Bayer MaterialScience PU unit Q2 sales rise 8.4% on higher prices

28 July 2011 12:27  [Source: ICIS news]

LONDON (ICIS)--Bayer MaterialScience's (BMS) polyurethane (PU) business unit increased its year-on-year sales in the second quarter by 8.4% to €1.37bn on strong revenue from methyl di-p-phenylene isocyanate (MDI) and polyether polyols that outweighed weaker-performing toluene di-isocyanate (TDI), the company said on Thursday.

The growth was largely because of higher selling prices in all regions, particularly in Europe, and specifically for MDI and polyether polyols products, the Germany-based producer said.

Between the start of the second quarter of 2010 and the end of the second quarter of 2011, European crude MDI prices rose by €500/tonne ($714/tonne), taking values to €2,000–2,050/tonne FD (free delivered) NWE (northwest Europe), according to ICIS.

The rise has been driven by growing demand in the construction sector, in particular for insulation applications, that is outpacing MDI supply. The growth potential in the insulation sector is due to increasing legislative requirements related to environmental concerns.

European pure MDI values rose by €450–550/tonne from the start of the second quarter of 2010 to the end of the second quarter in 2011, to €2,100–2,250/tonne FD NWE.

An extended downstream footwear season, some production constraints and good performance for downstream case adhesive sealant elastomer (CASE) applications, tied to construction activity, pushed MDI prices higher.

During the same period, sucrose base rigid polyols and flexible slabstock polyol prices moved up by more than €300/tonne. At the end of the second quarter of 2011, slabstock flexible prices were at €1,850–1,950/tonne FD NWE, while sucrose base rigid polyols were at €1,950–2,000/tonne FD NWE.

Similar to MDI, rising insulation demand for rigid polyols, a spate of planned and unplanned outages and the general uptrend in propylene feedstock costs, with the exception of the past two months, have caused substantial price increases for polyols.

By contrast, European TDI prices have dropped by up to €190/tonne since the start of the second quarter in 2010. This translated into values of €2,030–2,090/tonne FD NWE by the end of the second quarter in 2011.

The price erosion for TDI has been despite the general uptrend in toluene feedstock values over the same period and has been driven by lower-than-expected demand from the main downstream bedding and furniture sectors, thought to be due to reduced consumer spending and fewer export opportunities to the Middle East and Africa, due to the slowdown in Asia.

BMS’s overall PU volumes softened slightly year on year because of weaker demand for TDI and MDI. This was despite the significantly higher volumes for PU products in Europe, Latin America, the Middle East and Africa, which did not compensate for lower offtake in North America and the Asia-Pacific region.

BMS's polycarbonate business unit increased sales by 6.7%  year on year to €761m. Volumes were down overall, although the marked drop in the Asia-Pacific region, Latin America and the Middle East and Africa were partially offset by a moderate rise in North America and Europe.

On Thursday, German chemicals producer Bayer reported a 40.9% year-on-year jump in its second-quarter net profit to €747m, despite flat earnings at its MaterialScience business.

The MaterialScience segment reported €372m in earnings before interest, tax, depreciation and amortisation (EBITDA) before special items for the June 2011 quarter, from €373m in the same period last year.

According to analyst Bernstein Chemicals, Bayer’s group sales of  €9,252m were around 3% behind the analyst's forecasts and consensus.

It added that the company's underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of €2,035m was more or less in line with its forecasts and consensus, but said that around 1% of the underlying EBITDA came from a settlement gain.

Bayer's shares were down 2.84% at €55.72 at 10:58 London time on Thursday.

($1 = €0.70)

For more on Bayer visit ICIS company intelligence

By: Heidi Finch
+44 20 8652 3214

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