The following forecast is based on the current business development, taking into account the potential risks and opportunities. It is based on the exchange rates at the closing date on December 31, 2016, including rates of US$1.05 to the euro. A 1% appreciation (depreciation) of the euro against all other currencies would decrease (increase) sales on an annual basis by some €300 million and EBITDA before special items by about €80 million.
Sales to rise to more than €49 billion in 2017 after €46.8 billion in 2016
The Board of Management expects the positive development of the Bayer Group to continue in fiscal 2017. Sales of the Bayer Group including Covestro are targeted to increase to more than €49 billion. This corresponds to a low- to mid-single-digit percentage increase on a currency- and portfolio-adjusted basis. EBITDA before special items is forecast to grow by a mid-single-digit percentage. We aim to grow core earnings per share from continuing operations 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. by a mid-single-digit percentage as well. It should be noted that only 64% of Covestro will be reflected for the full year 2017. In addition, it should be noted that the weighted average number of shares has increased following the placement of the mandatory convertible notes in November 2016.
Sales and earnings forecast by segment
We plan sales of approximately €37 billion for the Life Science businesses. This corresponds to a mid-single-digit percentage increase on a currency- and portfolio-adjusted basis. EBITDA before special items is targeted to rise by a mid- to high-single-digit percentage.
At Pharmaceuticals, we expect sales of more than €17 billion. This corresponds to a mid-single-digit percentage increase on a currency- and portfolio-adjusted basis. We plan to raise sales of our key growth products Xarelto™, Eylea™, Stivarga™, Xofigo™ and Adempas™ to more than €6 billion. We expect a high-single-digit percentage increase in EBITDA before special items. We aim to improve the EBITDA margin before special items.
In the Consumer Health segment, we expect sales to come in at more than €6 billion. In line with anticipated market development, we plan to grow sales by a low- to mid-single-digit percentage on a currency- and portfolio-adjusted basis. We expect EBITDA before special items to increase by a low- to mid-single-digit percentage.
For Crop Science we are assuming sales of more than €10 billion. This corresponds to a low-single-digit percentage increase on a currency- and portfolio-adjusted basis. We expect EBITDA before special items to be at the prior-year level.
In the Animal Health segment, we expect a currency- and portfolio-adjusted increase in sales by a low- to mid-single-digit percentage. We plan to raise EBITDA before special items by a high-single-digit percentage.
For the Reconciliation, we expect sales of around €1 billion in 2017. We plan EBITDA before special items in the region of minus €0.2 billion.
For 2017, Covestro is budgeting a sales increase. EBITDA after adjustment for special items should be on or above the prior-year level.
Development of further key data
Net financial debt is targeted to improve to around €10 billion.
In 2017, we expect to take special charges in EBITDA in the region of €0.5 billion for the Bayer Group as a whole. Most of this amount is accounted for by costs in connection with the agreed acquisition of Monsanto and with restructuring and efficiency improvement measures. We aim to increase research and development spending to €4.8 billion. Capital expenditures will amount to about €2.5 billion for property, plant and equipment and around €0.4 billion for intangible assets. Depreciation and amortization are estimated at about €2.9 billion, including €1.4 billion in amortization of intangible assets. We also predict a financial result of around minus €1.4 billion. The effective tax rate is likely to be about 23%. Excluding capital and portfolio measures, net financial debt is targeted to be around €10 billion at the end of 2017.
Outlook for Bayer AG
On the basis of the business operating leases with Bayer Pharma AG and Bayer CropScience AG that came into effect at the start of 2017, the operational business of these two entities has been transferred to Bayer AG. As a result, the sales of these two entities now accrue to Bayer AG, for which we are predicting sales of more than €14 billion. The budgeted positive earnings of the Pharmaceuticals and Crop Science segments in 2017 will also accrue directly to Bayer AG as a result of the business operating leases. In addition, the earnings of most major Bayer subsidiaries in Germany are transferred directly to Bayer AG under profit and loss transfer agreements. Also, specific intra-company dividend measures ensure the availability of sufficient distributable income. Business development at Bayer AG is subject in principle to the same risks and opportunities as that of the Bayer Group. On account of the interdependencies between Bayer AG and its subsidiaries, the outlook for the Bayer Group thus largely also reflects the expectations for Bayer AG. Therefore, the forecast for the Bayer Group outlined above applies equally to Bayer AG. In the coming year, based on these factors, we expect Bayer AG to report a distributable profit that will again enable our stockholders to adequately participate in the Bayer Group’s earnings.