Management Report & Annexes | Report on Economic Position
17.1 Earnings Performance of Bayer AG
| Bayer AG Summary Income Statements according to the German Commercial Code [Table 3.17.1]
|Income from investments in affiliated companies – net
|Interest expense – net
|Other financial income – net
|Other operating income
|General administration expenses
|Other operating expenses
|Income before income taxes
|Allocation to retained earnings
In fiscal 2014 Bayer AG’s net income was €2,454 million, which was around the same level as in the previous year (2013: €2,498 million). The main decline was in income from investments in affiliated companies. This was largely offset by lower tax expense.
The income from investments in affiliated companies declined year on year by €329 million to €3,213 million (2013: €3,542 million). Bayer Pharma AG posted income of €2,158 million (2013: €1,934 million), which was once again by far the largest contribution. The improvement in this subgroup’s earnings was mainly due to a substantial increase in business with recently launched high-margin products. Bayer CropScience AG contributed €787 million (2013: €1,379 million) to Bayer AG’s income. The previous year’s figure included one-time income of €570 million from the intra-Group sale of seed technologies. Having made a loss of €20 million in the previous year, Bayer MaterialScience made a positive earnings contribution of €154 million in 2014. The main reasons for this were an improvement in operating earnings resulting from lower procurement prices for raw materials and energy, and higher dividend income. Other significant earnings contributions comprised €146 million (2013: €213 million) from a subsidiary that receives foreign dividend income. Bayer Business Services GmbH posted a loss of €75 million (2013: €74 million), and Bayer Technology Services GmbH reported a loss of €18 million (2013: €30 million).
Net interest expense was €341 million, an increase of €26 million compared with the previous year. This was mainly attributable to a rise in interest expense resulting from higher financial debt, principally as a consequence of bond issuances during the fiscal year. This was not fully compensated by lower interest rates. Of the net interest expense, €255 million was attributable to transactions with third parties and €86 million to intra-Group transactions.
Other financial income and expenses yielded a positive balance of €129 million (2013: €110 million). This mainly comprised income of €180 million (2013: €162 million) from the subgroups and service companies to cover pension expenses for retirees remaining with Bayer AG following the hive-down of the operating business. The non-interest portion of the corresponding expense, amounting to €19 million (2013: €26 million), is included in other financial expenses; the remainder is reflected in net interest expense. A further charge of €20 million (2013: €14 million) resulted from the translation of foreign currency receivables and payables and from currency derivatives.
General administration expenses relating to Bayer AG’s performance of its functions as a holding company amounted to €272 million (2013: €266 million). Miscellaneous operating expenses relating to these functions, net of the respective miscellaneous operating income, came to €19 million (2013: €30 million). The increase in administration expenses was attributable in part to a slight increase in the number of employees.
Pre-tax income decreased to €2,710 million (2013: €3,041 million). Tax expense was also lower at €256 million compared with €543 million in 2013. After deduction of taxes, net income was €2,454 million (2013: €2,498 million). An allocation of €593 million was made to other retained earnings, leaving a distributable profit of €1,861 million.
The Board of Management and Supervisory Board will propose to the Annual Stockholders’ Meeting on May 27, 2015 that the distributable profit be used to pay a dividend of €2.25 per share (826,947,808 shares) on the capital stock of €2,117 million entitled to the dividend for 2014.