The stock market in 2010
- Bayer stock performance in 2010: approx. 2 percent
- Five-year annual return: approx. 12 percent
- Board of Management and Supervisory Board propose dividend increase to €1.50 per share for 2010
Significant market recovery
Starting in the spring, the markets were dominated by the debate over the debt crisis in certain eurozone countries. However, thanks to the robust economic recovery in Germany the DAX maintained the upward trend that began in 2009, closing 2010 up 16 percent on the year. Following a highly volatile sideways trend in the first three quarters of the year, the DAX made significant gains in the fourth quarter and topped 7,000 points at the beginning of December before closing the year at 6,914 points.
The European equities index EURO STOXX 50 (performance index) slipped by roughly 3 percent, partly because of the problems in some countries of the European Union. Share price trends in the United States and Japan diverged, with the S&P 500 gaining some 13 percent but the Nikkei 225 losing about 3 percent.
Slight improvement in Bayer stock
Including the dividend of €1.40 per share paid in May 2010, the performance of Bayer stock came to nearly 2 percent for the year. It closed 2010 at €55.30, having reached a year high of €58.62 a short time earlier. Bayer stock thus outperformed the EURO STOXX 50 (performance index) for the fourth year in a row.
The trading volume in our shares receded by about 16 percent from the previous year to an average 3.6 million per day.
Good, stable credit standing on the bond market
The risk premium required by investors for corporate bonds with a good credit rating rose slightly in 2010. Since long-term interest rates declined during the year, Bayer’s refinancing terms on the capital market remained favorable.
The increase in risk premiums during the year can be seen from the trend in credit default swaps (CDS) shown in Graphic 2.2. The market price of these tradable insurance contracts, which are used to hedge against default of a borrower, depends on the underlying credit risk and thus helps to determine the credit margin when raising debt.
The rise in Bayer’s CDS during the year was relatively moderate. Bayer utilized the favorable conditions on the corporate bond market to make a JPY 10 billion private placement in Japan. The company had no further refinancing requirements in 2010. On the contrary, Bayer’s good liquidity position allowed early repayment of the remaining €885 million of the syndicated loan raised to partly finance the acquisition of Schering, Berlin, Germany.
A list of the bonds issued by Bayer can be found in Note 
to the consolidated financial statements.
Long-term return on Bayer stock remains ahead of the market
A long-term investor who purchased Bayer shares for €10,000 five years ago and reinvested all dividends would have seen the value of the position grow to €17,965 as of December 31, 2010, giving an average annual return of 12.4 percent.
|Long-Term Returns on Bayer Stock in % p.a. (Dividends Reinvested)||[Table 2.1] |
|Annual returns ||1 year 2010||3 years|
|DJ EURO STOXX 50||-2.8||-11.1||-1.9|
|Bayer Stock Data||[Table 2.2]|
| || ||2009||2010|
|Earnings per share||€||1.70||1.57|
|Core earnings per share *||€||3.64||4.19|
|Gross cash flow per share||€||5.63||5.77|
|Equity per share||€||22.92||22.85|
|Dividend per share||€||1.40||1.50|
| || || || |
|Year-end price **||€||55.96||55.30|
|High for the year **||€||56.45||58.62|
|Low for the year **||€||32.69||44.12|
| || || || |
|Total dividend payment||€ million||1,158||1,240|
|Number of shares entitled to the dividend (Dec. 31)|| million||826.95||826.95|
|Market capitalization (Dec. 31)||€ billion||46.3||45.8|
|Average daily share turnover on German stock exchanges||million||4.3||3.6|
| || || || |
|Price/EPS **|| ||32.9||35.2|
|Price/core EPS **|| ||15.4||13.2|
|Price/cash flow **|| ||9.9||9.6|
* For details on the calculation of core earnings per share, see Combined Management Report, Chapter 4.3.
** Xetra closing prices (source: Bloomberg)
A sustainable investment
Bayer stock is included in many stock indices and investment funds that list companies with sustainable and responsible corporate strategies, such as the Dow Jones Sustainability World and Europe indices, the FTSE4Good Global and Europe indices, the Advanced Sustainable Performance Indices Eurozone and the NYSE Euronext Low Carbon Europe Index. Storebrand, a Norwegian financial services provider focusing on sustainable investment, classifies Bayer as a best-in-class company in the pharmaceutical sector.
In 2010 the Carbon Disclosure Project (CDP) included Bayer in its Carbon Disclosure Leadership Index (CDLI) for the sixth consecutive year. Bayer was also represented in 2010 in the newly established Carbon Performance Leadership Index (CPLI), which honors detailed reporting of climate goals and strategy along with specific actions and achievements in emissions reduction.
Our sustainability reporting is based on the guidelines of the Global Reporting Initiative. During the year we also explained Bayer’s commitment to sustainability at numerous one-on-one meetings with investors and analysts.
Dividend increase to €1.50 per share
The Board of Management and the Supervisory Board will propose to the Annual Stockholders’ Meeting that a dividend of €1.50 per share be paid for 2010. This results in a payout ratio of approximately 36 percent calculated on core earnings per share, which is within the target corridor of 30 to 40 percent (for details on the calculation of core earnings per share, see Chapter 4.3
of the Combined Management Report).
The dividend yield calculated on the share price of €55.30 at year end 2010 amounts to 2.7 percent and the total dividend payment to €1,240 million.
Stockholders’ portal well received
Since the Annual Stockholders’ Meeting in 2010, we have offered an online stockholders’ portal on our IR website. Here investors can view their entries in the share register, amend their address data or register to receive invitations to future stockholders’ meetings by email. Our stockholders are making good use of this service, which will already reduce printing and mailing costs for the notice of the next Annual Stockholders’ Meeting.
During the period prior to the Meeting, stockholders can use the portal to register to attend the meeting, order admission tickets for themselves or a proxy, or issue a power of attorney and voting instructions to one of the proxies designated by the company. For our next Annual Stockholders’ Meeting we will offer stockholders a postal vote option, which will also be available via the stockholders’ portal.
International ownership structure
At the end of 2010, approximately 306,000 stockholders were listed in our share register. The following graphic shows the geographical distribution of our stockholders, based on the results of an international survey conducted in November 2010:
Communication with the capital market
Intensive dialogue with the capital market has traditionally been a high priority for Bayer. In 2010 our Investor Relations team visited 26 financial centers – mostly accompanied by the Chairman of the Board of Management or the Chief Financial Officer – and held more than 400 one-on-one meetings.
In addition to our regular quarterly and annual reporting, we held IR conference calls to update stockholders on the development status of rivaroxaban.
Our annual “Meet Management” event, which was held for the fifth time in 2010, is now an established part of our IR program for the capital market. This platform gives investors and analysts the opportunity for detailed discussions on the company’s development and future prospects at smaller meetings with members of the Group and subgroup management boards.
Awards for investor relations activities
According to a report published by the German Investor Relations Association (DIRK) and the German business magazine WirtschaftsWoche, Bayer’s investor relations activities are the best of all the DAX companies. For this we were honored with the German Investor Relations Award 2010.
Bayer also took second place among EURO STOXX 50 companies in the Capital Investor Relations Award 2010. We are delighted to have received this recognition from the capital market for our IR work over the past year (see also “Highlights 2010”).
In addition, Bayer’s IR website was ranked best in the health care sector and third in Europe in the IR Global Rankings conducted by MZ Consult of the United States, based on an evaluation of more than 500 companies in 35 countries.