Management Report
8. Financial Position of the Bayer Group
| Bayer Group Summary Statements of Cash Flows | [Table 15] |
|---|
| | 1st
Quarter 2009 | 1st
Quarter 2010 |
| | € million | € million |
| Gross cash flow* | 1,209 | 1,271 |
| Changes in working capital/other non-cash items | (516) | (539) |
| Net cash provided by (used in) operating activities (net cash flow) | 693 | 732 |
| Net cash provided by (used in) investing activities | (78) | (302) |
| Net cash provided by (used in) financing activities | 1,652 | (126) |
| Change in cash and cash equivalents due to business activities | 2,267 | 304 |
| Cash and cash equivalents at beginning of period | 2,094 | 2,725 |
| Change due to exchange rate movements and to changes in scope of consolidation | 4 | 12 |
| Cash and cash equivalents at end of period | 4,365 | 3,041 |
| * Gross cash flow = income after taxes, plus income taxes, plus non-operating result, minus income taxes paid or accrued, plus depreciation, amortization and write-downs, minus write-backs, plus/minus changes in pension provisions, minus gains/plus losses on retirements of noncurrent assets, plus non-cash effects of the remeasurement of acquired assets. The change in pension provisions includes the elimination of non-cash components of the operating result. It also contains benefit payments during the year. |
Operating cash flow
Gross cash flow in the first quarter of 2010 rose by 5.1% from the previous year to €1,271 million (Q1 2009: €1,209 million), largely because of the improvement in the operating result. Gross cash flow of HealthCare showed a slight decline. At CropScience, the drop in the operating result caused gross cash flow to recede significantly. MaterialScience saw a marked improvement in gross cash flow due to the gratifying expansion of business. Net cash flow of the Group rose by 5.6% to €732 million (Q1 2009: €693 million). Net cash flow reflected income tax payments of €174 million (Q1 2009: €19 million).
Investing cash flow
Net cash outflow for investing activities in the first three months of 2010 totaled €302 million (Q1 2009: €78 million). Cash outflows for property, plant and equipment and intangible assets were 20.7% lower at €230 million (Q1 2009: €290 million). Of this figure, HealthCare accounted for €69 million (Q1 2009: €62 million), CropScience for €38 million (Q1 2009: €76 million) and MaterialScience for €106 million (Q1 2009: €106 million). Included here are disbursements related to the expansion of our polymers production facilities in Shanghai, China. Outflows for acquisitions amounted to €17 million (Q1 2009: €0 million) and comprised mainly the purchase by MaterialScience of Artificial Muscle Inc., United States, in March 2010. Cash outflows for noncurrent financial assets amounted to €110 million (Q1 2009: inflows of €137 million). Among the cash inflow items in the first quarter of 2010 was €32 million (Q1 2009: €64 million) in interest and dividends received.
Financing cash flow
Net cash outflow for financing activities in the first quarter of 2010 amounted to €126 million (Q1 2009: inflow of €1,652 million). This total contained net loan repayments of €30 million (Q1 2009: net borrowings of €1,825 million). Interest payments were 43.2% lower at €96 million (Q1 2009: €169 million).
Liquid assets and net financial debt
| Net Financial Debt | [Table 16] |
|---|
| | Dec. 31, 2009 | March 31, 2010 |
| | € million | € million |
| Bonds and notes | 8,301 | 8,405 |
| of which hybrid bond | 1,267 | 1,297 |
| Liabilities to banks | 3,251 | 3,322 |
| Liabilities under finance leases | 550 | 572 |
| Liabilities from derivatives | 578 | 789 |
| Other financial liabilities | 178 | 188 |
| Positive fair values of hedges of recorded transactions | (426) | (548) |
| Financial debt | 12,432 | 12,728 |
| Cash and cash equivalents | (2,725) | (3,041) |
| Current financial assets | (16) | (25) |
| Net financial debt | 9,691 | 9,662 |
Despite the usual seasonal first-quarter expansion of business and negative currency effects, net financial debt of the Bayer Group on March 31, 2010, remained level with the end of 2009 at €9.7 billion. As of March 31, 2010 the Bayer Group held cash and cash equivalents of €3.0 billion. Financial liabilities amounted to €12.7 billion, including the €1.3 billion subordinated hybrid bond issued in July 2005. Net financial debt should be viewed against the fact that Moody’s and Standard & Poor’s treat 75% and 50%, respectively, of the hybrid bond as equity. Unlike con-ventional borrowings, the hybrid bond thus only has a limited effect on the Group’s rating-specific indicators. Our noncurrent financial liabilities dropped from €11.5 billion to €10.7 billion during the first quarter of 2010. At the same time, current financial liabilities increased from €1.5 billion to €2.7 billion. This was due largely to the reclassification of the €0.9 billion syndicated loan raised in 2006 in connection with the acquisition of Schering, Berlin, Germany, which matures in March 2011.
Net pension liability
| Net Pension Liability | [Table 17] |
|---|
| | Dec. 31, 2009 | March 31, 2010 |
| | € million | € million |
| Provisions for pensions and other post-employment benefits | 6,517 | 7,051 |
| Benefit plan assets in excess of obligation | (100) | (105) |
| Net pension liability | 6,417 | 6,946 |
The net pension liability increased from €6.4 billion to €6.9 billion in the first quarter of 2010, due especially to lower long-term capital market interest rates. Provisions for pensions and other post-employment benefits rose from €6.5 billion to €7.1 billion. The excess of benefit plan assets over the obligation – reflected in other receivables in the statement of financial position – came to €0.1 billion (December 31, 2009: €0.1 billion).