UpdateBayer's Q4 net income rises, but weak outlook for chemicals

03 March 2009 14:45  [Source: ICIS news]

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By Andy Brice and Hilde Ovrebekk

Bayer CEO Werner Wenning addresses the mediaLEVERKUSEN, Germany (ICIS news)--Bayer’s fourth quarter net income after non-controlling interest rose 58% to €106m ($133m) year on year as the group's life-science businesses offset a weaker performance in the recession-hit plastics segment, the company said on Tuesday.

Underlying operating profits fell by 8.8% in the fourth quarter of 2008 to €706m. Sales came in at €1.36bn, down 4.6% from €1.42bn in the fourth quarter of 2007 due to a significant decline in MaterialScience.

Earnings before interest, tax, depreciation and amortisation (EBITDA) before special items from its MaterialScience business slumped to €54m from €367m in the fourth quarter of 2007, due mainly to the steep decline in volumes as a result of a sharp deterioration in the automotive, construction and furniture industries, Bayer said.

Chairman of the management board Werner Wenning said the company expected a substantial drop in 2009 earnings for MaterialScience.

"In the main sectors of importance for our MaterialScience business, we anticipate a very difficult year marked by a great deal of uncertainty. The high-tech materials business is heavily impacted by the global recession," said Wenning, speaking at the company’s annual results conference in Leverkusen.

"The start to the year...has been even weaker than anticipated, and we must expect a severe drop in this subgroup's sales and earnings for 2009," he added.

MaterialScience recently announced it would reduce the working hours of its German non-managerial employees by 6.7%, effective on 9 February, and cut wages and salaries accordingly for an initial nine-month period.

HealthCare saw earnings advance by 18.8% to €1.10bn from €922m, EBITDA of its CropScience division improved by 2.8% to €182m from €177m, the German chemicals and pharmaceuticals company said.

Wenning said the company was benefiting from its life-science businesses HealthCare and CropScience, which are less dependent on global economic development.

“We expect further growth in earnings [for 2009] at HealthCare and CropScience, along with a substantial reduction in net debt,” he said.

Bayer had committed to raising its research spending in 2009 to €2.9bn, the largest R&D budget in its history, Wenning said.

For the full year, the company reported a 63.5% slump in net income to €1.72bn from €4.71bn in 2007. Operating profits rose 12.4% to €3.54bn, while sales increased 1.6% to €32.92bn from €32.39bn.

“From an operational standpoint, 2008 was the most successful year in Bayer’s long history,” said Wenning.

Bayer shares had dropped over 1.3% from Monday’s close to €36.20 at 13:30 GMT.

($1 = €0.80)

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By: Andy Brice
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