Management Report

8. Financial Position of the Bayer Group

Bayer Group Summary Statements of Cash Flows    [Table 15]
  2nd
Quarter
2014
2nd
Quarter
2015
1st
Half
2014
1st
Half
2015
  € million € million € million € million
Gross cash flow1 1,665 2,173 3,683 4,184
Changes in working capital/other non-cash items (96) (223) (1,970) (1,557)
Net cash provided by (used in) operating activities (net cash flow), continuing operations 1,569 1,950 1,713 2,627
Net cash provided by (used in) operating activities (net cash flow), discontinued operations 32 9 51 56
Net cash provided by (used in) operating activities (net cash flow) (total) 1,601 1,959 1,764 2,683
Net cash provided by (used in) investing activities (total) (517) (527) (2,697) (1,123)
Net cash provided by (used in) financing activities (total) (2,507) 334 512 (76)
Change in cash and cash equivalents due to business activities (1,423) 1,766 (421) 1,484
Cash and cash equivalents at beginning of period 2,631 1,607 1,662 1,853
Change due to exchange rate movements and to changes in scope of consolidation 20 (126) (13) (90)
Cash and cash equivalents at end of period 1,228 3,247 1,228 3,247
1 Gross cash flow = income after income taxes, plus income taxes, plus financial result, minus income taxes paid or accrued, plus depreciation, amortization and impairment losses, minus impairment loss reversals, plus/minus changes in pension provisions, minus gains/plus losses on retirements of noncurrent assets, minus gains from the remeasurement of already held assets in step acquisitions. The change in pension provisions includes the elimination of non-cash components of EBIT. It also contains benefit payments during the year.

Operating cash flow

Gross cash flow from continuing operations in the second quarter of 2015 climbed by 30.5% against the prior-year period to €2,173 million due to the improvement in ebitda. Net cash flow (total) rose by 22.4% to €1,959 million despite an increase in cash tied up in working capital. Net cash flow (total) reflected income tax payments of €352 million (q2 2014: €360 million).

Gross cash flow from continuing operations in the first half of 2015 advanced by 13.6% against the prior-year period to €4,184 million. Net cash flow (total) increased by a considerable 52.1% to €2,683 million due to a reduction in cash tied up in working capital, reflecting income tax payments of €796 million (h1 2014: €735 million).

Investing cash flow

Net cash outflow for investing activities in the second quarter of 2015 amounted to €527 million. Disbursements for property, plant and equipment and intangible assets were 13.6% higher at €601 million (q2 2014: €529 million). Of this amount, HealthCare accounted for €263 million (q2 2014: €225 million), CropScience for €149 million (q2 2014: €125 million) and MaterialScience for €135 million (q2 2014: €139 million).

Net cash outflow for investing activities in the first half of 2015 totaled €1,123 million. Disbursements for property, plant and equipment and intangible assets rose by 6.8% to €946 million (h1 2014: €886 million). Of this amount, HealthCare accounted for €373 million (h1 2014: €326 million), CropScience for €245 million (h1 2014: €240 million) and MaterialScience for €224 million (h1 2014: €237 million). Cash outflows for noncurrent and current financial assets amounted to €332 million (h1 2014: €60 million).

Financing cash flow

In the second quarter of 2015, there was a net cash inflow of €334 million for financing activities, including net borrowings of €2,349 million (q2 2014: net loan repayments of €705 million). Net interest payments were 136.9% higher at €154 million (q2 2014: €65 million). The cash outflow for dividends amounted to €1,861 million (q2 2014: €1,737 million).

In the first half of 2015, there was a net cash outflow of €76 million for financing activities, including net borrowings of €2,026 million (h1 2014: €2,373 million). Net interest payments increased by 91.9% to €236 million (h1 2014: €123 million).

Liquid assets and net financial debt

Net Financial Debt  [Table 16]
  Dec. 31,
2014
March 31,
2015
June 30,
2015
  € million € million € million
Bonds and notes/promissory notes 14,964 15,842 16,831
of which hybrid bonds1 4,552 4,544 5,824
Liabilities to banks 3,835 3,916 3,543
Liabilities under finance leases 441 476 458
Liabilities from derivatives 642 1,254 738
Other financial liabilities 1,976 1,943 3,278
Positive fair values of hedges of recorded transactions (258) (400) (334)
Financial liabilities 21,600 23,031 24,514
Cash and cash equivalents (1,853) (1,607) (3,247)
Current financial assets (135) (132) (133)
Net financial debt 19,612 21,292 21,134
1 classified as debt according to IFRS

Net financial debt of the Bayer Group declined by just 0.7% from €21.3 billion on March 31, 2015, to €21.1 billion on June 30, 2015. Cash inflows from operating activities and positive currency effects offset the outflow for the dividend payment.

Financial debt included four subordinated hybrid bonds, which were reflected at a total amount of €5.8 billion. Net financial debt should be viewed against the fact that Moody’s and Standard & Poor’s treat 75% and 50%, respectively, of the hybrid bond with a nominal volume of €1.3 billion issued in July 2005 as equity. Moody’s and Standard & Poor’s treat 50% of the hybrid bonds with nominal volumes of €1.75 billion and €1.5 billion issued in July 2014 and of the hybrid bond with a nominal volume of €1.3 billion issued in April 2015 as equity. The hybrid bonds thus have a more limited effect on the Group’s rating-specific debt indicators than conventional borrowings. The other financial liabilities as of June 30, 2015, included commercial paper totaling €2.6 billion. Our noncurrent financial liabilities rose in the second quarter of 2015 from €16.9 billion to €17.2 billion. At the same time, current financial liabilities increased from €6.5 billion to €7.7 billion owing to an increase in commercial paper.

Standard & Poor’s gives Bayer a long-term issuer rating of a– with stable outlook, while Moody’s gives us a long-term rating of a3 with stable outlook. The short-term ratings are a2 (Standard & Poor’s) and p2 (Moody’s). These investment-grade ratings document good creditworthiness.

Asset and capital structure

Bayer Group Summary Statements of Financial Position   [Table 17]
  Dec. 31,
2014
March 31,
2015
June 30,
2015
  € million € million € million
Noncurrent assets 48,007 51,689 49,462
Current assets 22,227 24,951 25,975
Assets held for sale and discontinued operations 183
Total current assets 22,227 24,951 26,158
Total assets 70,234 76,640 75,620
       
Equity 20,218 21,863 22,423
Noncurrent liabilities 34,513 34,514 32,433
Current liabilities 15,503 20,263 20,650
Liabilities directly related to assets held for sale and discontinued operations 114
Total current liabilities 15,503 20,263 20,764
Liabilities 50,016 54,777 53,197
Total equity and liabilities 70,234 76,640 75,620

Total assets fell by €1.0 billion against March 31, 2015, to €75.6 billion. Noncurrent assets decreased by €2.2 billion to €49.5 billion, largely due to currency effects and lower deferred tax assets. Total current assets rose by €1.0 billion to €26.2 billion, mainly due to an increase in the cash position.

Equity increased by €0.5 billion to €22.4 billion, lifted by income after income taxes of €1.1 billion, the €1.7 billion decrease – recognized outside profit or loss – in post-employment benefit obligations and changes of €0.1 billion in the cash flow hedges. The €1.9 billion dividend payment and €0.5 billion in negative exchange differences had an offsetting effect. The equity ratio (equity coverage of total assets) as of June 30, 2015, was 29.7% (March 31, 201528.5%).

Liabilities fell by €1.6 billion in the second quarter of 2015 to €53.2 billion. Provisions for pensions and other post-employment benefits declined by €2.4 billion, while other provisions moved back by €0.4 billion. The €1.4 billion increase in financial liabilities resulted partly from the hybrid bond issuance and the commercial paper.

Net Defined Benefit Liability for Post-Employment Benefits   [Table 18]
  Dec. 31,
2014
March 31,
2015
June 30,
2015
  € million € million € million
Provisions for pensions and other post-employment benefits 12,236 13,594 11,176
Net defined benefit asset (41) (41) (43)
Net defined benefit liability for post-employment benefits 12,195 13,553 11,133

The net defined benefit liability for post-employment benefits declined by €2.5 billion in the second quarter of 2015 to €11.1 billion, mainly due to an increase in long-term capital market interest rates for high-quality corporate bonds.

Last updated: July 29, 2015  Copyright © Bayer AG
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