5.1 Earnings Performance of Bayer AG
|Bayer AG Summary Income Statements according to the German Commercial Code||[Table 3.25]|
| ||€ million||€ million|
|Income from investments in affiliated companies – net||2,984||2,045|
|Interest expense – net ||(683)||(516)|
|Other non-operating income – net ||276||128|
|Other operating income||169||165|
|General administration expenses||177||200|
|Other operating expenses||142||173|
|Income before income taxes||2,427||1,449|
|Allocation to retained earnings||(1,068)||(5)|
The earnings performance of Bayer AG essentially depends on the earnings of its subsidiaries and on the income and expenses relating to corporate financing activities.
In fiscal 2010, income from investments in affiliated companies was €2,045 million (2009: €2,984 million). Of this amount, Bayer Schering Pharma AG accounted for €1,163 million (2009: €2,349 million), Bayer CropScience AG for €569 million (2009: €604 million) and Bayer MaterialScience AG for €30 million (2009: minus €234 million). The decline at Bayer Schering Pharma AG was due to the fact that the prior-year figure included a €608 million gain in connection with the agreement with Genzyme on the sale of intangible assets. In addition, business operations in 2010 resulted in a €154 million rise in selling expenses and a €230 million increase in research and development expenses. One-time charges related to the transfer of pension obligations diminished income by €80 million. At Bayer CropScience AG, a decrease in the operating result was largely offset by an improvement in the non-operating result. Income transferred from Bayer MaterialScience AG increased as a result of the improvement in the economic situation. Further significant earnings components were €266 million (2009: €219 million) from Bayer Gesellschaft für Beteiligungen mbH, our holding company for foreign subsidiaries; €177 million (2009: €107 million) from Bayer Animal Health GmbH; and minus €135 million (2009: minus €135 million) from Bayer HealthCare AG, the holding company for the global HealthCare business.
Net interest expense amounted to €516 million, which was €167 million less than in the previous year. This was mainly due to the further drop in interest rates and partly to a decline in net debt. Of the net interest expense, €382 million (2009: €459 million) was attributable to transactions with third parties and €134 million (2009: €224 million) to intra-Group transactions.
Other non-operating income and expenses yielded a positive balance of €128 million, down from €276 million in the previous year. This was mainly due to a €136 million decline in income from the translation of foreign currency receivables and payables and from currency derivatives.
The balance of miscellaneous operating income and expenses relating to Bayer AG's performance of its functions as a holding company was minus €8 million (2009: plus €27 million), while general administration expenses amounted to €200 million (2009: €177 million). Whereas the increase in administration expenses was caused by higher pension expenses and an increase in personnel expenses resulting from the temporarily larger number of members of the Board of Management, the other items were impacted by a write-down on buildings.
Pre-tax income declined by €978 million to €1,449 million. Tax expense amounted to €204 million (2009: €201 million). After deduction of taxes, net income came in at €1,245 million. Of this amount, €5 million was allocated to other retained earnings and €1,240 million was recognized as the distributable profit.
The Board of Management and Supervisory Board will propose to the Annual Stockholders’ Meeting on April 29, 2011 that the distributable profit be used to pay a dividend of €1.50 per share (826,947,808 shares) on the capital stock of €2,117 million entitled to the dividend for 2010.