Bayer looks to flat earnings in MaterialScience

08 May 2007 12:21  [Source: ICIS news]

LONDON (ICIS news)--Underlying second-quarter operating profits from Bayer's MaterialScience sub-group are likely to be on a par with those earned in the second quarter of 2006, the German healthcare, nutrition and high-tech materials group said on Tuesday.

The company’s polycarbonate and polyurethanes businesses tapped into strong volume growth in the first quarter but were hit by high raw material prices and selling price pressure.

First-quarter MaterialScience EBITDA (earnings before interest, tax, depreciation and amortisation) fell 24.1% to €409m ($553m) on sales growth excluding currency effects and portfolio changes of 9.4% to €2.61bn, Bayer said in its latest stockholders newsletter.

“Following the anticipated strong start to the year, MaterialScience plans to achieve further volume growth in 2007 and expects to sustain a good, value-creating earnings level,” Bayer said. Headline first-quarter financial results were released on 26 April.

In the first quarter of 2006, MaterialScience underlying EBITDA was up 3.2% at €489m on sales up 4.7% excluding currency and portfolio effects of €1.06bn. The quarter included contributions from the HC Starck and Wolff Walsrode businesses divested later in the year.

Bayer said that MaterialScience raw material and energy costs in the latest quarter were €140m higher.

Materials segment EBITDA dropped €90m or 52.9% to €80m against the higher cost backdrop and pressure on selling prices. Segment sales were up 9% on a currency adjusted basis at €739. Polycarbonate sales of €683m were up 9.1% on the same basis, despite lower selling prices.

Thermoplastics polyurethane sales were 8.0% higher at €56m, thanks largely to higher volumes in Europe, Bayer added.

Systems segment EBITDA was down 10.8% at €329m. Higher costs were almost completely absorbed in higher prices and volumes, Bayer said, but there were raw material supply problems at the Shanghai methyl di-p-phenylene isocyanate (MDI) plant. Systems sales were up 9.6% on a currency adjusted basis at €1.87bn.

Polyurethanes sales were up 9.7% on the adjusted basis at €1.33bn. Coatings, adhesives, sealants sales were up 10.3% at €393m.

Bayer said it expected to improve the underlying EBITDA margin in HealthCare towards 24% for the year as a whole. It was 26.3% in the first quarter.

CropScience was expected to grow slightly faster than the market and improve the underlying EBITDA margin towards 22%, it added. The margin was 32.7% in the first quarter.

By: Nigel Davis
+44 20 8652 3214

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