Management Report
3.2 CropScience
| Key Data – CropScience | [Table 3.9] |
|---|
| | 2009 | 2010 | Change |
|
€ million |
€ million |
% | Fx & p adj.% |
| Sales | 6,510 | 6,830 | +4.9 | -1.3 |
| Change in sales | | | | |
| Volume | +1.2% | -0.7% | | |
| Price | +1.3% | -0.6% | | |
| Currency | -0.6% | +6.0% | | |
| Portfolio | +0.1% | +0.2% | | |
| Sales by segment | | | | |
| Crop Protection | 5,424 | 5,493 | +1.3 | -4.7 |
| Environmental Science, BioScience | 1,086 | 1,337 | +23.1 | +15.6 |
| Sales by region | | | | |
| Europe | 2,540 | 2,381 | -6.3 | |
| North America | 1,529 | 1,535 | +0.4 | |
| Asia/Pacific | 1,028 | 1,229 | +19.6 | |
| Latin America/Africa/Middle East | 1,413 | 1,685 | +19.2 | |
| EBIT | 798 | 261 | -67.3 | |
| Special items | (219) | (526) | | |
| EBIT before special items * | 1,017 | 787 | -22.6 | |
| EBITDA* | 1,311 | 767 | -41.5 | |
| Special items | (197) | (526) | | |
| EBITDA before special items * | 1,508 | 1,293 | -14.3 | |
| EBITDA margin before special items * | 23.2% | 19.0% | | |
| Gross cash flow ** | 1,043 | 546 | -47.7 | |
| Net cash flow ** | 745 | 1,399 | 87.8 | |
Fx & p adj. = currency- and portfolio-adjusted
* For definition see Chapter 4.2 "Calculation of EBIT(DA) Before Special Items."
** For definition see Chapter 4.5"Liquidity and Capital Expenditures of the Bayer Group."
|
CropScience raised sales by 4.9% in 2010 to €6,830 million (2009: €6,510 million). Adjusted for currency and portfolio effects, however, business dipped by 1.3%. This was due to weaker sales in Crop Protection, while the Environmental Science, BioScience segment turned in a positive performance.
EBIT of CropScience fell substantially year on year from €798 million to €261 million. Earnings were held back by special charges of €526 million (2009: €219 million), which in 2010 related to an intended settlement program and legal and defense costs in connection with litigations concerning genetically modified rice (LL RICE) in the United States. EBIT before special items shrank by 22.6% to €787 million (2009: €1,017 million). EBITDA before special items declined by 14.3% to €1,293 million (2009: €1,508 million). This decrease was due mainly to significantly lower volumes and a drop in prices in Crop Protection and increased expenses for research and development in the BioScience business unit.
| Best-Selling CropScience Products * | [Table 3.10] |
|---|
| | 2009 | 2010 | Change |
|
€ million |
€ million |
% | Fx adj.% |
Confidor™/Gaucho™/Admire™/Merit™
(Insecticides/Seed Treatment/Environmental Science) |
606 |
597 |
-1.5 |
-7.0 |
| Flint™/Stratego™/Sphere™/Nativo™ (Fungicides) | 400 | 453 | +13.3 | +6.6 |
| Basta™/Liberty™/Rely™/Ignite™ (Herbicides) | 323 | 270 | -16.4 | -24.6 |
| Proline™/Input™/Prosaro™ (Fungicides) | 267 | 259 | -3.0 | -7.0 |
| Atlantis™ (Herbicides) | 231 | 210 | -9.1 | -10.7 |
| Folicur™/Raxil™ (Fungicides/Seed Treatment) | 210 | 206 | -1.9 | -8.3 |
| Poncho™ (Seed Treatment) | 183 | 192 | +4.9 | -2.1 |
| Decis™/K-Othrine™ (Insecticides/Environmental Science) | 170 | 184 | +8.2 | +1.2 |
| Fandango™ (Fungicides) | 146 | 140 | -4.1 | -4.9 |
| Puma™ (Herbicides) | 167 | 139 | -16.8 | -24.0 |
| Total | 2,703 | 2,650 | -2.0 | -7.6 |
| Proportion of CropScience sales | 42% | 39% | | |
Fx adj. = currency-adjusted
* Figures are based on active ingredient class. For the sake of clarity, only the principal brands of the Crop Protection and Environmental Science business units are listed.
|
Crop Protection
| Key Data – Crop Protection | [Table 3.11] |
|---|
| | 2009 | 2010 | Change |
|
€ million |
€ million |
% | Fx & p adj.
% |
| Sales | 5,424 | 5,493 | +1.3 | -4.7 |
| Herbicides | 1,986 | 1,944 | -2.1 | -8.3 |
| Fungicides | 1,564 | 1,570 | +0.4 | -5.0 |
| Insecticides | 1,234 | 1,370 | +11.0 | +4.2 |
| Seed Treatment | 640 | 609 | -4.8 | -10.2 |
| Sales by region | | | | |
| Europe | 2,206 | 2,030 | -8.0 | |
| North America | 1,081 | 956 | -11.6 | |
| Asia/Pacific | 862 | 1,021 | +18.4 | |
| Latin America/Africa/Middle East | 1,275 | 1,486 | +16.5 | |
| EBIT | 713 | 600 | -15.8 | |
| Special items | (162) | 0 | | |
| EBIT before special items * | 875 | 600 | -31.4 | |
| EBITDA* | 1,161 | 1,025 | -11.7 | |
| Special items | (140) | 0 | | |
| EBITDA before special items * | 1,301 | 1,025 | -21.2 | |
| EBITDA margin before special items * | 24.0% | 18.7% | | |
| Gross cash flow ** | 924 | 743 | -19.6 | |
| Net cash flow ** | 591 | 1,079 | +82.6 | |
Fx & p adj. = currency- and portfolio-adjusted
* For definition see Chapter 4.2 "Calculation of EBIT(DA) Before Special Items."
** For definition see Chapter 4.5 "Liquidity and Capital Expenditures of the Bayer Group."
|
Sales in the Crop Protection segment rose by 1.3% in 2010 to €5,493 million (2009: €5,424 million). Adjusted for shifts in currency parities, sales were down by 4.7%. Business with our seed treatments, herbicides and fungicides trended downward in a shrinking market. By contrast, business with our insecticides expanded.
In the Europe region, sales fell by 8.0% to €2,030 million (2009: €2,206 million). The currency-adjusted decline was 9.6%. The negative development in Europe affected all business units and was largely due to the exceptionally weak business performance in France. This in turn resulted mainly from considerable market shrinkage caused by an extremely competitive environment and adverse weather conditions.
Sales of our crop protection products in North America receded by 11.6% to €956 million (2009: €1,081 million). Adjusted for currency effects, the decrease came to 18.4%. This decline was primarily due to a disappointing performance by our herbicides business, with price declines for our principal products in the first half of the year. Heavy competitive pressure from generic manufacturers and high inventory levels in the distribution channels also led to a sharp decline in fungicide sales in the United States and to lower volumes for our products Prosaro™ and Stratego™. Sales of seed treatments in the United States, however, improved, largely because of the successful launch of Poncho™/VotivoTM. This new product contains the bacterium Bacillus firmus, a biological component that provides better protection against threadworms in the soil (nematodes).
Sales in the Asia/Pacific region advanced by 18.4% to €1,021 million (2009: €862 million). Adjusted for currency effects, business improved by 5.3%. Market development in this region was impacted by extreme weather conditions. Business in Japan receded considerably for weather-related reasons. However, this was more than offset by a good performance in other countries, particularly India, Australia and China. Driven by a rise in prices for agricultural raw materials and favorable monsoon conditions, the insecticides, fungicides and herbicides businesses in India each saw double-digit growth. The main contributors to the positive development were the herbicide Balance™ in Australia, where it was used particularly in sugarcane, and the insecticide Belt™ in China.
In the Latin America/Africa/Middle East region, sales climbed by 16.5% to €1,486 million (2009: €1,275 million). Adjusted for currency effects, business expanded by 8.8%. Business developed very well in Latin America, especially in fungicides, herbicides and insecticides. The growth driver in the fungicides business was our innovative product Sphere™ Max in Brazil and Argentina. We saw impressive growth in insecticides, especially in Brazil, with the new product Belt™, which has already been extremely well received by the market, and the insecticide Connect™. Herbicide sales rose again, mainly due to pleasing volume levels for Finale™ and the corn herbicide Soberan™ in Brazil. Business with seed treatments, however, was distinctly below the prior year due to weak sales in Brazil. The good growth in business in the Middle East region was partly the result of an especially strong performance in Turkey. We achieved moderate sales growth in Africa.
EBIT of the Crop Protection segment declined by 15.8% to €600 million (2009: €713 million). There were no special items in 2010 (2009: minus €162 million). EBIT before special items thus fell 31.4% short of the prior year’s €875 million. EBITDA before special items for the segment fell by 21.2% to €1,025 million (2009: €1,301 million). Earnings were hampered by the lower volumes and the resulting drop in capacity utilization in the first half, and by price erosion in North America.
Environmental Science, BioScience
In the Environmental Science, BioScience segment, sales climbed by 23.1% in 2010 to €1,337 million (2009: €1,086 million). Adjusted for currency and portfolio effects, business increased by a substantial 15.6%.
| Key Data – Environmental Science, BioScience | [Table 3.12] |
|---|
| | 2009 | 2010 | Change |
|
€ million |
€ million |
% | Fx & p adj.
% |
| Sales | 1,086 | 1,337 | +2 3.1 | +15.6 |
| Environmental Science | 583 | 650 | +11.5 | +5.4 |
| BioScience | 503 | 687 | +36.6 | +27.4 |
| Sales by region | | | | |
| Europe | 334 | 351 | +5.1 | |
| North America | 448 | 579 | +29.2 | |
| Asia/Pacific | 166 | 208 | +25.3 | |
| Latin America/Africa/Middle East | 138 | 199 | +44.2 | |
| EBIT | 85 | (339) | . | |
| Special items | (57) | (526) | | |
| EBIT before special items * | 142 | 187 | +31.7 | |
| EBITDA* | 150 | (258) | . | |
| Special items | (57) | (526) | | |
| EBITDA before special items * | 207 | 268 | + 29.5 | |
| EBITDA margin before special items * | 19.1% | 20.0% | | |
| Gross cash flow ** | 119 | (197) | . | |
| Net cash flow ** | 154 | 320 | . | |
Fx & p adj. = currency- and portfolio-adjusted
* For definition see Chapter 4.2 "Calculation of EBIT(DA) Before Special Items."
** For definition see Chapter 4.5 "Liquidity and Capital Expenditures of the Bayer Group."
|
Sales of the Environmental Science business unit rose by 11.5% to €650 million (2009: €583 million). Adjusted for currency effects, this represented a 5.4% improvement, to which all regions contributed. Business with consumer products expanded considerably, thanks above all to the positive development in Germany. Sales of products for professional users advanced, especially those of the insecticide Ficam™ and other products in Africa and the new insecticide Temprid™ in the United States. Sales in France, however, were markedly lower year on year due to adverse changes in the business environment.
BioScience saw a 36.6% rise in sales to €687 million (2009: €503 million). Adjusted for currency and portfolio effects, business moved ahead strongly by 27.4%. We achieved double-digit sales growth in each of the main crops: cotton, canola, rice and vegetables. The largest increase was in our cotton seed business in North America as a result of product innovations and the recovery in the cotton market. Sales of InVigor™ canola seed in North America also continued to advance, due partly to the rise in our seed prices – accompanied by price reductions for the respective canola herbicides – and partly to the higher volumes that resulted from increased crop acreages. Sales of our Arize™ rice seed showed particularly good growth in Asia despite adverse weather conditions. Business with vegetable seeds moved ahead in all regions, particularly Latin America/Africa/Middle East and Asia/Pacific.
EBIT of the Environmental Science, BioScience segment fell by €424 million to minus €339 million (2009: €85 million). Special charges of €526 million in 2010 (2009: €57 million) related to an intended settlement program and legal and defense costs in connection with litigations concerning genetically modified rice (LL RICE) in the United States. EBIT before special items rose by 31.7% to €187 million (2009: €142 million). EBITDA before special items for the segment, at €268 million, exceeded the prior-year figure of €207 million by 29.5%, mainly on account of volume growth in both business units. BioScience also saw an overall rise in selling prices and a resulting improvement in margins, which more than offset the higher expenses for the expansion of our research and development activities.