UpdateCorrected: Bayer to close down US chemicals plants, sees no recovery

29 July 2009 14:37  [Source: ICIS news]

Correction: In the ICIS news story headlined “Bayer to close down US chemicals plants, sees no recovery” dated 29 July, 2009, please read in the third paragraph …a small methyl di-p-phenylene isocyanate (MDI) plant would also be closed … instead of  … a small US methyl di-p-phenylene isocyanate (MDI) plant would also be closed…. A corrected story follows.

(Releads and updates throughout)

By Mark Watts and Bohan Loh

Bayer CEO Werner Wenning sees no sign of sustained recoveryLONDON (ICIS news)--Bayer plans to close down several chemicals plants in the US, where it still sees no sign of sustained improvement in demand, the German chemicals and drugs maker said on Wednesday.

The company’s Bayer MaterialScience division said permanent shutdowns would include a resins plant in New Martinsville, West Virginia, and a chlorine electrolysis plant in Baytown, Texas.

Bayer’s polycarbonate films production in Berlin, Connecticut, would be consolidated at the company’s Massachusetts site, while a small methyl di-p-phenylene isocyanate (MDI) plant would also be closed.

Bayer said further restructuring measures would take place depending on economic developments, especially in polycarbonates, with more decisions due at the end of 2009.

“The bottom of the cycle has been reached, but there is still no sign of a sustained recovery in demand,” said group CEO Werner Wenning.

The group reported a 7.3% year-on-year drop in its second-quarter net profits to €532m ($755m) as a poor performing MaterialScience division continued to drag down earnings of the group.

Bayer’s MaterialScience division was the only business segment that reported a loss before interest, tax and special items during the three-month period to 30 June, of €22m.

Earnings before interest, tax and special items from the company’s Healthcare business rose 19% year on year to €758m, while contribution from the Cropscience division was flat at €374m for the same period.

Group revenue for the quarter came in 6% lower year on year at €8.01bn, largely due to a 30% plunge in sales volumes at Bayer’s MaterialScience division.

“Demand in key customer industries was significantly lower than in the prior-year period due to the financial and economic crisis,” Bayer said, adding that certain capacities within the business segment would be permanently shut by the end of the year.

Bayer said that the strongest “return to normality” in terms of chemicals volumes was in Asia, led by China, while the US had showed no recovery from earlier in the year, at the height of the economic crisis.

Global polycarbonate and MDI production was running at 60% of nameplate capacity, while toluene di-isocyanate (TDI) was at 70%.

MaterialScience was expected to report a positive underlying EBITDA for the third quarter and for the full year of 2009.

Bayer gave a full-year group sales guidance of between €31-32bn and reiterated its target of limiting any declines in group earnings before interest, tax, depreciation and amortisation (EBITDA) before special items to 5%.

Bayer shares had risen to €42.19 by 14:03 CET, up 5.3% from Tuesday's close.

($1 = €0.71)

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By: Mark Watts
+44 20 8652 3214



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