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Review of forecast against actual
business developments

In the Annual Report for 2014, we gave forecasts of the key financial performance indicators for the Group and our business sectors for 2015. At the time of the forecast, the acquisition of Sigma-Aldrich was still pending due to outstanding antitrust clearances. We therefore provided a separate forecast in the event of the successful acquisition of Sigma-Aldrich, in which we expected the first-time consolidation of Sigma-Aldrich in mid-2015. The following report reviews the forecast against the actual business developments, including the first-time consolidation of Sigma-Aldrich on November 18, 2015.

Net sales

We predicted slight organic sales growth for the Group in 2015, supplemented by a slight portfolio effect and a moderately positive exchange rate effect. All business sectors contributed significantly to the moderate 2.6% organic increase in the net sales of the Group, thus exceeding the forecast. In addition, despite the delay in the acquisition of Sigma-Aldrich owing to antitrust reviews, we recorded a solid portfolio effect of 4.3%, in part due to the good performance of AZ Electronic Materials, a company we acquired in 2014. The strengthening of the U.S. dollar and major Asian currencies against the euro in 2015 contributed significantly to the strong positive currency effect of 6.2% on net sales.

Our Healthcare business sector generated slight organic sales growth of 1.6% in 2015, thus slightly exceeding the guidance provided in the Annual Report for 2014. In addition to the performance of Rebif® in North America, which exceeded our expectations, this was due to the organic increase in sales of our products to treat diabetes (Glucophage®), cardiovascular diseases (Concor®), infertility (Gonal-f®), and thyroid disorders (Euthyrox®), as well as Neurobion®, a brand marketed by the Consumer Health business.

For our Life Science business sector, we forecast a moderate organic increase in sales in the Annual Report for 2014. Posting strong organic sales growth of 6.5% in 2015, the Life Science business sector of our company exceeded this forecast. Process Solutions made a significant contribution to this development with organic sales growth of 11.6%. In addition, our Life Science business sector saw a portfolio effect of 10.2% due to the acquisition of Sigma-Aldrich.

For our Performance Materials business sector, we predicted slight organic sales growth, supplemented by a strong portfolio effect. At 0.6%, the actual organic growth was only slightly below this forecast. Special mention should be made of the dynamic development of the OLED materials business, as well as the energy-saving UB-FFS technology from the Display Materials business unit. However, the mature LC technology TN-TFT suffered from an accelerated decline in volumes. The portfolio effect of the revenues from acquired businesses was 10.4%.

EBITDA pre exceptionals

In 2015, excluding the acquisition of Sigma-Aldrich, EBITDA pre exceptionals of the Group saw a solid increase over the previous year, thus exceeding the forecast we gave in the Annual Report for 2014. In addition, apart from operating performance, positive foreign exchange effects of the U.S. dollar and major Asian currencies contributed to this development. Including Sigma-Aldrich, we generated a strong EBITDA pre exceptionals increase of 7.1% to € 3,630 million for the Group in 2015.

For our Healthcare business sector, we predicted a slight decline in EBITDA pre exceptionals in the Annual Report for 2014. The good development of organic sales helped us to exceed this forecast, achieving the year-earlier level with EBITDA pre exceptionals of € 2,002 million.

In the Annual Report for 2014, we predicted a moderate increase for our Life Science business sector. Excluding Sigma-Aldrich, EBITDA pre exceptionals of our Life Science business sector saw a low double-digit increase, thus exceeding our guidance provided in the Annual Report for 2014. In addition to positive exchange rate effects, this development was also attributable to a favorable product mix.

We forecast a low double-digit increase in EBITDA pre exceptionals for our Performance Materials business sector in 2015. With medium double-digit growth (excluding Sigma-Aldrich), we significantly exceeded this forecast. Both good operating business performance and positive exchange rate effects were responsible for this development.

For EBITDA pre exceptionals of Corporate and Other, we expected a low double-digit percentage decline. Owing to expenses for currency hedging transactions as a result of the global exchange rate movements against the euro and the intensification of future-oriented Group initiatives (e.g. new branding), the Corporate and Other expense of EBITDA pre exceptionals more than doubled overall. Consequently, we did not meet our forecast.

Business free cash flow

For 2015, we had forecast a slight improvement in business free cash flow of the Group. Excluding the contribution from Sigma-Aldrich, we can confirm this forecast. While business free cash flows of the Life Science and Performance Materials business sectors of our company showed a sharp increase over 2014, both our Healthcare business sector and Corporate and Other saw a decline. The decrease in Healthcare is attributable to higher investments and the high amount of capital tied up in receivables. In Corporate and Other, expenses for the ONE Global Headquarters and strategic Group initiatives in particular led to a decrease in business free cash flow. Including Sigma-Aldrich, our Group business free cash flow increased sharply by 6.2%.

Review of forecast against actual business developments in 2015


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Forecast for 2015 in:  
Actual results 2014
in € million
Forecast for 2015 in the
Annual Report for 2014
Q1 / 2015 Interim Report Q2 / 2015 Interim Report Q3 / 2015 Interim Report Results 2015 in € million (% YoY)
Group
Net sales1 11,363 Slight organic growth, slight portfolio effect, moderately positive foreign exchange effect
Forecast incl. Sigma-Aldrich:
Double-digit growth rates
€ 12.3 – 12.5 billion
Forecast incl. Sigma-Aldrich:
Double-digit growth rates
€ 12.3 – 12.5 billion
Forecast incl. Sigma-Aldrich: Low double-digit percentage growth
€ 12.6 – 12.8 billion, of which Sigma-Aldrich:
€ 300 million
12,845
(+ 13.0%
+ 2.6% org.
+ 4.3% portfolio,
+ 6.2% currency)
EBITDA pre exceptionals 3,388 Slight increase due to operating business developments and
positive foreign exchange effects; at least at the 2014 level
Forecast incl. Sigma-Aldrich:
Very strong growth
€ 3.45 – 3.55 billion
Forecast incl. Sigma-Aldrich:
Double-digit growth rates
€ 3.45 – 3.55 billion
Forecast incl. Sigma-Aldrich:Low double-digit percentage growth
€ 3.58 – 3.65 billion, of which Sigma-Aldrich:
€ 80 – 95 million
3,630
(+ 7.1%)
Business free cash flow 2,605 Slight increase
Forecast incl. Sigma-Aldrich:
Very strong growth
€ 2.4 – 2.5 billion
Forecast incl. Sigma-Aldrich:
Strong growth
€ 2.4 – 2.5 billion
Forecast incl. Sigma-Aldrich:
Stable development
€ 2.6 – 2.7 billion, of which Sigma-Aldrich:
€ 50 – 70 million
2,766
(+ 6.2%)
Healthcare
Net sales1 6,621 Organic at the
previous year’s level
Organic at the
previous year’s level
Organic at the
previous year's level
Organic at the
previous year's level
6,934
(+ 4.7%
+ 1.6% org.
+ 3.1% currency)
EBITDA pre exceptionals 2,000 Slight decline € 1.9 – 2.0 billion € 1.9 – 2.0 billion € 1.93 – 2.0 billion 2,002
(+ 0.1%)
Business free cash flow 1,701 Slight decline € 1.5 – 1.55 billion € 1.5 – 1.55 billion € 1.5 – 1.55 billion 1,581
(– 7.1%)
Life Science
Net sales1 2,682 Moderate organic growth
Forecast incl. Sigma-Aldrich:
Double-digit growth rates
Moderate organic growth
Forecast incl. Sigma-Aldrich:
Double-digit growth rates
Moderate organic growth
Forecast incl. Sigma-Aldrich:
Double-digit growth rates
Solid organic growth, portfolio effect in the low
double-digit percentage range
3,355
(+ 25.1%
+ 6.5% org.
+ 10.2% portfolio,
+ 8.4% currency)
EBITDA pre exceptionals 659 Moderate increase
Forecast incl. Sigma-Aldrich:
Double-digit growth rates
€ 730 – 760 million
Forecast incl. Sigma-Aldrich:
Double-digit growth rates
€ 740 – 760 million
Forecast incl. Sigma-Aldrich:
Double-digit growth rates
€ 760 – 780 billion, in addition from Sigma-Aldrich:
€ 80 – 95 million
856
(+ 30.0%)
Business free cash flow 419 Strong increase
Forecast incl. Sigma-Aldrich:
Double-digit growth rates
€ 450 – 480 million € 450 – 480 million € 530 – 560 million, in addition from Sigma-Aldrich:
€ 50 – 70 million
676
(+ 61.2%)
Performance Materials
Net sales1 2,060 Slight organic increase, strong portfolio effect Slight organic increase, strong portfolio effect Slight organic increase, strong portfolio effect Slight organic increase, strong portfolio effect 2,556
(+ 24.1%
+ 0.6% org.
+ 10.4% portfolio,
+ 13.1% currency)
EBITDA pre exceptionals 895 Low double-digit
percentage increase
€ 1.05 – 1.1 billion € 1.06 – 1.1 billion € 1.1 – 1.14 billion 1,132
(+ 26.5%)
Business free cash flow 700 Low double-digit
percentage increase
€ 850 – 900 million € 850 – 900 million € 890 – 940 million 931
(+ 33.0%)
Corporate and Other
EBITDA pre exceptionals – 166 Double-digit
percentage decline
€ – 330 – – 280 million € – 350 – – 300 million € – 360 – – 340 million – 360
(+ 116.9%)
Business free cash flow – 215 € – 420 – – 390 million € – 420 – – 390 million € – 440 – – 410 million – 421
(+ 96.2%)
1
The composition of net sales has changed, see “Changes to accounting and measurement principles and disclosure changes” in the Notes to the Group accounts.