14.5 Liquidity and Capital Expenditures of the Bayer Group

Bayer Group Summary Statements of Cash Flows

 

 

Full Year 2014

 

Full Year 2015

 

 

€ million

 

€ million

2014 figures restated

1

Gross cash flow = income after income taxes, plus income taxes, plus financial result, minus income taxes paid or accrued, plus depreciation, amortization and impairment losses, minus impairment loss reversals, plus / minus changes in pension provisions, minus gains / plus losses on retirements of noncurrent assets, minus gains from the remeasurement of already held assets in step acquisitions. The change in pension provisions includes the elimination of noncash components of EBIT. It also contains benefit payments during the year. Gross cash flow is not defined in the International Financial Reporting Standards.

Gross cash flow1

 

6,707

 

6,999

Changes in working capital / other noncash items

 

(1,010)

 

(152)

Net cash provided by (used in) operating activities (net cash flow), continuing operations

 

5,697

 

6,847

Net cash provided by (used in) operating activities (net cash flow), discontinued operations

 

113

 

43

Net cash provided by (used in) operating activities (net cash flow) (total)

 

5,810

 

6,890

Net cash provided by (used in) investing activities (total)

 

(15,539)

 

(2,762)

Net cash provided by (used in) financing activities (total)

 

9,736

 

(3,974)

Change in cash and cash equivalents due to business activities

 

7

 

154

Cash and cash equivalents at beginning of period

 

1,662

 

1,853

Change due to exchange rate movements and to changes in scope of consolidation

 

184

 

(148)

Cash and cash equivalents at end of period

 

1,853

 

1,859

Operating cash flow

Gross cash flow is not defined in the International Financial Reporting Standards.

Gross cash flow Income after income taxes, plus income taxes, plus financial result, minus income taxes paid or accrued, plus depreciation, amortization and impairment losses, minus impairment loss reversals, plus / minus changes in pension provisions, minus gains / plus losses on retirements of noncurrent assets, minus gains from the remeasurement of already held assets in step acquisitions; the change in pension provisions includes the elimination of noncash components of ebit. It also contains benefit payments during the year. This indicator is not defined in the International Financial Reporting Standards. from continuing operations climbed by 4.4% in 2015 to €6,999 million (2014: €6,707 million), mainly because of the improvement in EBITDA EBIT plus the amortization of intangible assets and the depreciation of property, plant and equipment, plus impairment losses and minus impairment loss reversals, recognized in profit or loss during the reporting period; this indicator is not defined in the International Financial Reporting Standards. . Net cash flow (total) rose by 18.6% to €6,890 million (2014: €5,810 million) due to a sharp decrease in additional cash tied up in working capital. Income taxes paid in 2015 amounted to €1,699 million (2014: €1,835 million).

Investing cash flow

Net cash outflow for investing activities in 2015 amounted to €2,762 million. Cash outflows for property, plant and equipment and intangible assets were 6.2% higher at €2,517 million (2014: €2,371 million) and included €969 million (2014: €832 million) at HealthCare, €722 million (2014: €686 million) at CropScience and €508 million (2014: €605 million) at Covestro. The €176 million (2014: €13,545 million) in outflows for acquisitions mainly related to the purchase of SeedWorks India Pvt. Ltd., Hyderabad, India, and further payments in connection with the purchase of the consumer care business of Merck & Co., Inc., United States. The latter was among the major acquisitions in 2014, alongside that of Algeta ASA, Norway. Cash outflows from noncurrent and current financial assets amounted to €370 million (2014: €177 million). Inflows from interest and dividends totaled €106 million (2014: €107 million).

The principal strategic capital expenditures for property, plant and equipment in the operating segments within the past two years are listed in the following table.

Capital Expenditures for Property, Plant and Equipment

Description
  • Expansion of production capacities for new rFactor VIII therapies in Wuppertal, Germany
  • Expansion of R&D laboratory capacities in Wuppertal, Germany
  • Modernization of research facilities in Berlin, Germany
  • Modernization of site infrastructure in Wuppertal and Leverkusen, Germany
  • Expansion of production capacities in Beijing, China
  • Expansion of Quality Control Biologics in Berkeley, California, United States
  • Capacity expansions for herbicides in the United States and Germany
  • Construction of production facilities for insecticides in India and Germany
  • Additional capacity expansions for fungicides in Germany
  • Expansion of R&D facilities in Germany
  • Establishment of breeding stations for various plant species worldwide
  • Expansion of R&D facilities in North America
  • Construction of a production line for CO2 based polyols in Dormagen, Germany
  • Continuation of projects started in 2014 for Polycarbonates and Coatings, Adhesives, Specialties
  • Expansion of Xarelto™ production capacities in Wuppertal and Leverkusen, Germany
  • Expansion of production capacities for new rFactor VIII therapies in Wuppertal, Germany
  • Expansion of R&D laboratory capacities in Wuppertal, Germany
  • Modernization of research facilities in Berlin, Germany
  • Expansion of production capacities in Beijing, China
  • Expansion of Quality Control Biologics in Berkeley, California, United States
  • Completion of capacity expansion for fungicides in Germany and Switzerland
  • Completion of capacity expansion for herbicides in Germany
  • Establishment of breeding stations for various plant species worldwide
  • Doubling of production capacities for polycarbonates in Shanghai, China
  • Doubling of production capacities for hexamethylene diisocyanate (HDI) in Shanghai, China
  • Completion of capacity expansion for diphenylmethane diisocyanate (MDI) in Shanghai, China
  • Construction of a world-scale production complex for toluene diisocyanate (TDI) based on gas-phase phosgenation technology in Dormagen, Germany

Financing cash flow

Net cash outflow for financing activities in 2015 amounted to €3,974 million, including net loan repayments of €2,929 million (2014: net borrowings of €11,838 million). Net interest payments were 80% higher at €652 million (2014: €362 million). The cash outflow for dividends amounted to €1,869 million (2014: €1,739 million). The stock market flotation of Covestro led to an inflow of €1,490 million.

Liquid assets and net financial debt

Net Financial Debt

 

 

Dec. 31, 2014

 

Dec. 31, 2015

 

 

€ million

 

€ million

1

Classified as debt according to IFRS

2

These include short-term loans and receivables with maturities between 3 and 12 months outstanding from banks and other companies as well as available-for-sale financial assets and held-to-maturity financial investments that were recorded as current on initial recognition.

Bonds and notes / promissory notes

 

14,964

 

15,547

of which hybrid bonds1

 

4,552

 

4,525

Liabilities to banks

 

3,835

 

2,779

Liabilities under finance leases

 

441

 

474

Negative fair values of hedges of recorded transactions

 

642

 

753

Other financial liabilities

 

1,976

 

369

Positive fair values of hedges of recorded transactions

 

(258)

 

(350)

Financial liabilities

 

21,600

 

19,572

Cash and cash equivalents

 

(1,853)

 

(1,859)

Current financial assets2

 

(135)

 

(264)

Net financial debt

 

19,612

 

17,449

Net financial debt is not defined in the International Financial Reporting Standards and is calculated as shown above.

In 2015, net financial debt of the Bayer Group decreased by 11.0% to €17.4 billion. Cash inflows from operating activities and the stock market flotation of Covestro were partly offset by cash outflows for dividends and negative currency effects. As of December 31, 2015, the Group had cash and cash equivalents of €1.9 billion (2014: €1.9 billion). Financial liabilities at the end of the reporting period amounted to €19.6 billion (2014: €21.6 billion), with three subordinated hybrid bonds reflected at €4.5 billion overall. Net financial debt should be viewed against the fact that Moody’s and Standard & Poor’s treat 50% of the hybrid bonds with nominal volumes of €1.75 billion and €1.5 billion issued in July 2014 and of the Hybrid bond A hybrid bond is a corporate bond with equityequivalent properties, usually with either no maturity date or a very long maturity. Due to its subordination, it has a lower likelihood of repayment than a normal bond in the event of issuer bankruptcy. with a nominal volume of €1.3 billion issued in April 2015 as equity. The hybrid bonds thus have a more limited effect on the Group’s rating-specific debt indicators than conventional borrowings. Our noncurrent financial liabilities declined in 2015 from €18.5 billion to €16.5 billion, while current financial liabilities remained unchanged at €3.4 billion.