Bayer Expects to Meet Earnings Forecast Despite Polymer Woes
With three quarters of 2013 behind it, Germany's Bayer group sees itself as still on track to fulfil the "ambitious forecast" for 2013 voiced by CEO Marijn Dekkers earlier this year - despite unfavourable currency translations and cyclical effects in the polymers business. Along with 4-5% sales growth to €41 billion, this assumes a mid-single-digit percentage increase in group EBITDA.
In a conference call with journalists, Dekkers said his confidence is based on "encouraging growth" in the HealthCare and CropScience subgroups. Bayer MaterialScience continues under pressure from global overcapacity for the engineering plastic polycarbonate, but this business did not worsen further in the third quarter, he said.
Figures for the Leverkusen-based chemicals and life sciences group from July to September show sales flat against the 2012 period at €9.6 billion. Adjusted for currency and portfolio effects, sales increased by 6%. EBITDA before special items came in 7.7% higher at nearly €2 billion. While EBIT firmed strongly by 47.5% to €1.2 billion, this reflected in part lower special charges for restructuring and integration of acquired businesses, EBIT before special items rose 11.5% to €1.3 billion.
Adjusted for currency and portfolio effects, sales of the HealthCare subgroup improved by 7.4%, to €4.7 billion, while EBITDA before special items rose 4.6% to €1.4 billion. CropScience sales climbed 12% to €1.7 billion, thanks to a "persistently favorable market environment." The subgroup's EBITDA before special items improved by nearly 14% to €224 million. In MaterialScience, sales were flat at just under €3 billion. EBITDA before special items was 2.7% higher, despite higher raw materials costs. The figure included a one-off gain of €17 million from divestment of a "minor business."
New and innovative products in life science form the basis for Bayer's current and future growth, Dekkers said. In HealthCare five new products, the anticoagulant Xarelto; Eyela, a drug to treat age-related macular degeneration; Stivarga, a treatment for metastatic colorectal cancer; Xofigo, for bone metastatic prostate cancer; and Adempass, to treat pulmonary hypertension are expected to bring in sales of €1.4 billion this year.
A peak sales potential of more than €5.5 billion is also forecast for these drugs, and the Bayer pipeline additionally includes five candidates currently in Phase I or II of clinical development, planned to enter Phase III by 2015. Three of the drugs are in cardiology or hematology, one in oncology and one in gynecology.
Bayer also is "making very good progress" in its CropScience business, the CEO said. In reported terms, the subgroup's sales of products approved since 2006 showed a 35% increase-year-on year in the third quarter. Management expects a combined peak sales potential of at least €4 billion for products launched between 2011 and 2016.
In MaterialScience (BMS), Dekkers explained that in particular global overcapacity for polycarbonate is negatively affecting business. A large new polycarbonate plant in Asia-Pacific has swelled available volumes and depressed prices to the extent that the company has been unable to recoup its higher raw materials costs.
Bayer has launched what the group CEO called a "modest" four-year cost reduction scheme for BMS, which will cost 700 jobs in its worldwide 14,500-workforce. In Germany, where the business employs 180 people, a pact between Bayer management and the works council will prevent lay-offs. Dekkers said, however, that some jobs could go with the divestment of unspecified businesses.