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Financial Strategy

The financial management of the Bayer Group is conducted by the strategic management holding company Bayer AG. Capital is a global resource, generally procured centrally and distributed within the Group. The foremost objectives of our financial management are to help bring about a sustained increase in corporate value and ensure the Group’s liquidity and creditworthiness. This involves reducing the cost of capital, improving the financing cash flow, optimizing the capital structure and effectively managing risk. The management of currency, interest rate, raw material price and default risks helps to reduce the volatility of our earnings.

The rating agencies contracted assess Bayer as follows:

	Long-term rating	Outlook	Short-term rating
Standard & Poor’s	A-	stable	A-2
Moody’s	A3	stable	P-2

These credit ratings reflect the company’s high solvency and ensure access to a broad investor base for financing purposes. Particularly in these days of turbulent credit markets, our strategy remains geared toward achieving a rating in the single-A category in order to maintain our financial flexibility. We therefore plan to use part of our operating cash flows to reduce net debt.

We pursue a prudent debt management strategy aimed at ensuring flexibility, drawing on a balanced financing portfolio. Chief among these resources are a multi-currency European Medium Term Note program, a syndicated acquisition financing, a syndicated credit facility, bilateral loan agreements and a global commercial paper program.

We use financial derivatives to hedge against risks arising from business operations or financial transactions, but do not employ contracts in the absence of an underlying transaction. It is our policy to diminish the default risk by selecting trading partners with a high credit standing. We closely monitor the execution of all transactions, which are conducted according to Group-wide guidelines.

Further details of our risk management objectives and the ways in which we account for all the major types of hedged transactions – along with price, credit and liquidity risks as they relate to the use of financial instruments – are given in the Risk Report.