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July 2008
Interim report for the second quarter of 2008 - Bayer continues its success
Sales up 3.6 percent to EUR 8,511 million / EBITDA before special items increases by 5.0 percent to EUR 1,896 million / EBIT before special items improves by 5.3 percent to EUR 1,248 million / Full-year guidance for CropScience raised again / Group earnings forecast confirmed
Earnings before interest, taxes, depreciation and amortization (EBITDA), before special items, rose by 5.0 percent in the second quarter, to EUR 1,896 million (Q2 2007: EUR 1,806 million). Here, too, CropScience posted the largest increase. “We are very satisfied with our performance overall. We succeeded in significantly improving our operating result although exchange rates remained unfavorable and energy and raw material costs continued to rise,” Wenning said. In the second quarter alone, currency effects diminished EBITDA by approximately EUR 190 million. The operating result (EBIT) before special items grew by 5.3 percent to EUR 1,248 million (Q2 2007: EUR 1,185 million).
Positive trend at HealthCare continues
Sales of Bayer HealthCare improved by 0.5 percent in the second quarter to EUR 3,734 million (Q2 2007: EUR 3,717 million). The currency- and portfolio-adjusted increase was 6.6 percent.
Sales in the Pharmaceuticals segment held steady year on year, at EUR 2,584 million. On a currency- and portfolio-adjusted basis, business expanded by 5.8 percent. The strongest growth among the leading products was achieved by the cancer drug Nexavar®, sales of which advanced by 90.4 percent on a currency-adjusted basis (Fx adj.). Also posting strong gains were the hormonal intra-uterine system Mirena® and the Yasmin®/YAZ®/Yasminelle® family of oral contraceptives, where sales grew by 47.2 and 32.1 percent (Fx adj.), respectively. Sales of the multiple sclerosis treatment Betaferon®/Betaseron® gained 13.6 percent and Aspirin Cardio® 22.2 percent (both Fx adj.). Sales of the hemophilia drug Kogenate® declined by 6.7 percent (Fx adj.), largely due to fluctuations in the order pattern of a marketing partner.
In the Consumer Health segment, business expanded by 1.4 percent (currency- and portfolio-adjusted: 8.3 percent) in the second quarter, to EUR 1,150 million. All divisions contributed to this increase. In the over-the-counter medicines (Consumer Care) business, the antifungal Canesten® showed the biggest increase among the leading products, with business up by 23.4 percent (Fx adj.), followed by the analgesic Aleve®/ naproxen (Fx adj. 19.4 percent). The Diabetes Care Division continued to benefit from the successful marketing of the Contour® blood glucose monitoring systems (Fx adj. +22.3 percent), which are replacing the older Elite® systems. In the Animal Health Division, our important product Advantage® – used for flea control – experienced sales growth of 6.2 percent (Fx adj.).
EBITDA before special items of the subgroup climbed by 2.6 percent to EUR 994 million (Q2 2007: EUR 969 million). The pleasing growth in business and synergies from the integration of Schering, Berlin, Germany, more than offset unfavorable currency effects and the considerably higher marketing costs associated with business expansion in emerging countries and new product launches.
Outstanding performance by Bayer CropScience
The Bayer CropScience subgroup was particularly successful, with sales rising by 15.5 percent to EUR 1,804 million (Q2 2007: EUR 1,562 million). On a currency- and portfolio-adjusted basis, the increase was 23.0 percent. Growth was attributable chiefly to a very gratifying volume increase and a rise of nearly 3 percent in selling prices. “Our business benefited from the trend on the world agricultural markets and generally favorable weather patterns in Europe and Latin America,” Wenning remarked.
Sales of the Crop Protection business climbed by 20.9 percent (Fx adj. 29.1 percent) to EUR 1,526 million. Sales rose in all business units thanks to the positive market environment, but were particularly strong for fungicides. Our young products based on active substances introduced to core markets since 2000 achieved above-average growth, with sales advancing by roughly 50 percent to over EUR 500 million. “We are confident of generating annual sales of EUR 2 billion with these products by 2009 – two years earlier than our original goal of 2011,” Wenning said.
Business in the Environmental Science, BioScience segment declined by 7.3 percent (currency- and portfolio-adjusted: 2.6 percent) year on year, to EUR 278 million. Sales of the BioScience business group gained 13.0 percent to EUR 113 million. Adjusted for currency effects and for acquisitions in the cotton and vegetable seed businesses, sales of BioScience rose by 13.9 percent. By contrast, sales of Environmental Science declined by 17.5 percent (Fx adj. 10.9 percent) to EUR 165 million. In North America, there was a further drop in sales of products for professional users in the green industry segment, while in Europe, business was down particularly in the area of home and garden products for consumers.
EBITDA before special items of Bayer CropScience increased by 26.5 percent to EUR 501 million (Q2 2007: EUR 396 million), due to higher earnings from the crop protection business. Against the background of a positive market environment and steadily rising raw material and energy costs, the subgroup succeeded in implementing price increases for a number of product groups in the first six months of the year. Bayer CropScience is planning further price adjustments in the second half of 2008.
Difficult market environment for Bayer MaterialScience
Sales of our high-tech materials business were level with the prior-year quarter, at EUR 2,622 million (Q2 2007: EUR 2,623 million). Bayer MaterialScience exceeded the figure for the same quarter of 2007 by 5.3 percent on a currency- and portfolio-adjusted basis. This expansion was attributable to selling price and volume increases.
In the Systems segment, sales advanced by 3.7 percent (currency- and portfolio-adjusted: 8.1 percent) to EUR 1,935 million. All business units contributed to this increase. Our foam raw materials (polyurethanes) business – particularly TDI (toluene diisocyanate) – posted a gratifying performance. The Polyurethanes business unit saw sales rise by a currency- and portfolio-adjusted 8.7 percent overall. Our coatings, adhesives and specialties businesses grew by a currency- and portfolio-adjusted 5.2 percent.
The Materials segment generated sales of EUR 687 million, down 9.2 percent from the prior-year period. Adjusted for currency and portfolio effects, sales declined by 1.8 percent. The main reason for this was price erosion for polycarbonates, while volumes of these products held steady. Sales of the Polycarbonates business unit dropped by 2.3 percent on a currency- and portfolio-adjusted basis. By contrast, the Thermoplastic Polyurethanes business unit grew sales by a currency- and portfolio-adjusted 4.3 percent.
Despite this expansion in business, EBITDA before special items of Bayer MaterialScience fell by 9.0 percent to EUR 372 million. Overall earnings were weighed down by a year-on-year increase of more than EUR 100 million in raw material and energy costs and by negative currency shifts. These effects were not completely offset by selling price and volume increases and savings from the cost structure programs.
