Financial Statements

5. Segment Reporting

At Bayer the Board of Management, as the chief operating decision maker, allocates resources to the operating segments and assesses their performance. The reportable segments and regions are identified, and the disclosures selected, in line with the internal financial reporting system (management approach) and based on the Group accounting policies outlined in Note [4].

As of December 31, 2014, the Bayer Group comprised three subgroups, with operations subdivided into strategic business entities known as divisions (HealthCare), business groups (CropScience) or business units (Material­Science). Their activities are aggregated into four reportable segments according to economic characteristics, products, production processes, customer relationships, methods of distribution and regulatory environment.

The segments’ activities are as follows:

Activities of the Segments[Table 4.12]
HealthCare  
Pharmaceuticals



Development, production and marketing of prescription pharmaceuticals, such as anticoagulants, treatments for hemophilia, multiple sclerosis, cancer, eye diseases, pulmonary hypertension, high blood pressure and infectious diseases; and contraceptives
Consumer Health



Development, production and marketing of over-the-counter medications, dermatology products, nutritional supplements, veterinary medicines and grooming products for animals; diagnostic systems such as blood glucose meters, medical products such as injection systems and contrast media for diagnostic procedures
CropScience  
CropScience


Development, production and marketing of a comprehensive product portfolio in the areas of seeds and plant traits, crop protection, and for gardens, the green industry and non-agricultural pest control
MaterialScience  
MaterialScience


Development, production and marketing of high-tech polymer materials in the areas of polyurethanes, polycarbonates, coating and adhesive raw materials and specialty chemicals; production and marketing of selected inorganic basic chemicals

Business activities that cannot be allocated to any other segment are reported under “All other segments.” These include primarily the services provided by the service areas: Business Services, Technology Services and Currenta.

Holding companies’ activities, the elimination of intersegment sales, and higher or lower expenses for Group-wide long-term stock-based compensation arising from fluctuations in the performance of Bayer stock are presented in our segment reporting as “Corporate Center and Consolidation.”

The reconciliation in the table “Key Data by Region” eliminates interregional items and transactions and reflects income, expenses, assets and liabilities not allocable to geographical areas, particularly those relating to the Corporate Center.

The segment data are calculated as follows:

  • The intersegment sales reflect intra-Group transactions effected at transfer prices fixed on an arm’s-length basis.
  • Although EBIT before special items and EBITDA before special items are not defined in the International Financial Reporting Standards, they represent key performance indicators for the Bayer Group. The special items comprise effects that are non-recurring or do not regularly recur or attain similar magnitudes. EBITDA is the EBIT as reported in the income statement plus amortization and impairment losses on intangible assets and depreciation and impairment losses on property, plant and equipment, minus impairment loss reversals.
  • The gross cash flow comprises income after 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 non-cash components of EBIT. It also contains benefit payments during the year.
  • The net cash flow is the cash flow from operating activities as defined in IAS 7 (Statement of Cash Flows).
  • The capital invested and the segment assets include all assets serving the respective segment that are required to yield a return on their cost of acquisition. Segment assets include, in addition, assets held for sale where the return is covered by the sale proceeds. Similarly, the segment liabilities include the liabilities directly related to assets held for sale. Also included in the capital invested and in segment assets are material participating interests of direct relevance to business operations. Intangible assets and property, plant and equipment are included in the capital invested at cost of acquisition, generation or construction throughout their useful lives. Interest-free liabilities are deducted from the capital invested, which is stated as of December 31.
  • The CFROI – a measure of the return on the capital employed – is the difference between the gross cash flow and the cost of reproducing depletable assets, divided by the average capital invested for the year.
  • The equity items reflect the earnings and carrying amounts of companies accounted for using the equity method.
  • Since the financial management of Group companies is carried out centrally by Bayer AG, financial liabilities are not directly allocated among the segments. Consequently, the liabilities shown for the individual segments do not include financial liabilities. These are included in the reconciliation.
  • The number of employees on either permanent or fixed-term contracts is stated in full-time equivalents (FTE), with part-time employees included on a pro-rated basis in line with their contractual working hours. The figures do not include apprentices.

Reconciliations

The reconciliations of ebitda before special items, ebit before special items and ebit to Group income before income taxes and of the assets and liabilities of the segments to the assets and liabilities, respectively, of the Group are given in the following tables:

Reconciliation of Segments’ EBITDA Before Special Items to Group Income
Before Income Taxes [Table 4.13]
 20132014
 € million€ million
EBITDA before special items of segments8,8769,231
EBITDA before special items of Corporate Center(475)(419)
EBITDA before special items 8,4018,812
Depreciation, amortization and impairment losses/loss reversals before special items of segments (2,624)(2,862)
Depreciation, amortization and impairment losses/loss reversals before special items of Corporate Center (4)(6)
Depreciation, amortization and impairment losses/loss reversals before special items(2,628)(2,868)
EBIT before special items of segments6,2526,369
EBIT before special items of Corporate Center(479)(425)
EBIT before special items 5,7735,944
Special items of segments(839)(438)
Special items of Corporate Center
Special items(839)(438)
EBIT of segments5,4135,931
EBIT of Corporate Center(479)(425)
EBIT4,9345,506
Financial result(727)(981)
Income before income taxes 4,2074,525
Reconciliation of Segments’ Assets to Group Assets [Table 4.14]
 20132014
 € million€ million
Assets of the operating segments46,33663,861
Corporate Center assets 179195
Non-allocated assets4,8026,178
Group assets51,31770,234

 

Reconciliation of Segments’ Liabilities to Group Liabilities  [Table 4.15]
 20132014
 € million€ million
Liabilities of the operating segments17,22523,570
Corporate Center liabilities2,8423,409
Non-allocated liabilities10,44623,037
Group liabilities30,51350,016

The reconciliation of segment sales to Group sales is apparent from the table of key data by segment in Note [1].

Information on geographical areas

The following table provides a regional breakdown of external sales by market and of intangible assets, property, plant and equipment:

Information about Geographical Areas[Table 4.16]
 Net sales (external) –
by market
Intangible assets and
property, plant and equipment
 2013201420132014
 € million€ million€ million€ million
Germany4,8624,98112,80612,403
United States8,3518,9086,83618,307
China3,3053,6252,3493,102
Other23,63924,7256,8009,437
Total40,15742,23928,79143,249

Information on major customers

Revenues from transactions with a single customer in no case exceeded 10% of Bayer Group sales in 2014 or 2013.

Last updated: February 26, 2015  Copyright © Bayer AG
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