Bayer quarterly performance robust in a difficult environment

Bayer's Q2 profits beat analysts' expectations, despite a dramatic 36.4% drop in Bayer MaterialScience (BMS) sales. In Q2-2009 the Bayer Group's businesses turned in a robust performance in a difficult environment. CropScience also continued to increase sales and matched the good earnings level of the prior-year period, while the HealthCare subgroup registered strong gains in sales and earnings. MaterialScience improved its performance compared with Q1-2009 but remained well below the prior year. The signs that the bottom of the cycle has been reached in the industrial business have thus been confirmed, although a lasting improvement is not yet in sight. Key data for the Bayer Group improved in Q2-2009 compared with the first three months - in some cases considerably - but remained below the high level of the second quarter of 2008. Group sales fell by 5.9% to €8,009 mln (Q2 2008: € 8,511 mln). Adjusted for currency and portfolio effects, sales fell by 8.9%. Earnings before interest, taxes, depreciation and amortization (EBITDA) - before special items - dropped by 6.9% to €1,765 mln (Q2 2008: €1,896 mln). The operating result (EBIT) before special items receded by 11.8% to €1,101 mln (Q2 2008: €1,248 mln). "Our high-tech materials business stabilized in the second quarter, with sales and earnings showing a marked improvement against the first three months," Management Board Chairman Wenning explained. However, volumes and selling prices at MaterialScience were still substantially below the prior-year period. Sales of the subgroup dropped by 30.2 % to € 1,830 mln (Q2 2008: € 2,622 mln). Adjusted for currency and portfolio effects, sales were down by 34.4 %. Demand in key customer industries was significantly lower than in the prior-year period due to the financial and economic crisis. Sales of foam raw materials (Polyurethanes) posted the steepest decline (Fx & portfolio adj. minus 38.6 %), while business with high-tech plastics (Polycarbonates) receded by 32.3 % on a currency-adjusted basis. The Coatings, Adhesives, Specialties unit registered a decline of 29.3 % (Fx & portfolio adj.). EBITDA before special items of MaterialScience dropped by 67.5 % to € 121 mln (Q2 2008: € 372 mln). Lower raw material and energy costs and a divestment gain of € 15 mln had a positive effect. The restructuring program launched in 2007 also resulted in cost savings. EBITDA before special items in the first quarter of 2009 was minus € 116 mln. MaterialScience has responded extensively to the slump in demand. Considerable production capacities in the Polycarbonates, Polyurethanes and Coatings, Adhesives, Specialties businesses were temporarily shut down at an early stage. In addition, the decision has been made to permanently shut down certain capacities for Polyurethanes; Coatings, Adhesives, Specialties; and Basic Chemicals by the end of the year. Further structural measures are to take place depending on market developments, particularly in Polycarbonates. "What's more, we will speed up the implementation of the restructuring programs already announced," said the Bayer CEO.