Bayer Aktienges Ads CEO Discusses Q3 2010 Results - Earnings Call Transcript
Bayer Aktienges Ads (
)
Q3 2010 Earnings Call
October 28, 2010 04:30 pm ET
Executives
Alexander Rosar - IR
Marijn Dekkers - CEO
Joerg Reinhardt - Chairman, HealthCare
Patrick Thomas - Chairman, MaterialScience
Werner Baumann - CFO
Sandra Peterson - Chairman, CropScience
Analysts
Fabian Wenner – UBS
Richard Vosser – JPMorgan
Sachin Jain - Merrill Lynch
Craig Maxwell - UniCredit
Michael Leuchten - Barclays Capital
Ronald Koehler - MainFirst Bank
Karen Jay - JPMorgan
Jo Walton - Credit Suisse
Andreas Heine – UniCredit
Jeremy Redenius - Sanford Bernstein
Florent Cespedes - Exane BNP Paribas
Christian Faitz - Maquarie
Cornelia Thomas - WestLB
Andrew Benson – Citi
Jean de Watteville - Nomura
Jack Scannell - Sanford Bernstein
Presentation
Operator
»
Bayer AG Q2 2010 Earnings Call Transcript
»
Bayer Aktienges Ads Q1 2010 Earnings Call Transcript
»
Allergan Q3 2010 Earnings Call Transcript
Ladies and Gentlemen and it’s a great pleasure for me to welcome on behalf of my colleagues to our conference call in which we will review our third quarter figures. With me on the call are Marijn Dekkers our new CEO and Werner Baumann our CFO. HealthCare will be represented by Reinhardt, CropScience by Sandra Peterson, and MaterialScience by Patrick Thomas. Mr. Dekkers start off our conference call with a brief summary of development for the quarter. We assume you have all received and reviewed of our newsletter, the recent documents and the slides with the addressed value for the main point.
Before handing over to Mr. Dekkers, I would like to draw your attention also to the Safe Harbor statements. Thank you
Marijn Dekkers
Thank you Alexander, good afternoon ladies and gentlemen. It’s also my pleasure to welcome you for the first time as CEO of Bayer. During the last nine months, I had the opportunity to work closely together with Mr. Wenning and develop a deep understanding of Bayer. I would like to take this opportunity to thank Mr. Wenning again for all the support he has given me personally as also for his excellent leadership of Bayer in the past eight and half years.
Let me now briefly review the quarter starting with the overview, we again increased sales and underlining EBITDA in the third quarter of this year mainly driven by MaterialScience. Emerging markets contributed 37% to group sales and continued strong business momentum. Our elevation pipeline continues to hold significant promise. We confirm our target we present the Xarelto ROCKET AF data during the upcoming American Heart Conference. Major progress was achieved in de-leveraging the balance sheet but not mention debt being reduced by EUR 1.6 billion in the quarter. Based on the development so far and our expectations for the remainder of the year we reiterate conclude full year financial outlook.
So let me now briefly look at the key data for the quarter and in my comments I will focus on the portfolio and currency adjusted sales figures variation. On slide 4 you see group sales of EUR 8.6 billion advanced by 60% in Euros or 8% in adjusted for currency exchange. Underlying growth was mainly driven by higher volume.
Volumes added almost 6% in selling price increases nearly 3% to the topline exchange rate. Underlying EBITDA was EUR 4.7 billion gained 10% due to the positive business trends at MaterialScience and positive currency effect. Currency effective group underlined EBITDA by EUR 150 million in the quarter. We increased our R&D investments by EUR 80 million in the quarter.
This on the scores of confidence in our new products and our new R&D pipeline. The quarter was hampered by special charges totaling EUR 436 million. These were related to litigations in the US. Of this amount, 386 million were mainly attributable to an intended settlement programs at CropScience in connection with litigations concerning genetically modified rice. Special charges of 50 million were taken at HealthCare in connection with litigations concerning Yaz and Yasmin.
Core earnings per share rose by 22% to EUR 95 spend. On slide five, you see some regional perspective the strongest growth was achieved in the emerging economy. In Western Europe, business gain 6% and in the United States business was up 3%. But the emerging markets accounted 37% of group sales. In these markets the extended hours of sales by 17% with a strongest growth achieved in the emerging aging market and in Eastern Europe.
These significantly re-demonstrates that we are well positioned in the emerging market and that our significant investments there are really paying off. On slide six, the gross cash flow declined by 25%. The decrease was mainly due litigation related provisions not reflected in net cash flow.
Net cash flow rose by nearly 3%, in more efficient working capital management also contributed through the increase. Pre-operating cash flows improved by 6% to almost EUR 1.2 billion. This allowed us to significantly reduce financial debt. Net debt at the end of the quarter was EUR 9.1 billion down by EUR 1.6 billion compared with the end of the second quarter. This was also helped by positive currency effect in total currency changes lower net debt to EUR 4 billion.
Now let’s look more closely at the trends in our individual business starting with HealthCare on slide seven. The third quarter performance of HealthCare namely impacted trend. Lower sales in the United States as the result of generic competition for YAZ, very solid expansion of pharmaceutical sales in other countries and further growth in consumer health. The aggregate effect of these diverging trends within HealthCare was a slight overall increase in sales, the slight shortfall in underlying EBITDA as compared to the prior year period. Pharmaceuticals achieved sales of EUR 2.7 billion in the quarter. Sales in the United States felled by 99% outside the United States, pharmaceutical segment is growing 5%. Business expanded remarkably in the emerging market for example in the Peoples Republic of China, represents by 31%. In Europe sales were basically flat.
Let’s move on the key pharma product, this is with better for own expenses slightly. Sales of the YAZ family showed a significant drop of 28% and due to sharply lower sales in the United States. However sales of the YAZ family outside the United States increased almost 9%. Kogenate formed very positively specially in America with sales up by nearly 7%. At plus 1% sales of Nexavar were up slightly over the very strong prior year quarter, we benefited from the products registration in Japan for the treatment of liver cancer in May 2009.
Mirena was up almost 21% benefiting from the selling price increases in March. Higher volumes particularly in China with significant expansion of business with Aspirin Cardio. Sales were up almost 13%. But Levitra grew 9% and Avelox sales were slightly above previous years. Sales in our consumer health segment rose by nearly 3% in the quarter.
Contributing to this performance were the businesses of consumer care and animal health. While at MedicalCare there was a slight drop in sales. Due to the business strengths I just described healthcare was not quite able to match the prior year level of underlying EBITDA. Here the figure was down by about 4%. Earnings were also diminished by the negative effects of HealthCare reforms.
Read the rest of this transcript for free on seekingalpha.com
