Liquidity and Capital Expenditures of the Bayer Group (XLS:) Download Bayer Group Summary Statements of Cash Flows 2016 2017 Change € million € million % 2016 figures restated Net cash provided by (used in) operating activities, continuing operations 6,435 6,611 +2.7 Net cash provided by (used in) operating activities, discontinued operations 2,654 1,523 −42.6 Net cash provided by (used in) operating activities (total) 9,089 8,134 −10.5 Net cash provided by (used in) investing activities (total) (8,729) (432) +95.1 Net cash provided by (used in) financing activities (total) (350) (1,881) . Change in cash and cash equivalents due to business activities 10 5,821 . Cash and cash equivalents at beginning of period 1,859 1,899 +2.2 Change due to exchange rate movements and to changes in scope of consolidation 30 (139) . Cash and cash equivalents at end of period 1,899 7,581 . Net cash provided by operating activities Cash Inflowsfrom Operating Activities (from Continuing Operations) € million The net cash provided by operating activities in continuing operations schließen Continuing operations Sales and earnings reporting for continuing operations pertains only to business operations that are expected to remain in the company’s portfolio for the foreseeable future; opposite of discontinued operations. increased by 2.7% to €6,611 million thanks to an improvement in EBIT and a reduction in cash tied up in working capital schließen Working capital is the difference between short-term current assets and short-term liabilities; it is calculated by deducting short-term liabilities from current assets (excluding cash and cash equivalents). In the statement of cash flows, the change in working capital is one of the variables used to assess a company’s financial health. The objective of working capital management is to reduce working capital by minimizing the “financing gap” caused by the time lapse between the disbursement of funds (= payment for necessary raw materials) and the receipt of funds for the finished product. . This figure included the components of the payments received from DOW Chemical as part of a patent dispute that fall under operating activities. By contrast, the net cash provided by operating activities (total) decreased by 10.5% to €8,134 million as the prior-year figure included inflows from the sale of the Diabetes Care business. Net cash used in investing activities The net cash outflow for investing activities in 2017 amounted to €432 million. Cash outflows for property, plant and equipment and intangible assets were 8.2% lower at €2,366 million (2016: €2,578 million) and included €915 million (2016: €835 million) at Pharmaceuticals, €178 million (2016: €215 million) at Consumer Health, €553 million (2016: €757 million) at Crop Science, €38 million (2016: €37 million) at Animal Health and €283 million (2016: €415 million) at Covestro. Divestments resulted in a net inflow of €453 million. This includes the proceeds of €999 million from the sale of Covestro shares on September 29, 2017, which, together with the control termination agreement, led to the de facto loss of control, less the Covestro cash and cash equivalents of €637 million deducted as a consequence. Cash outflows for acquisitions in the amount of €158 million related to the acquisition of the Cydectin™ product portfolio in the United States in the Animal Health segment. Net cash inflows from current and noncurrent financial assets totaled €1,230 million (2016: outflows totaling €6,335 million). Net cash used in financing activities In 2017, there was a net cash outflow of €1,881 million for financing activities, including net loan repayments of €2,479 million (2016: €730 million). Net interest payments were 7.8% lower at €732 million (2016: €794 million). The cash outflow for dividends amounted to €2,364 million (2016: €2,126 million). A net inflow of €3,717 million came from the sale of Covestro shares before the de facto loss of control. In the previous year, the net cash inflow from the issuance of mandatory convertible notes amounted to €3,952 million, reported as a €3,300 million capital contribution and a €652 million borrowing. Liquid assets and net financial debt (XLS:) Download Net Financial Debt1 Dec. 31, 2016 Dec. 31, 2017 Change € million € million % 1 For definition see Chapter “Alternative Performance Measures Used by the Bayer Group.”. 2 Classified as debt according to IFRS 3 These include the market values of interest-rate and currency hedges of recorded transactions. 4 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 that were recorded as current on first-time recognition. Bonds and notes / promissory notes 15,991 12,436 −22.2 of which hybrid bonds2 4,529 4,533 +0.1 Liabilities to banks 1,837 534 −70.9 Liabilities under finance leases 436 238 −45.4 Liabilities from derivatives3 587 240 −59.1 Other financial liabilities 730 970 +32.9 Receivables from derivatives3 (313) (244) −22.0 Financial debt 19,268 14,174 −26.4 Cash and cash equivalents (1,899) (7,581) . Current financial assets4 (5,591) (2,998) −46.4 Net financial debt 11,778 3,595 −69.5 Net financial debt of the Bayer Group declined by €8,183 million in 2017, due mainly to cash inflows from operating activities and from the sale of Covestro shares. A further reduction in net financial debt resulted from the derecognition of financial liabilities and financial assets in connection with the deconsolidation of Covestro. Net financial debt includes three subordinated hybrid bonds schließen Hybrid bond A hybrid bond is a corporate bond with equity-equivalent 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 total volume of €4,533 million, 50% of which is treated as equity by Moody’s and S & P Global Ratings. The hybrid bonds thus have a more limited effect on the Group’s rating-specific debt indicators than senior debt. In May 2017, Bayer Holding Ltd., Japan, issued two bonds with a volume of JPY 10 billion each. In addition, in June 2017, Bayer AG issued debt instruments (exchangeable bond) with a nominal value of €1.0 billion, which mature in 2020. These can be repaid in cash, Covestro shares or a combination of the two. The annual coupon is 0.05%. During 2017, five bonds totaling around €2 billion were redeemed at maturity. In October 2017, one bond with a nominal value of €750 million maturing in 2018 was redeemed early. The decline in liabilities to banks mainly resulted from early repayment of a US$900 million bank loan taken out to finance the acquisition of the Merck OTC schließen OTC (over-the-counter) designates the business with nonprescription medicines. business. The other financial liabilities as of December 31, 2017, contained €525 million related to the mandatory convertible notes issued in November 2016 and €292 million in commercial paper.