UpdateBayer Q2 net profit up despite weak MaterialScience results

31 July 2013 12:10  [Source: ICIS news]

(updates throughout including sector breakdown, analyst comment)

Bayer headquarters in Leverkusen, GermanyLONDON (ICIS)--Bayer’s net profit for the second quarter of the year increased by 75% compared with the same period in 2012, as a strong growth for its life science and crop treatment divisions offset a weaker performance by its MaterialScience arm, the company said on Wednesday.

The Germany-based chemicals producer’s sales increased by 1.9% year on year to €10.4bn ($13.8bn) compared to the same quarter last year, while net profit increased from €481m in the second quarter of 2012 to €841m, driven by a more-than threefold increase in HealthCare operating profits and a 30% increase in CropScience operating profits.

Operating profit for Bayer MaterialScience was down 29% for the quarter, at €143m. Total group operating profit was €1.29bn, a 74% year-on-year increase, while earnings before interest, tax, depreciation and amortisation (EBITDA) for the June quarter were up 34% at €2.09bn, Bayer said.

Bayer HealthCare’s operating profits for the quarter were €729m compared with €234m profit recorded in the same period in 2012, driven by a strong contribution from new pharmaceutical products and growing consumer health sales buoyed by emerging markets and consumer care sales.

Sales in this segment increased 3.8% year on year to €4.80bn, Bayer said.

"At HealthCare, the launches of new pharmaceutical products are progressing considerably better than expected,” said company chairman Marijn Dekkers in the statement.

With falling sales and profits, Bayer is predicting that its MaterialScience division will underperform in 2013 compared to the previous year. Division sales volumes for the quarter were on a par with the second quarter 2012, as North American growth offset slumps in most other regions.

However, sales and profit figures were impacted by lower selling prices in Europe and Asia Pacific, the company added. Sales fell by 2.7% year on year during the quarter to €2.88bn.

“The subgroup now expects EBITDA before special items to come in below the prior-year figure. In the third quarter, MaterialScience expects sales (foreign exchange & portfolio adjusted) and EBITDA before special items to exceed the levels of the second quarter of 2013,” Bayer said.

Meanwhile, Bayer CropScience had a 30% increase in operating profit to €496m, with sales up 5.1% to €2.39bn as a result of strong growth in Latin America, Africa and the Middle East, Bayer said. Demand from Europe and Asia also remained strong, while North American volumes were impaired by a late start to the growing season.

"Our business continued to be supported by the persistently high price levels for agricultural commodities," Dekkers said.

For the first half of 2013, Bayer’s overall net profit grew 32% year on year to €2.00bn, with sales rising 2.0% to €20.6bn, the company said.

US-based analyst Bernstein Research said that Bayer’s earnings per share (EPS) for the quarter were 5% above consensus forecasts, but noted that the company’s performance in EBITDA terms was in line with the market analyst estimates, leading it to rate the company at "Market-Perform".

Bernstein said: “We think MaterialScience margins are set to improve since the industry's capacity surplus is working its way through the system and prices are increasing again. For CropScience, we have similar concerns as with Syngenta that volume growth will slow as crop price inflation eases.

“HealthCare has many of the attributes we prefer, but these are well known to investors, and are largely reflected in the current valuation,” Bernstein added.

($1 = €0.75)

Additional reporting by Pearl Bantillo


By: Tom Brown
+44 208 652 3214



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