Business Development by Segment Animal Health Slower market growth The Animal Health market expanded by around 2% in 2017 (2016: 5%), with growth significantly lagging behind previous years. Alongside a difficult market environment in the farm animals business in Europe and North America, growth rates in the companion animals business, and in the important parasiticides market in particular, were also lower than in previous years. The slight recovery of the farm animals business in the core markets and an upturn in the American companion animals business at the end of the year were unable to offset the weaker market development in the first half of the year. (XLS:) Download Key Data – Animal Health Q4 2016 Q4 2017 Change1 2016 2017 Change1 € million € million Reported % Fx & p adj. % € million € million Reported % Fx & p adj. % Fx & p adj. = currency- and portfolio-adjusted; Fx adj. = currency-adjusted 1 For definition see Chapter “Alternative Performance Measures Used by the Bayer Group.” Sales 329 322 −2.1 +1.8 1,523 1,571 +3.2 +2.0 Change in sales1 Volume −1.0% +2.1% +2.6% +0.4% Price +4.1% −0.3% +2.2% +1.6% Currency 0.0% −6.1% −2.6% −0.9% Portfolio 0.0% +2.2% 0.0% +2.1% € million € million Reported % Fx adj. % € million € million Reported % Fx adj. % Sales by region Europe / Middle East / Africa 84 82 −2.4 −1.2 445 442 −0.7 0.0 North America 129 126 −2.3 +5.4 621 655 +5.5 +6.4 Asia / Pacific 79 79 . +7.6 300 317 +5.7 +7.3 Latin America 37 35 −5.4 +2.7 157 157 0.0 0.0 EBITDA1 34 28 −17.6 343 352 +2.6 Special items1 (4) (21) (6) (29) EBITDA before special items1 38 49 +28.9 349 381 +9.2 EBITDA margin before special items1 11.6% 15.2% 22.9% 24.3% EBIT1 25 10 −60.0 313 307 −1.9 Special items1 (5) (23) (7) (31) EBIT before special items1 30 33 +10.0 320 338 +5.6 Net cash provided by operating activities 85 75 −11.8 193 209 +8.3 Sales growth driven by business in Asia / Pacific and the United States Sales of Animal Health increased by 2.0% (Fx & portfolio adj.) to €1,571 million in 2017. Business in the Asia / Pacific region developed especially positively due to higher demand and price increases. We also registered currency-adjusted growth in North America, with the Cydectin™ product portfolio acquired in January 2017 from Boehringer Ingelheim Vetmedica, Inc., United States, contributing to sales gains. The Europe / Middle East / Africa and Latin America regions remained at the prior-year level. (XLS:) Download Best-Selling Animal Health Products Q4 2016 Q4 2017 Change1 2016 2017 Change1 € million € million Reported % Fx adj. % € million € million Reported % Fx adj. % Fx adj. = currency-adjusted 1 For definition see Chapter “Alternative Performance Measures Used by the Bayer Group.” Advantage™ product family 102 87 −14.7 −10.1 535 488 −8.8 −7.8 Seresto™ 28 32 +14.3 +26.0 174 218 +25.3 +25.1 Drontal™ product family 31 30 −3.2 +2.3 128 132 +3.1 +4.5 Baytril™ 34 31 −8.8 −0.6 113 113 0.0 +2.5 Total 195 180 −7.7 −1.5 950 951 +0.1 +1.1 Proportion of Animal Health sales 59% 56% 62% 61% +25.1% growth in sales of Seresto™ (Fx adj.) Sales by product Sales of our Advantage™ family of flea, tick and worm control products were down year on year, due mainly to increased competitive pressure and the related decline in demand in the Europe / Middle East / Africa and North America regions. We achieved continued strong growth with our Seresto™ flea and tick collar that resulted chiefly from increased demand in the United States and Europe. Business with our Drontal™ family of dewormers expanded once again. Here we benefited particularly from increased prices and volumes in the United States and the Asia / Pacific region. The increase in sales of our antibiotic Baytril™ was largely attributable to the United States, partly due to a one-time effect in connection with a change in the distribution model, and to expanded volumes in Mexico. Earnings In 2017, we raised EBITDA before special items by 9.2% to €381 million. Adjusted for negative currency effects of €8 million, earnings increased by 11.5%. Price increases, the Cydectin™ business we acquired and lower selling expenses contributed to the growth in earnings. In contrast, negative contributions came from net other operating expenses as well as higher research and development expenses. EBIT of Animal Health declined by 1.9% to €307 million, after special charges of €31 million (2016: €7 million) in conjunction with efficiency improvement measures. (XLS:) Download Special Items1 Animal Health EBIT Q4 2016 EBIT Q4 2017 EBIT2016 EBIT2017 EBITDA Q4 2016 EBITDA Q4 2017 EBITDA 2016 EBITDA 2017 € million € million € million € million € million € million € million € million 1 For definition see Chapter “Alternative Performance Measures Used by the Bayer Group.” Restructuring (5) (23) (7) (31) (4) (21) (6) (29) Total special items (5) (23) (7) (31) (4) (21) (6) (29) Online Annex: A 2.2.2-4 limited assurance The development of Animal Health in 2017 is shown in the following graphics (A 2.2.2-4/1, A 2.2.2-4/2 and A 2.2.2-4/3). Animal Health Quarterly Sales Animal Health Quarterly EBIT1 Animal Health Quarterly EBITDA before Special Items1 1 For definition see “Alternative Performance Measures Used by the Bayer Group.”
