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Segment Reporting

(32) Information by business sector / country and region


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Information by business sector

 

Healthcare Life Science Performance Materials Corporate and Other Group
€ million 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
Net sales1 6,933.8 6,620.5 3,355.3 2,682.5 2,555.6 2,059.8 12,844.7 11,362.8
Operating result (EBIT) 1,096.7 1,106.4 300.8 289.2 878.0 611.5 – 432.3 – 245.1 1,843.2 1,762.0
Depreciation and amortization 752.2 749.2 371.6 308.1 241.7 190.0 17.9 14.3 1,383.4 1,261.6
Impairment losses 121.5 90.8 2.0 1.6 1.5 2.7 3.4 5.1 128.4 100.2
Reversals of impairment losses – 0.1 – 0.8 – 0.6 – 0.3 – 0.9 – 0.9
EBITDA 1,970.4 1,946.4 674.3 598.9 1,120.4 803.6 – 411.0 – 226.0 3,354.1 3,122.9
Exceptionals 31.3 53.9 181.8 59.7 11.7 91.2 50.9 60.0 275.7 264.8
EBITDA pre exceptionals (Segment result) 2,001.7 2,000.3 856.1 658.6 1,132.1 894.8 – 360.1 – 166.0 3,629.8 3,387.7
EBITDA margin pre exceptionals (in % of net sales) 28.9 30.2 25.5 24.6 44.3 43.4 28.3 29.8
Net operating assets 5,813.1 6,041.0 21,441.3 6,196.3 4,278.6 3,348.6 112.4 126.1 31,645.4 15,712.0
Segment liabilities – 2,479.0 – 2,507.9 – 909.6 – 434.6 – 289.5 – 355.4 – 61.2 – 56.5 – 3,739.3 – 3,354.4
Investments in property, plant and equipment2 232.3 225.1 133.4 130.6 102.9 91.5 45.3 33.6 513.9 480.9
Investments in intangible assets2 145.9 114.1 8.2 6.5 9.7 7.5 15.3 15.2 179.1 143.3
Net cash flows from operating activities 1,682.8 2,287.3 706.2 580.0 1,138.9 900.4 – 1,332.7 – 1,062.2 2,195.2 2,705.5
Business free cash flow 1,581.0 1,701.2 675.6 419.0 930.8 699.6 – 421.2 – 214.7 2,766.2 2,605.1
1
The composition of net sales has been changed, see “Changes to accounting and measurement principles and disclosure changes”.
2
According to the consolidated cash flow statement.

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Information by country and region

 

  Europe thereof Germany thereof Switzerland North America thereof USA Asia-Pacific thereof China Latin America Middle East and Africa Group
€ million 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
Net sales by customer location 1 4,102.7 4,016.7 850.8 845.5 159.6 149.3 2,722.9 2,152.3 2,566.5 2,009.9 4,240.8 3,442.9 1,104.7 805.7 1,265.3 1,285.1 513.0 465.8 12,844.7 11,362.8
Net sales by company location 1 4,735.2 4,580.7 1,563.5 1,592.3 176.7 182.5 2,718.7 2,142.4 2,586.7 2,022.3 4,014.4 3,266.3 668.7 472.3 1,238.1 1,256.5 138.3 116.9 12,844.7 11,362.8
Intangible assets 8,427.6 7,966.3 595.2 448.9 4,235.6 4,151.4 15,959.7 2,522.5 15,959.6 2,522.3 940.7 904.0 52.2 54.3 5.0 2.4 6.0 0.3 25,339.0 11,395.5
Property, plant and equipment 2,401.2 2,163.1 1,104.2 1,032.8 527.5 498.2 1,027.0 416.2 1,025.0 415.1 443.4 314.8 123.7 58.1 93.0 88.4 44.5 7.9 4,009.1 2,990.4
Research and development costs – 1,509.7 – 1,550.7 – 835.0 – 816.0 – 529.6 – 604.8 – 123.5 – 90.4 – 120.8 – 88.7 – 45.1 – 37.8 – 12.4 – 7.0 – 24.0 – 20.7 – 6.9 – 4.1 – 1,709.2 – 1,703.7
Number of employees 23,429 20,537 11,938 11,191 1,946 1,347 9,794 5,092 9,629 4,939 11,096 9,488 2,619 2,172 4,352 3,883 942 639 49,613 39,639
1
The composition of net sales has been changed, see “Changes to accounting and measurement principles and disclosure changes”.

(33) Information on segment reporting

Segmentation was performed in accordance with the organizational and reporting structure of the Group that applied during 2015.

The Healthcare business sector comprises the businesses with prescription and over-the-counter pharmaceuticals and biopharmaceuticals as well as allergy products. The Life Science business sector offers solutions to research and analytical laboratories in the pharmaceutical / biotechnology industry or in academic institutions, and customers manufacturing large- and small-molecule drugs. The Performance Materials business sector consists of the entire specialty chemicals business. The fields of activity of the individual segments are described in detail in the sections about the business sectors in the combined management report.

Corporate and Other includes income and expenses, assets and liabilities as well as cash flows that cannot be directly allocated to the reportable segments presented. This relates mainly to central Group functions. Moreover, the column serves the reconciliation to the Group numbers. The expenses and income as well as cash flows attributable to the financial result and income taxes are also presented under Corporate and Other.

Apart from sales, the success of a segment is mainly determined by EBITDA pre exceptionals (segment result) and business free cash flow. EBITDA pre exceptionals and business free cash flow are performance indicators not defined by International Financial Reporting Standards. However, they represent important variables used to steer the Group. To permit a better understanding of operational performance, EBITDA pre exceptionals excludes depreciation and amortization, impairment losses, and reversals of impairment losses as well as specific income and expenses of a one-time nature presented in the following. Among other things, business free cash flow is also used for internal target agreements.

Transfer prices for intragroup sales are determined on an arm’s-length basis.

Neither in 2015 nor in 2014 did any single customer account for more than 10% of Group sales.

The following table presents the reconciliation of EBITDA pre exceptionals of all operating businesses to the profit before income tax of the Group:


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€ million 2015 2014
TotalEBITDA pre exceptionals of the operating businesses 3,989.9 3,553.7
Corporate and Other – 360.1 – 166.0
EBITDA pre exceptionals of the Group 3,629.8 3,387.7
Depreciation and amortization / impairment losses / reversals of impairments – 1,510.9 – 1,360.9
Exceptionals – 275.7 – 264.8
Operating result (EBIT) 1,843.2 1,762.0
Financial result – 356.7 – 205.0
Profit before income tax 1,486.5 1,557.0

Exceptionals comprised the following:


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€ million 2015 2014
Acquisition-related exceptionals – 132.7 – 85.0
Integration costs / IT costs – 77.6 – 87.2
Restructuring costs – 47.5 – 83.9
Gains / losses on the divestment of businesses – 2.0 1.9
Other exceptionals – 15.9 – 10.6
Exceptionals before impairment losses / reversals of impairments – 275.7 – 264.8
Impairment losses – 91.5 – 9.8
Reversals of impairments
Exceptionals (total) – 367.2 – 274.6

Exceptionals are included in the consolidated income statement under cost of sales as well as under other operating expenses. The costs of € 132.7 million reported under acquisition-related exceptionals (2014: € 85.0 million) were largely incurred in connection with the acquisition of the Sigma-Aldrich Corporation, USA. Of this amount, € 41.6 million was attributable to integration planning activities; further expenses of € 60.0 million were incurred directly for the acquisition of the company. Both amounts were recorded under other operating expenses. A further amount of € 31.1 million was related to cost of sales and disclosed accordingly.

Business free cash flow was determined as follows:


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€ million 2015 2014
EBITDA pre exceptionals 3,629.8 3,387.7
Investments in property, plant and equipment,
software as well as advance payments for intangible assets
– 609.0 – 527.5
Changes in inventories as reported in the consolidated balance sheet – 960.1 – 185.5
Changes in trade accounts receivable and receivables from royalties and licenses
as reported in the consolidated balance sheet
– 514.2 – 214.2
Adjustment first-time consolidation of the Sigma-Aldrich Corporation 1,219.7
Adjustment first-time consolidation of AZ Electronic Materials S.A. 144.6
Business free cash flow 2,766.2 2,605.1

The reconciliation of operating assets presented in the Segment Reporting to the total assets of the Group was as follows:


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€ million Dec. 31, 2015 Dec. 31, 2014
Assets 38,007.2 26,010.1
Monetary assets (cash and cash equivalents, current financial assets, loans and securities) – 1,093.0 – 5,563.1
Non-operating receivables, income tax receivables, deferred taxes and net defined benefit assets – 1,483.8 – 1,380.6
Assets held for sale – 45.7
Operating assets (gross) 35,384.7 19,066.4
Trade accounts payable – 1,921.2 – 1,539.4
Other operating liabilities – 1,818.1 – 1,815.0
Segment liabilities – 3,739.3 – 3,354.4
Operating assets (net) 31,645.4 15,712.0

The following tables present the adjustments to the previous year’s figures of the three business sectors owing to disclosure changes to royalty, license and commission expenses as well as royalty, license and commission income (see Note [6] “Changes to accounting and measurement principles and disclosure changes”).


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Healthcare

2014 Adjustment

€ million 2014 old structure 2014 adjustment 2014 adjusted
Net sales 6,549.4 71.2 6,620.5
Royalty, license and commission income 194.4 – 194.4
Total revenues 6,743.8
Cost of sales – 1,370.4 – 0.1 – 1,370.5
(of which: amortization of intangible assets)1 (–) (–) (–)
Gross profit 5,373.4 – 123.3 5,250.0
Marketing and selling expenses – 2,083.3 – 467.5 – 2,550.8
(of which: amortization of intangible assets)1 (– 555.4) (–) (– 555.4)
Royalty, license and commission expenses – 520.9 520.9
Administration expenses – 246.9 – 246.9
Research and development costs – 1,366.0 – 1,366.0
(of which: amortization of intangible assets)1 (– 1.0) (–) (– 1.0)
Other operating income 324.6 123.2 447.8
Other operating expenses – 374.4 – 53.3 – 427.7
Operating result ( EBIT ) 1,106.4 1,106.4
Margin (% of net sales) 16.9 – 0.2 16.7
EBITDA 1,946.4 1,946.4
Margin (% of net sales) 29.7 – 0.3 29.4
EBITDA pre exceptionals 2,000.3 2,000.3
Margin (% of net sales) 30.5 – 0.3 30.2
1
Excluding amortization of internally generated or separately acquired software.

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Life Science

2014 Adjustment

€ million 2014 old structure 2014 adjustment 2014 adjusted
Net sales 2,682.5 2,682.5
Royalty, license and commission income 14.0 – 14.0
Total revenues 2,696.5
Cost of sales – 1,168.7 – 1,168.7
(of which: amortization of intangible assets)1 (– 47.6) (–) (– 47.6)
Gross profit 1,527.8 – 14.1 1,513.8
Marketing and selling expenses – 844.1 – 15.6 – 859.8
(of which: amortization of intangible assets)1 (– 151.8) (–) (– 151.8)
Royalty, license and commission expenses – 15.6 15.6
Administration expenses – 110.4 – 110.4
Research and development costs – 162.6 – 162.6
(of which: amortization of intangible assets)1 (–) (–) (–)
Other operating income 11.5 14.1 25.6
Other operating expenses – 117.4 – 117.4
Operating result ( EBIT ) 289.2 289.2
Margin (% of net sales) 10.8 10.8
EBITDA 598.9 598.9
Margin (% of net sales) 22.3 22.3
EBITDA pre exceptionals 658.6 658.6
Margin (% of net sales) 24.6 24.6
1
Excluding amortization of internally generated or separately acquired software.

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Performance Materials

2014 Adjustment

€ million 2014 old structure 2014 adjustment 2014 adjusted
Net sales 2,059.6 0.2 2,059.8
Royalty, license and commission income 0.9 – 0.9
Total revenues 2,060.5
Cost of sales – 983.2 – 983.2
(of which: amortization of intangible assets)1 (– 46.4) (–) (– 46.4)
Gross profit 1,077.3 – 0.6 1,076.6
Marketing and selling expenses – 177.8 – 1.1 – 178.8
(of which: amortization of intangible assets)1 (– 11.7) (–) (– 11.7)
Royalty, license and commission expenses – 1.1 1.1
Administration expenses – 56.1 – 56.1
Research and development costs – 170.6 – 170.6
(of which: amortization of intangible assets)1 (– 2.8) (–) (– 2.8)
Other operating income 6.4 0.6 7.0
Other operating expenses – 66.6 – 66.6
Operating result ( EBIT ) 611.5 611.5
Margin (% of net sales) 29.7 29.7
EBITDA 803.6 803.6
Margin (% of net sales) 39.0 39.0
EBITDA pre exceptionals 894.8 894.8
Margin (% of net sales) 43.4 43.4
1
Excluding amortization of internally generated or separately acquired software.