Report on Future Perspectives and on Opportunities and Risks

Future Perspectives

Economic Outlook

Economic Outlook1

 

 

Growth
2016

 

Growth forecast 2017

2016 figures restated

1

Real growth of gross domestic product, source: IHS Global Insight

2

Including about 50 countries defined by IHS Global Insight as emerging markets in line with the World Bank

As of June 2017

World

 

+2.5%

 

+3.0%

European Union

 

+1.8%

 

+1.9%

of which Germany

 

+1.8%

 

+2.0%

United States

 

+1.6%

 

+2.3%

Emerging Markets2

 

+3.8%

 

+4.5%

The economic prospects further improved in the first half of 2017, and the global economy is likely to expand at a faster pace than in the previous year. In the United States, particularly, we expect more favorable economic development. We now expect a slightly faster pace of growth in the European Union despite uncertainty surrounding future political development there. Economic output in the Emerging Markets will probably pick up considerably overall compared with the previous year. We continue to expect strong growth in China but at a slightly slower pace.

Economic Outlook for the Segments1

 

 

Growth
2016

 

Growth forecast 2017

2016 figures restated

1

Bayer’s estimate, except pharmaceuticals; source for pharmaceuticals market: 2017-2021 IMS Market Prognosis, Latest Update May 2017; all rights reserved; currency-adjusted

As of June 2017

Pharmaceuticals market

 

+5%

 

+4%

Consumer health market

 

+4%

 

+3–4%

Seed and crop protection market

 

0%

 

+1%

Animal health market

 

+5%

 

+5%

In 2017, Covestro expects a continuation of the growth trend in its main customer industries – construction, electrical engineering and electronics, and furniture. Growth in the automotive industry is still expected to be weaker than in the previous year.

Corporate Outlook

Due to the current business and currency development, we are adjusting our forecast for the fiscal year 2017.

The forecast for the second half is based on the exchange rates as of June 30, 2017, including a rate of US$1.14 (previously: US$1.07) to the euro. A 1% appreciation (depreciation) of the euro against all other currencies would decrease (increase) sales on an annual basis by €300 million and EBITDA before special items by €80 million.

This results in the following changes overall for the Bayer Group: Sales are now expected to increase to more than €49 billion (previously: around €51 billion). This now corresponds to a mid-single-digit (previously: mid- to high-single-digit) percentage increase on a currency- and portfolio-adjusted basis. EBITDA before special items is now targeted to increase by a high-single-digit percentage (previously: low-teens percentage). We now aim to grow core earnings per share from continuing operations by a low- to mid-single-digit percentage (previously: mid- to high-single-digit percentage). Here it must be noted that Bayer’s interest in Covestro amounts to only 41% as of June 2017 (previously: 53%). Excluding capital and portfolio measures, net financial debt is targeted to be around €7 billion at the end of 2017 (previously: around €8 billion).

We are now budgeting for sales of between €35 billion and €36 billion (previously: approximately €37 billion) for our Life Science businesses. This corresponds to a low-single-digit percentage (previously: mid-single-digit percentage) increase on a currency- and portfolio-adjusted basis. We expect EBITDA before special items to come in slightly above the level of the previous year (previously: rise by a mid- to high-single-digit percentage).

Despite negative currency development, we confirm the forecast we published in February for Pharmaceuticals and continue to expect sales of more than €17 billion. This corresponds to a mid-single-digit percentage increase on a currency- and portfolio-adjusted basis. As before, we plan to raise sales of our key growth products to more than €6 billion. We continue to expect a high-single-digit percentage increase in EBITDA before special items. There is no change in our expectation of further improving the EBITDA margin before special items.

For Consumer Health, we forecast a weak second half of the year and now expect to generate full-year sales of about €6 billion (previously: more than €6 billion). This would be in line with the prior-year level on both a reported and a currency- and portfolio-adjusted basis (previously: low- to mid-single-digit percentage increase on a currency- and portfolio-adjusted basis). We now expect EBITDA before special items to decline by a high-single-digit percentage (previously: increase by a low- to mid-single-digit percentage).

We are now budgeting for sales of below €10 billion (previously: more than €10 billion) for Crop Science. This corresponds low-single-digit-percentage decline on a currency- and portfolio-adjusted basis (previously: low-single-digit percentage increase). We now expect EBITDA before special items to decline by a mid-teens percentage (previously: at the prior-year level).

We confirm the forecasts published in February and April 2017 for Animal Health, the Reconciliation and Covestro. This also applies to the forecasts for the other key data.