Analysis Annual Report 2010 Bayer Essay Example for Free

Analysis Annual Report 2010 aspirin Essay profitabilityWhich indicators beat been brought forward in the divisionly makeup of the high society? Which particular targets argon aimed at? How does the ag throng estate and assess the growing of profitability in the annual report? Is there more late(a) reality information round this issue? Where? Is this information in line with the sensation remarked in the annual report? Is it indicating a similar evolution? What atomic number 18 the main propositions of the confederacy to improve its profitability? payWhat is the global financing st trampgy of the assembly? What is the evolution of the financing cost ( some(prenominal) indicators)? What is the shareholders remune ration program? What are your sources (of information) regarding this issue?InvestmentsWhat are the main investment / disinvestment policies? How are these investments financed? What is the outlook of the company regarding this issue?Consolidation affectWhat are the most important consolidated subsidiaries? (Eventu ally mention the approximate number of subsidiaries)? Are there associated companies? What is the evolution of the income attributable to shareholders (or result part of the group)? What are the comments of the company regarding this issue? What kind of indicators does the company report somewhat shareholder value? Are those indicators compared with other information?International standardsDoes the group announce the non-publication of some standards? If yes, for which reasons? Among instructive notes associated with the consolidated historys, choose adept that is relative to a specific standard. For this note, report essential characteristics that highlight the differences in terms of recording and reporting in the relation to Belgian GAAPs. What is the impact of IAS/IFRS referential (if any) on the account that is concerned by this note?Global diagnosticIs there important recent information about this company? Woul d you invest in this company? Why?Business sectorWhat is the main business of the group?Firstly, we have to know that aspirin was founded in Barmen, Germany in 1963 by Friedrich Bayer and Johann Friedrich Weskott his partner. It is a global and an finder company with core competencies in the domain of health care, nutrition and high-tech frameworks. They produce and provide service to benefit people and improve their flavour of life. In addition, they seek to create value with the help of innovation, proceeds and high earning power. For them, sustainability is very important for their social and ethical responsibilities.Its headquarters are in Leverkusen. This is one of the bombasticst phamarceutical companies in the world and has three sebgroups Bayer CropScience, Bayer HealthCare and Bayer MaterialScience. Led by the anxiety belongings company, they also have three service companies which operate independently Bayer Business Services, Bayer applied science Services and Cur renta. Are there other activities, complementary businesses within the group? Bayer CropScience has products in coiffure protection and nonagricultural pest control. It also has activities in seeds and plant traits.Bayer HealthCare is Bayers pharmaceutical and medical products subgroup. It is gnarly in the research, development, manufacture and marketing of products. It comprises a further four subdivisions Bayer Schering Pharma, Bayer Consumer Care, Bayer beast Health and Bayer Medical Care. Bayer MaterialScience is a supplier of high-tech polymers, and develops solutions for a broad prototype of applications relevant to everyday life.Bayer Business Services located at the Bayer USA military headquarters in Pennsylvania. It handles the information technology infrastructure and technical support aspect of Bayer Canada and USA. Bayer engine room Services is engaged in process development and in process and plant engineering, construction and optimization. Currenta offers servic es for the chemical industry, including utility supply, waste management, infrastructure, safety, security, analytics and vocational training. What are the main groups competitors?The main groups competitors are Merck Co, GlaxoSmithKline, Pfizer and Sanofi Aventis. Indeed, GlaxoSmithKline have the second post in the pharmaceuticals world just behind Pfizer. Sanofi Aventis is in fourth model and Merck Co and Bayer share the third place. Which main dangers (that are inherent to this business sector) does the company mention? Which hedging policies are put in place? Business operations necessarily involve risks. So according to Bayer, effective management of risks is a key factor in sustainably safeguarding a companys value. happens are assessed both qualitatively and quantitatively in determining strategies of the strategic business entities. The risk management formation is set on the crowd Intranet.Directive published explains the basic principles of this management in accor d with German Law.According to Bayer Group, the definition of the risk is represented by events and possible developments within or after-school(prenominal) of the group that would decrease the value of the company. These risks are described as follows Legal risksBayer Group is exposed to many reasoned risks from legal disputes or proceedings to which they are currently a party So it is because possible that legal or regulatory judgments could remarkablely affect the revenues and earnings of the company.Industry-specific risksSome governments intervene directly in setting determines and the government reimbursement systems favoring less expensive generic pharmaceuticals over brand-name products, which diminish earnings from Bayers pharmaceutical products and could potentially render the market introduction of a new product unprofitable.So if it necessary, Bayers Group adjusts his business plans according to the significance of governmental intervention. Sales of the Group are submit to seasonal fluctuations and CropScience business surplusly affected by weather conditions. Moreover the early identification of trends in the economic market is important elements of the Bayers Group business management. Finally where it appears strategically opportune they whitethorn acquire a company or part of a company and combine it with their brisk business. The integration processes associated with their acquisitions are steered by integration teams. Appropriate resources are provided to support the integration processes.Product development risksThe Groups competitive position, sales and earnings depend significantly on the development of commercially workable new products and technologies exertion.So they therefore devote substantial resources to research and development. Furthermore it is possible that effects of their products may be discovered after regulatory approval or registration. So litigations and associated claims for damages due to ostracize eff ects can materially diminish their earnings.Regulatory risksOur life science businesses, in particular are suit to strict regulatory regimes relating to the testing, manufacturing and marketing of many of our products. In some countries regulatory controls have become increasingly demanding like in the USA or in EU. That may enlarge product development costs. So Projects have been initiated to coordinate the implementation of new regulatory controls and mitigate any negative implications for the business.Patent risksA orotund remainder of Bayers products is protected by patents. When a patent defense is unsuccessful, or if one of our patents expires, our equipment casualtys are likely to come under pressure because of increased competition from generic products entering the market. The legal department, in conjunction with the relevant give wayal departments, regularly reviews the patent situation. Potential infringements of Bayers patents by other companies are carefully mon itored so that legal action can be taken if necessary. Production, procurement market and environmental risksProduction capacities at some of their manufacturing facilities could be adversely affected by, for instance, technical failures, natural disasters This applies peculiarly to the biotech products because of the highly complex manufacturing processes. If in such cases they are unable to meet demand they may defend declines in sales revenues.So they address product and environmental risks by way of suitable quality assurance measures. In addition, they are committed to the international Responsible Care initiative of the chemical industry. IT risksMajor disruptions or failure of global or regional business systems may result in loss of selective information and impairment of business and production processes. As a consequence technical precautions such as info recovery and continuity plans have been established together with the internal it service provider to address this risk. Risk to pension obligations from capital market developmentsThe Bayer Group has obligations to current and former employees related to pensions and other post-employment benefits.Changes in relevant valuation parameters such as interest rates, mortality and rates of increases in compensation may raise the present value of the pension obligations. This may lead to increased pension costs or diminish stockholders equity. Financial risksIn this part we are speaking about the management of monetary and commodity price risks. As a global enterprise, Bayer is exposed in the normal course of business to recognize risks, liquidity risks and unlike market price risks that could materially affect its net assets, financial position and results of operations. The various risks associated with financial instruments are outlined below together with the relevant risk management systems. In this risk there is a lot of subcategoriesCredit risks plagiarise from the hypothesis of the value of receivables or other financial assets being impaired because counterparties cannot meet their payment or other performance obligations. To effectively manage the citation risks from trade receivables, Bayer has put in place a standardized risk management system Credit limits are set for all customers. Finally to minimize credit risks, financial transactions are only conducted with banks and other partners of first-class credit standing in line with predefined exposure limits.Liquidity risks arise from the possibility of not being able to meet current or future payment obligations because low cash is available. Those problems are centrally managed in the Bayer Group. Sufficient liquid assets are held to meet all of the Groups payment obligations when they fall due, thereby ensuring solvency at all times. The size of this reserve is regularly reviewed and adjusted as necessary to current conditions. Then credit facilities also exist with banks.Markets risks relate to the possibi lity that the fair value or future cash catamenias of financial instruments may fluctuate due to variations in market prices. Market risks include coin, interest rate and other price risks, especially commodity price risks.Currency risks since the Bayer Group conducts a significant portion of its operations outside the euro zone, fluctuations in currency exchange rates can materially affect earnings. Currency risks are identified, analyzed and managed centrally and systematically. The field of hedging is evaluated regularly and defined in a corporate directive. Then a significant proportion of contractual and foreseeable currency risks is hedged, mainly through forward exchange contracts and currency options.Interest rate risks The Bayer Groups interest rate risks arise primarily from financial assets and liabilities with maturities exceeding one year. Interest rate risks in the Group are analyzed centrally and managed by the central finance department. This is done in line with the duration set by the Board of Management, which implicitly also includes the ration of fixed-rate to floating-rate debt. Then the duration is subject to regular review.Other price risks (especially price risks) The Bayer Group requires significant quantities of petrochemical feed stocks and energy for its various production processes. The prices of these inputs may fluctuate considerably depending on market conditions. This applies particularly tothe MaterialScience business. They have addressed this risk by concluding long-term contracts with multiple suppliers. The operation of their production facilities requires large amounts of energy, mostly in the form of electricity and steam. To minimize the exposure to energy price fluctuations, they aim for a balanced diversification of fuels for steam production and a mix of external procurement and captive production for power generation.As we can see the overall risk assessment is based on a consolidated view of risk each. There wer e no risks identified may endanger the existence of the group in 2010. And this is the continuation of the previous year.ProfitabilityWhich indicators have been brought forward in the annual report of the company? Which specific targets are aimed at? The profitability of a company makes the relationship between the results obtained by the company and the means apply to achieve this result. The result of a business can be estimated thanks to divergent criterion, such asOperating income Which one measures the earnings generated from the production activity of the company? The profit of the year Which measures the net result of the company, when expenses and benefits have been taken into account?The Value Added which measures the wealth created thanks to the production function of the company? Similarly, the means used by a business can be measured byThe total of assets this corresponds to the measurement of assets used by the company to produce. The equity measurement of all financi al resources used to produce starting. Capital stock it is all the financial resources made available to the company by shareholders. We mustiness not forget that a business can be profitable but still have a lower profitability of its sector. Thats why its profitability should be compared with the one of its main competitors. hence a possible lack of competitiveness could be detected. There are 3 kind of profitabilityReturn on business Return on assets Return on equity.The profitability indicators highlighted by the Bayer Group in its annual report are the following EBIT (before special items) EBITDA (before special items) Cash flow return on investment Earnings per share ROE (return on equity)ROA (return on assets).So concerning specific targets we believe that shareholders, investors and potential investors, suppliers and staff are the key audiences that are intended profitability indicators. How does the group state and assess the evolution of profitability in the annual repo rt? Is there more recent public information about this issue? Where? Is this information in line with the one mentioned in the annual report? Is it indicating a similar evolution? The group assesses its profitability by focusing on the various indicators mentioned above. In its annual report, the group highlights a number of indicators of profitability, which are EBIT EBITDAThese indicators are reported in order to exit a more accurate assessment of business operations.The company considers EBITDA before special items to be a more suitable indicator of operating performance since it is not affected by depreciation, amortization, impairments or special items. By reporting this indicator, the company aims to give readers a clearer picture of the results of operations and ensure greater comparing of data over time. EBIT for 2010 came in at 2,730 million whereas it was 3,006 million in 2009. This decrease is due to several factors that areSales of the Bayer Group rose by 12.6% from the previous year to 35,088 million in 2009 the amount was 31,168 million, thanks largely to the recovery in the Material Science business. Adjusted for currency and portfolio effects, sales grew by 8.0% The cost of goods sold advanced by 13.0% to 17,103 million. This was mainly due to a considerable increase at MaterialScience, which in turn resulted chiefly from the growth in volumes and higher average raw material prices for the year. The ratio of the cost of goods sold to total sales was 48.7%, this ratio increased by 0, 1%, it was 48, 6% in 2009. Selling expenses rose by 11.1% year on year to 8,803million, it was 7,923million in 2009, and were thus combining weight to 25.1% of sales. Health Care accounted for the greater part of the increase. The group raised their research and development expenses in 2010 by a further 11.2%,the amount increased from 2,746million in 2009 to 3,053million in 2010