UpdateBayer will invest to expand MaterialScience in China - CEO

28 October 2010 12:16  [Source: ICIS news]

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LONDON (ICIS)--Bayer MaterialScience's main driver of investment will be the further expansion of production capacities in China after it made a strong contribution to the German specialty chemical maker's total earnings growth, chairman Marijn Dekkers said on Thursday.

Bayer reported a 12.4% year-on-year increase in third-quarter net profit to €280m ($384m) as sales for the three months to September jumped 16% to €8.58bn on the back of an improved performance from its MaterialScience business.

Sales from MaterialScience surged 30.8% to €2.67bn, while its earnings before interests, taxes and amortisation (EBITDA) soared 72% to €409m.

"The growth was due to significantly higher demand in our main customer industries. Selling prices also rose distinctly overall," Dekkers said.

Dekkers added that Asia, in particular China, continued to gain in importance as a market for Bayer’s MaterialScience products, and the sub-group wanted to take advantage of this market trend.

"We plan to take advantage of these trends. The main driver of investment at BMS is therefore the ongoing expansion of production capacities in China," Dekkers said.

Bayer’s HealthCare business saw sales increase 8.5% year on year to €4.27bn while EBITDA before special items fell 3.7% to €1.10bn. Dekkers said that the group’s pharmaceuticals business had become stagnant due to current difficult market conditions.

The group’s CropScience segment meanwhile witnessed sales grow 17.6% to €1.3bn compared with the third quarter of 2009, partly due to an improvement in demand. EBITDA before special items of the subgroup grew by 16.7% in the third quarter of 2010 to €126m, after Bayer achieved strong growth rates for its fungicides, insecticides and herbicides.

In addition, Bayer further reduced the group's overall net financial debt during the third quarter from €10.7bn to €9.1bn, on the back of cash inflows from business operations and positive currency effects of €400m, Dekkers said.

Group operating profit, however, slipped 14% to €556m as it had set aside €436m in provisions for litigations in the US.

In the first nine months of 2010, the company’s net profit was up 24% to €1.50bn on the back of a 12% growth in sales to €26.08bn, the chairman said. Its operating profit for the period rose 4.5% to €2.76bn, he added.

Looking ahead, Bayer remained optimistic for 2010 and announced it would continue to target sales growth of more than 5% on a currency and portfolio adjusted basis.

“It remains our aim to increase EBITDA before special items to more than €7bn. And we still expect core earnings per share to improve by more than 15%,” Dekkers said.

In addition, Bayer was optimistic about its MaterialScience business for the rest of the year.

“For the full year 2010 we expect sales at MaterialScience to be in the region of €10bn, and EBITDA before special items in excess of €1.3bn. This would be about three times the prior-year earnings level,” Dekkers said.

“Our original goal for MaterialScience was to re-attain the pre-crisis sales level by 2012. We will now achieve this much earlier than planned," he added.

Additional reporting by Pearl Bantillo

($1 = €0.72)

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By: Franco Capaldo
+44 (0)20 8652 3214

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