30-Jul-2010 - Bayer AG

Bayer increases sales and earnings in the second quarter

MaterialScience leaves the crisis behind

The Bayer Group once again achieved gains in sales and earnings in the second quarter of 2010. “MaterialScience has left the crisis behind and saw business expand more strongly than expected. Volumes have returned to the pre-crisis level,” explained Management Board Chairman Werner Wenning on Thursday following the publication of the interim report for the second quarter. Sales at HealthCare improved slightly, while the subgroup’s earnings matched the prior-year level. CropScience was down year on year. That subgroup saw volumes and selling prices decline in a market environment made difficult by the competitive situation and unfavorable weather conditions. “We can confirm the 2010 Group outlook we raised in April,” Wenning said.

The Bayer Chairman announced that the company will increase its investment for the future more substantially than planned. “We now expect research and development expenses for the full year to come in at a record level of some EUR 3.1 billion. In this way we are supporting our successful pharmaceutical research and development pipeline – and underscoring our position as the leading research-based pharmaceutical and chemical company in Germany,” said Wenning. Previously the company had planned to raise research and development spending in 2010 to approximately EUR 2.9 billion, compared to EUR 2,746 million in the previous year.

Sales of the Bayer Group rose by 14.6 percent in the second quarter, to EUR 9,179 million (Q2 2009: EUR 8,009 million). Adjusted for currency and portfolio effects, business grew by 9.2 percent. Earnings before interest, taxes, depreciation and amortization (EBITDA) – before special items – improved by 8.6 percent to EUR 1,917 million (Q2 2009: EUR 1,765 million). This was attributable primarily to the gratifying business trends at MaterialScience and Consumer Health, as well as to positive currency effects. The operating result (EBIT) before special items advanced by 14.4 percent to EUR 1,260 million (Q2 2009: EUR 1,101 million). Research and development expenses rose by 12.7 percent to EUR 747 million (Q2 2009: EUR 663 million).

Bayer remains optimistic for 2010

For the full year, Bayer anticipates a further recovery in the global economy, although the pace of growth is expected to slow as the year progresses. “We remain optimistic for 2010,” Wenning emphasized. The strong recovery at MaterialScience is compensating for the below-forecast business performance at HealthCare and CropScience. Currency parities have also continued to trend positively. Bayer continues to target currency- and portfolio-adjusted sales growth of more than 5 percent. The company also still aims to increase EBITDA before special items to more than EUR 7 billion. Core earnings per share are expected to improve by more than 15 percent. The company’s estimates are based on the exchange rates prevailing at the end of the second quarter of 2010.

HealthCare is adjusting its sales forecast for 2010 overall following the unexpected market entry of a generic competitor to YAZ® in the United States. The subgroup now expects sales in the Pharmaceuticals segment to remain level year on year on a currency- and portfolio-adjusted basis. Consumer Health, however, is still expected to expand faster than the market. After adjusting for currency and portfolio effects, HealthCare anticipates a slight increase in sales (previously: about 3 percent). In part because of the situation pertaining to YAZ®, the subgroup expects EBITDA before special items to at least reach the prior-year level (previously: year-on-year increase).

Against the background of the unfavorable weather and market conditions in the first half of the year, CropScience is lowering its sales and earnings forecast for 2010. Provided market conditions return to normal in the second half of the year, this subgroup anticipates that sales in 2010 overall will be slightly lower than the prior-year level on a currency- and portfolio-adjusted basis (previously: increase of between 2 and 3 percent). CropScience expects EBITDA before special items to decline significantly in 2010 overall (previously: level with the prior year).

MaterialScience remains optimistic for the second half and expects business to continue trending positively. From today’s viewpoint, the subgroup now considers as conservative the previous targets of increasing full-year sales by approximately 20 percent and more than doubling EBITDA before special items. MaterialScience expects to exceed these forecasts. In the third quarter, the subgroup anticipates that sales and EBITDA before special items will be in line with those of the previous quarter.

Facts, background information, dossiers
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