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.
Forum: "Bayer's Perspective on Innovation 2008"
Research and Development
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.
HealthCare: Focus on diseases requiring highly innovative
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.
Key Data by Subgroup and Segment, 2007
EBIT：Earnings Before Interest and Taxes）
EBITDA：Earnings Before Interest, Taxes, Depreciation, and Amortization