Stronger Q2 volumes drive profits growth at Bayer MaterialScience

Nigel Davis

30-Jul-2014

Bayer headquarters in Leverkusen, GermanyLONDON (ICIS)–Bayer’s MaterialScience businesses produced a 12.5% higher underlying operating profit in the second quarter of €126m on significantly higher volume growth across most of its portfolio, the company said on Wednesday.

This Q2 earnings before interest and tax (EBIT) number is before a restructuring charge of €17m in the 2014 quarter and a special gain of €31m in the Q2 2013.

“Earnings were helped by higher volumes, lower raw material prices and our efficiency improvements,” the diversified, Germany-headquartered healthcare, crop protection and materials company said.

Bayer MaterialScience sales were down 0.4% at €2.86bn in the quarter or 3.6% higher when adjusted for the strengthened euro and portfolio changes.

“This growth was due to significantly higher volumes for polycarbonates; polyurethanes; and coatings, adhesives, specialties,” Bayer management board chairman Marijn Dekkers explained.

Higher MaterialScience volume sales were achieved in North America, Europe and Asia-Pacific, Bayer said, but volumes were lower in Latin America/Africa/Middle East. Selling prices, meanwhile, were lower than in the prior-year quarter in all regions.

Bayer MaterialScience produced strongest volume growth in its polycarbonates business driven by improved demand from customers in the automotive and electrical/electronics industries. The much larger polyurethanes business did not grow as strongly but volumes were higher in North American and Europe, in particular, while they were flat in Asia-Pacific.

Bayer on Wednesday reported second quarter net income up 13.3% year on year to €953m buoyed partly by strong sales of its pharmaceutical products.

The company’s sales rose by 0.95% year on year to €10.5bn in the second quarter, while its earnings before interest and taxes (EBIT) were up by 14.5% at €1.47bn.

“Our life science businesses, in particular, saw unabated growth momentum, with very encouraging sales gains for our recently launched pharmaceutical products and our North and Latin American CropScience business,” it said.

For the first six months of this year, the company’s net income rose by 18.7% year on year to €2.38bn, while sales were up by 1.88% at €21bn.

Bayer’s Q2 healthcare segment EBIT before special items were up 0.4% at €991m on sales up 0.9% at €4.85bn. The Healthcare sales increase was 6.3% on a currency and portfolio adjusted basis.

Bayer CropScience EBIT before special items were down 8.6% at €470m on sales 3.3% higher at €2.47bn or 10.5% higher on a currency and portfolio adjusted basis.

 “We now plan to grow [group] sales by about 6% on a currency- and portfolio-adjusted basis,” the company said.

“Allowing for negative currency effects of about 4% compared to the previous year, group sales would be approximately €41bn…we plan to raise EBITDA [earnings before interest, tax, depreciation and amortisation] before special items by a low- to mid-single-digit percentage,” it added.

Bayer expects its MaterialScience sales this year to increase on a currency and portfolio adjusted basis by “a mid single-digit percentage” and for earnings to rise.

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