Presentation Roadshow California July 2012 *before special items 1 st Quarter 2012 HealthCare: Increase In All Divisions In million, % yoy, () = Fx & portf. adjusted Consumer Health +4% (+3%) Q1 12 Sales 1,825 36% 2,517 Pharma +4% (+2%) Adj. EBITDA* 1,140 Earnings 1,181 +4% Adj. EBIT* 724 740 +2% 806 861 +7% Price 0% HealthCare 4,342m; +4% (+2%) Volume +2% Fx +2% Portfolio 0% 493 520 +5% 416 441 +6% 313 341 +9% Q1 11 Q1 12 Q1 11 Q1 12 Page 34 Bayer Investor Presentation Roadshow California July 2012 *before special items
1 st Quarter 2012 CropScience: Good Start To The Season In million, % yoy, () = Fx & portf. adjusted Environmental Science +5% (+3%) Q1 12 Sales 486 187 Crop Protection 36% +16% (+15%) 1,937 Adj. EBITDA* 745 Earnings 981 +32% 624 Adj. EBIT* 861 +38% BioScience +21% (+17%) CropScience 2,610m; +16% (+14%) Price +1% Volume +14% Fx +2% Portfolio -1% Q1 11 Q1 12 Q1 11 Q1 12 Page 35 Bayer Investor Presentation Roadshow California July 2012 *before special items 1 st Quarter 2012 MaterialScience: Continuing Margin Pressure In million, % yoy, () = Fx & portf. adjusted Polycarbonates -1% (-4%) Q1 12 Sales 706 Polyurethanes 36% +7% (+5%) 1,443 Adj. EBITDA* Earnings Adj. EBIT* CAS** 0% (+4%) IO*** +13% (+9%) 462 177 MaterialScience 2,788m; +4% (+3%) 345 278-19% 205 127-38% Price 0% Volume +3% Fx +2% Portfolio -1% Q1 11 Q1 12 Q1 11 Q1 12 Page 36 Bayer Investor Presentation Roadshow California July 2012 *before special items **CAS: Coatings, Adhesives, Specialties *** IO: Industrial Operations
1 st Quarter 2012 Cash Flow And Net Debt Development Cash Flow in million, Net Debt in billion, Q1 12 Cash Flow Net Debt Development GCF NCF cont. Investments ofcf - 162m 7.0 6.9 1,595 271 256 15 % y-o-y +22-66 +8-97 Q4 11 Q1 12 Page 37 Bayer Investor Presentation Roadshow California July 2012 Reporting Events and AGM Date Event Publication Tuesday, July 31, 2012 Tuesday, October 30, 2012 Wednesday, November 21, 2012 Thursday, February 28, 2013 Thursday, April 25, 2013 Friday, April 26, 2013 Investor Conference Call Investor Conference Call Meet Management in Tokyo Investor Conference Call Investor Conference Call Annual General Meeting 2 nd Quarter 2012 Results Stockholders Newsletter 3 rd Quarter 2012 Results Stockholders Newsletter Investor Conference 2012 Annual Report 1 st Quarter 2013 Results Stockholders Newsletter Page 38 Bayer Investor Presentation Roadshow California July 2012
Investor Relations Contacts Dr. Alexander Rosar Head of Investor Relations Phone: +49-214-30-81013 E-mail: alexander.rosar@bayer.com Dr. Jürgen Beunink Phone: +49-214-30-65742 E-mail: juergen.beunink@bayer.com Fabian Klingen Phone: +49-214-30-35426 E-mail: fabian.klingen@bayer.com Peter Dahlhoff Phone: +49-214-30-33022 E-mail: peter.dahlhoff@bayer.com Judith Nestmann Phone: +49-214-30-66836 E-mail: judith.nestmann@bayer.com Dr. Olaf Weber Phone: +49-214-30-33567 E-mail: olaf.weber@bayer.com Page 39 Bayer Investor Presentation Roadshow California July 2012