Dec 12, 2008 Reuters

Bayer aims for 2009 profit rise despite downturn
* Bayer aims to boost 2009 underlying profit despite crisis
* Economic conditions worsening
* May have temporary plant closures in 2009
* Shares outperform DAX

Bayer continues to target an increase in underlying earnings next year even though the economic environment is worsening, weighing particularly on its plastics and foams business, Chief Executive Werner Wenning said on Friday.

The German healthcare-chemicals hybrid still plans to increase earnings before interest, taxes, depreciation and amortisation (EBITDA), adjusted for special items, in 2009, he told a news conference.

Economic condition have "worsened dramatically" in the last few weeks, he added.

The MaterialScience unit, which makes plastics and insulation foams and accounts for about 30 percent of group sales, was preparing for temporary plant shutdowns and shortened work weeks next year, having already taken other steps to curtail output, he said.

The division suffered a "considerable" decline in sales and profit in October and even more so in November, Wenning added.

Bayer, one of the few remaining listed European companies that combine chemicals and drugs production, has stressed its reliance on its medicines units -- so far unscathed by the unfolding economic crisis -- while its plastics unit is drawn into the maelstrom that has also gripped major peers.

U.S. chemical giants DuPont and Dow Chemical earlier this month announced job cuts. Germany's BASF, the world's largest chemical maker, last month cut its 2008 profit outlook for the second time, citing a "massive" decline in demand in key industries.

Bayer's plastics unit depends on demand from construction companies and makers of cars and car parts, among the industries worst hit by the crisis.

Management is discussing a revision of the unit's 2009 investment budget but a reduction from this year's level has already been decided, Wenning said.

Further measures beyond shorter working weeks and plant shutdowns are not on the cards for the division now, he added.

When asked about a possible divestment of the unit, the CEO repeated previous answers, saying that
all of Bayer's three divisions constitute core businesses with "outstanding" growth perspectives.

Sales growth at Bayer's prescription drugs and farming pesticides units will help the company achieve its targets, Wenning said.

Bayer shares fell 2.2 percent to 38.95 euros at 1236 GMT, outperforming the 4.3 percent decline in Germany's blue-chip index DAX.GDAXI.

In October, Bayer had confirmed its target to increase 2008 underlying earnings from last year's level and introduced the goal for a further increase in 2009.

Bayer shares are valued at about 9.5 times estimated 2009 earnings, more than the 8.2 multiple for the European chemicals sector but below the healthcare industry, which trades at a 11.4 ratio.

The shares have lost more than 36 percent this year, trailing the 18 percent decline in the DJ Stoxx healthcare index but outperforming the 41 percent slump in the chemicals benchmark .


Bayer to cut investments at plastics unit in 2009

Bayer plans to reduce investments in plant and equipment at its MaterialScience plastics division next year compared to 2008, Chief Executive Werner Wenning said on Friday.

The unit, which is suffering from a slump in demand from car makers and construction companies, is preparing for temporary plant shutdowns and shortened work weeks but is not planning further measures at this stage, Wenning told a news conference.

December 12, 2008

News Forum: "Bayer's Perspective on Innovation 2008"

Bayer Strengthens Research and Development
Bayer innovations provide solutions for the global challenges of the future /
Pharmaceutical pipeline is well filled, with 50 projects currently in phases I to III of clinical testing /
Ten new crop protection active ingredients are to come onto the market between 2008 and 2012 /
Bayer Chairman Wenning calls for tax breaks for research and development, better patent protection, increased efforts in education policy and a higher acceptance of technology

The Bayer Group is to further expand its research and development activities despite the current financial and economic crisis. "The task now is to set the right course. Only through innovation can our company generate the growth that is essential to safeguard its sustained success," said Werner Wenning, Chairman of the Board of Management of Bayer AG, in an address given in front of 130 journalists during the "Bayer's Perspective on Innovation 2008" press forum in Leverkusen. In 2008 the company's research and development budget is at around EUR 2.8 billion. "This represents the biggest R&D budget in Germany in the chemical and pharmaceutical sector - and amounts to about five percent of all research and development spending by German industry as a whole," explained Wenning. Bayer will continue in the future to commit itself to strong research and development.

Bayer HealthCare: Focus on diseases requiring highly innovative solutions
Bayer CropScience: Safeguarding nutrition for a growing world population
Bayer MaterialScience: Innovative solutions for improved quality of life, climate protection and conservation of resources

Wenning: Research must be supported in Germany through tax breaks
Cooperations and strategic partnerships for excellence in research
Bayer: Science For A Better Life

Address by Werner Wenning Chairman of the Board of Management

--- But first let me say a few words about the Group's performance. As you know, the economic environment has deteriorated dramatically in recent weeks. Yet for Bayer, we remain confident. This is precisely the time when our long-term corporate strategy pays off: HealthCare und CropScience account for some 70 percent of sales and are far less exposed to cyclical fluctuations. We expect to achieve our targets for these two subgroups.

At MaterialScience, however, we have been looking at considerably weaker sales and earnings, even more so in November than in October. Of course we have already responded by cutting back production in some areas and are preparing further measures next year, such as temporary shutdowns and short-time working. For the Group as a whole, however, we intend to achieve growth both this year and next and to improve underlying EBITDA. I feel it's important for me to say this, given the current climate of uncertainty. But I don't wish to say any more on that subject today.

Key Data by Subgroup and Segment, 2007

  Sales EBIT before
special items
EBITDA before
special items
HealthCare  14,807 45.7%  2,492 58.1%  3,792 56.0%
 Pharmaceuticals  10,267    1,641    2,807  
 Consumer Health   4,540     851     985  
CropScience   5,826 18.0%   786 18.3%  1,324 19.5%
 Crop Protection   4,781     632    1,093  
 Science, BioScience
  1,045     154     231  
MaterialScience  10,435 32.2%  1,117 26.1%  1,606 23.7%
 Materials   3,041     100     273  
 Systems   7,394    1,017    1,333  
Reconciliation   1,317     -108      55  
 32,385    4,287    6,777  

EBITEarnings Before Interest and Taxes
Earnings Before Interest, Taxes, Depreciation, and Amortization