Management Report
5.2 CropScience
| Key Data – CropScience | [Table 7] |
|---|
| | 2nd Quarter
2009 | 2nd Quarter
2010 | Change | 1st Half
2009 | 1st Half
2010 | Change |
| | € million | € million | % | € million | € million | % |
| Sales | 1,852 | 1,884 | +1.7 | 3,972 | 3,836 | -3.4 |
| Change in sales | | | | | | |
| Volume | -1.6% | -2.8% | | +1.0% | -6.6% | |
| Price | +3.6% | -2.7% | | +3.8% | -1.3% | |
| Currency | +0.7% | +7.0% | | +0.2% | +4.3% | |
| Portfolio | 0.0% | +0.2% | | 0.0% | +0.2% | |
| Sales by segment | | | | | | |
| Crop Protection | 1,540 | 1,520 | -1.3 | 3,274 | 2,996 | -8.5 |
| Environmental Science, BioScience | 312 | 364 | +16.7 | 698 | 840 | +20.3 |
| Sales by region | | | | | | |
| Europe | 737 | 737 | +0.0 | 1,778 | 1,655 | -6.9 |
| North America | 562 | 494 | -12.1 | 1,138 | 1,021 | -10.3 |
| Asia/Pacific | 280 | 343 | +22.5 | 519 | 583 | +12.3 |
| Latin America/Africa/Middle East | 273 | 310 | +13.6 | 537 | 577 | +7.4 |
| EBITDA* | 427 | 330 | -22.7 | 1,160 | 841 | -27.5 |
| Special items | (70) | (66) | | (74) | (114) | |
| EBITDA before special items* | 497 | 396 | -20.3 | 1,234 | 955 | -22.6 |
| EBITDA margin before special items* | 26.8% | 21.0% | | 31.1% | 24.9% | |
| EBIT* | 304 | 203 | -33.2 | 913 | 591 | -35.3 |
| Special items | (70) | (66) | | (78) | (114) | |
| EBIT before special items* | 374 | 269 | -28.1 | 991 | 705 | -28.9 |
| Gross cash flow** | 337 | 240 | -28.8 | 887 | 603 | -32.0 |
| Net cash flow** | 471 | 782 | +66.0 | 50 | 517 | . |
* For definition see “Calculation of EBIT(DA) Before Special Items.” ** For definition see “Financial Position of the Bayer Group.” |
Sales of the CropScience subgroup climbed by 1.7% in the second quarter to €1,884 million (Q2 2009: €1,852 million). After adjusting for currency and portfolio effects, sales fell by 5.5%. This was due to a weaker Crop Protection business, while Environmental Science, BioScience once again achieved a positive business performance.
| Best-Selling CropScience Products * | [Table 8] |
|---|
| | 2nd
Quarter
2009 | 2nd
Quarter
2010 | Change | Currency-
adjusted
change |
1st Half
2009 |
1st Half
2010 | Change | Currency-
adjusted
change |
| | € million | € million | % | % | € million | € million | % | % |
Confidor®/Gaucho®/
Admire®/Merit® (Insecticides/
Seed Treatment/
Environmental Science) |
145 |
143 |
-1.4 |
-8.7 |
308 |
281 |
-8.8 |
-12.3 |
| Proline®/Input®/Prosaro® (Fungicides) | 112 | 111 | -0.9 | -5.6 | 219 | 191 | -12.8 | -16.4 |
Flint®/Stratego®/
Sphere®/Nativo®
(Fungicides) |
92 |
93 |
+1.1 |
-8.0 |
197 |
183 |
-7.1 |
-10.5 |
Basta®/Liberty®/
Rely®/Ignite®
(Herbicides) |
117 |
100 |
-14.5 |
-24.3 |
226 |
171 |
-24.3 |
-31.8 |
Folicur®/Raxil®
(Fungicides/Seed Treatment) |
57 |
55 |
-3.5 |
-10.7 |
132 |
117 |
-11.4 |
-16.5 |
| Atlantis® (Herbicides) | 4 | 18 | . | . | 135 | 109 | -19.3 | -20.4 |
| Fandango® (Fungicides) | 56 | 47 | -16.1 | -16.6 | 100 | 104 | +4.0 | +2.3 |
Decis®/K-Othrine®
(Insecticides/
Environmental Science) |
54 |
55 |
+1.9 |
-5.2 |
93 |
103 |
+10.8 |
+4.0 |
| Puma® (Herbicides) | 65 | 63 | -3.1 | -13.0 | 123 | 96 | -22.0 | -28.4 |
| Poncho® (Seed Treatment) | 65 | 42 | -35.4 | -44.5 | 133 | 86 | -35.3 | -39.2 |
| Total | 767 | 727 | -5.2 | -12.6 | 1,666 | 1,441 | -13.5 | -17.8 |
| Proportion of CropScience sales | 41% | 39% | | | 42% | 38% | | |
| * Figures are based on active ingredient class. For the sake of clarity, only the principal brands and business units are listed. |
EBITDA before special items was down by 20.3% to €396 million (Q2 2009: €497 million). This was attributable to much lower profitability at Crop Protection, while Environmental Science, BioScience improved earnings. EBIT before special items fell by 28.1% to €269 million (Q2 2009: €374 million). Special charges totaling €66 million were incurred in connection with litigations concerning genetically modified rice in the United States. EBIT shrank by 33.2% to €203 million (Q2 2009: €304 million).
Crop Protection
| Key Data – Crop Protection | [Table 9] |
|---|
| | 2nd Quarter
2009 | 2nd Quarter
2010 | Change | 1st Half
2009 | 1st Half
2010 | Change |
| | € million | € million | % | € million | € million | % |
| Sales | 1,540 | 1,520 | -1.3 | 3,274 | 2,996 | -8.5 |
| Herbicides | 542 | 587 | +8.3 | 1,281 | 1,190 | -7.1 |
| Fungicides | 493 | 477 | -3.2 | 1,002 | 894 | -10.8 |
| Insecticides | 361 | 344 | -4.7 | 651 | 640 | -1.7 |
| Seed Treatment | 144 | 112 | -22.2 | 340 | 272 | -20.0 |
| Sales by region | | | | | | |
| Europe | 634 | 632 | -0.3 | 1,545 | 1,411 | -8.7 |
| North America | 448 | 355 | -20.8 | 826 | 622 | -24.7 |
| Asia/Pacific | 214 | 258 | +20.6 | 421 | 461 | +9.5 |
| Latin America/Africa/Middle East | 244 | 275 | +12.7 | 482 | 502 | +4.1 |
| EBITDA* | 391 | 295 | -24.6 | 998 | 675 | -32.4 |
| Special items | (32) | 0 | | (36) | 0 | |
| EBITDA before special items* | 423 | 295 | -30.3 | 1,034 | 675 | -34.7 |
| EBITDA margin before special items* | 27.5% | 19.4% | | 31.6% | 22.5% | |
| EBIT* | 283 | 189 | -33.2 | 783 | 465 | -40.6 |
| Special items | (32) | 0 | | (38) | 0 | |
| EBIT before special items* | 315 | 189 | -40.0 | 821 | 465 | -43.4 |
| Gross cash flow** | 307 | 229 | -25.4 | 765 | 495 | -35.3 |
| Net cash flow** | 357 | 570 | +59.7 | (2) | 312 | . |
* For definition see “Calculation of EBIT(DA) Before Special Items.” ** For definition see “Financial Position of the Bayer Group.” |
Sales in the Crop Protection segment fell by 1.3% to €1,520 million (Q2 2009: €1,540 million). The currency-adjusted decline was 8.6%. Sales of our herbicides came in close to the prior-year level on a currency-adjusted basis. By contrast, business with our insecticides, fungicides and seed treatment products was much weaker, with sales down significantly in some cases.
Sales in Europe were nearly level year on year in the second quarter of 2010, at €632 million (-0.3%). Adjusted for currency effects, business fell by 3.0%. This was attributable above all to the unfavorable weather conditions in key growing regions. Sales in France, particularly for fungicides, were well below the high prior-year level for market-related reasons. The considerable market contraction in that country resulted primarily from lower prices for agricultural raw materials and unusual drought conditions. In Germany we registered a steep decline in insecticide sales, while the trend for herbicides was positive. In the United Kingdom we expanded our fungicides business in particular; in northern Europe there was in increase especially in sales of herbicides.
Sales in the North America region were down by 20.8% to €355 million (Q2 2009: €448 million). The currency-adjusted decline was 30.0%. Our business in the United States was hampered by the difficult market and competitive situation, as well as by pressure exerted on prices by generic manufacturers. The price reductions implemented already in the first quarter led to further declines in sales of our herbicides Liberty® and Ignite®. Business was also down for fungicides. Contributing to this trend were targeted inventory clearances. This affected particularly the Stratego® product group in the applications corn and soybeans. Intensified generic competition and low insect infestation pressure led to a marked decline in sales in our insecticides business. Sales were also well down in our seed treatment business due to an unfavorable market environment that resulted above all from high inventories in the U.S. distribution channels. Sales in Canada also fell steeply in the second quarter. Sustained high precipitation levels in that country prior to sowing led to a significant reduction in cultivation acreages for canola and wheat.
Sales in the Asia/Pacific region were up by a substantial 20.6% to €258 million (Q2 2009: €214 million). The currency-adjusted improvement was 6.5%. The gratifying business trend in Australia played a particularly important role here. There we benefited from good weather conditions and saw a considerable improvement in sales of the corn herbicide Balance®. We also achieved sales increases in China. The positive business performance for our insecticide Confidor® in particular contributed to the sales growth in India.
In the Latin America/Africa/Middle East region, sales rose by 12.7% to €275 million (Q2 2009: €244 million). After adjusting for currency effects, sales advanced by 3.1%. Contributing to this increase were significantly higher sales in Africa and the Middle East, and particularly Turkey. By contrast, sales in Latin America fell slightly despite a gratifying performance by the fungicides Sphere® and Nativo®. Sales declined overall in Brazil especially because of the negative trend in the seed treatment business, while there was a gratifying expansion of business in Argentina.
EBITDA before special items of the Crop Protection segment dropped by 30.3% in the second quarter of 2010 to €295 million (Q2 2009: €423 million). This was attributable chiefly to lower prices and a decrease in volumes. Profitability was also impaired by lower capacity utilization at our production facilities. EBIT before special items fell by 40.0% to €189 million (Q2 2009: €315 million). There were no special charges in the Crop Protection segment in the second quarter of 2010 (Q2 2009: €32 million). EBIT dropped by 33.2% year on year.
First-half sales of the Crop Protection segment dropped by 8.5% to €2,996 million (H1 2009: €3,274 million). This corresponds to a currency-adjusted decrease of 12.7%. The first half of 2010 was characterized by unfavorable weather conditions in key growing regions, difficult market situations and growing pressure on prices from generic products. Our business in the Asia/Pacific and Latin America/Africa/Middle East regions came in nearly at the prior-year level, while sales in Europe were down as a result of the weak first quarter. Sales in the North America region declined sharply. EBITDA before special items in the Crop Protection segment fell 34.7% to €675 million (H1 2009: €1,034 million). EBIT before special items dropped by 43.4% to €465 million (H1 2009: €821 million). There were no special charges in the Crop Protection segment in the first half of 2010 (H1 2009: €38 million). EBIT fell by 40.6% to €465 million (H1 2009: €783 million).
Environmental Science, BioScience
| Key Data – Environmental Science, BioScience | [Table 10] |
|---|
| | 2nd Quarter
2009 | 2nd Quarter
2010 | Change | 1st Half
2009 | 1st Half
2010 | Change |
| | € million | € million | % | € million | € million | % |
| Sales | 312 | 364 | +16.7 | 698 | 840 | +20.3 |
| Environmental Science | 172 | 199 | +15.7 | 336 | 369 | +9.8 |
| BioScience | 140 | 165 | +17.9 | 362 | 471 | +30.1 |
| Sales by region | | | | | | |
| Europe | 103 | 105 | +1.9 | 233 | 244 | +4.7 |
| North America | 114 | 139 | +21.9 | 312 | 399 | +27.9 |
| Asia/Pacific | 66 | 85 | +28.8 | 98 | 122 | +24.5 |
| Latin America/Africa/Middle East | 29 | 35 | +20.7 | 55 | 75 | +36.4 |
| EBITDA* | 36 | 35 | -2.8 | 162 | 166 | +2.5 |
| Special items | (38) | (66) | | (38) | (114) | |
| EBITDA before special items* | 74 | 101 | +36.5 | 200 | 280 | +40.0 |
| EBITDA margin before special items* | 23.7% | 27.7% | | 28.7% | 33.3% | |
| EBIT* | 21 | 14 | -33.3 | 130 | 126 | -3.1 |
| Special items | (38) | (66) | | (40) | (114) | |
| EBIT before special items* | 59 | 80 | +35.6 | 170 | 240 | +41.2 |
| Gross cash flow ** | 30 | 11 | -63.3 | 122 | 108 | -11.5 |
| Net cash flow ** | 114 | 212 | +86.0 | 52 | 205 | . |
* For definition see “Calculation of EBIT(DA) Before Special Items.” ** For definition see “Financial Position of the Bayer Group.” |
Sales of the Environmental Science, BioScience segment climbed by 16.7% in the second quarter of 2010 to €364 million (Q2 2009: €312 million). After adjusting for currency and portfolio effects, business was up by 9.8%.
Sales of the Environmental Science business unit climbed by 15.7% to €199 million (Q2 2009: €172 million). After adjusting for currency effects, the increase was 9.1%. Sales of products for professional users for use in non-agricultural applications rose significantly in the United States and in Germany and Japan. By contrast, there was a slight decline year on year in sales of products for private users.
BioScience increased sales by a substantial 17.9% to €165 million (Q2 2009: €140 million). On a currency- and portfolio-adjusted basis, business expanded by 10.8%. This growth resulted mostly from higher sales of canola seed. We also further expanded the vegetable seed business.
EBITDA before special items in the Environmental Science, BioScience segment rose by 36.5% to €101 million (Q2 2009: €74 million), resulting from the expansion of business and from one-time income of €19 million in connection with a license agreement signed in the second quarter of 2010. This improvement more than offset increased expenditures for research and development at BioScience. EBIT before special items rose by 35.6% to €80 million (Q2 2009: €59 million). Special charges totaling €66 million resulted from litigations relating to the lawsuits pending in the United States in connection with genetically modified rice. EBIT shrank by 33.3% to €14 million (Q2 2009: €21 million).
Sales in the Environmental Science, BioScience segment improved by 20.3% in the first half of 2010, to €840 million (H1 2009: €698 million). When adjusted for currency and portfolio effects, sales grew by 14.7%. Sales of cotton and canola seed saw especially solid growth. The cotton seed business benefited above all from an expansion in growing acreages. Selling price increases in North America were instrumental in the growth of canola seed sales, whereas we lowered prices for the corresponding canola herbicides. EBITDA before special items in the Environmental Science, BioScience segment advanced by 40.0% to €280 million (H1 2009: €200 million). EBIT before special items rose by 41.2% to €240 million (H1 2009: €170 million). Special charges totaling €114 million (H1 2009: €40 million) resulted from litigations relating to the lawsuits pending in the United States in connection with genetically modified rice. EBIT came to €126 million (-3.1%).