Bayer Declares 2008 Results, With Increase In Revenue Of 1.6%

The Bayer Group achieved its earnings targets for 2008. “From an operational standpoint, 2008 was the most successful year in Bayer’s long history,” said Management Board Chairman Werner Wenning at the Spring Financial News Conference in Leverkusen. He explained that Bayer is benefiting from its alignment toward the life-science businesses HealthCare and CropScience, which are less dependent on global economic development. “Our corporate strategy is proving effective even in a difficult environment,” Wenning pointed out. However, he said the effects of the unexpectedly severe financial and economic crisis left a considerable mark on the MaterialScience business, especially in the fourth quarter. He expressed confidence for 2009 despite substantial risks for the future development of the world economy: “We expect further growth in earnings at HealthCare and CropScience, along with a substantial reduction in net debt.” By contrast, a substantial drop in earnings is anticipated at MaterialScience. Group sales rose by 1.6% in 2008, to EUR 32,918 million (2007: EUR 32,385 million). Adjusted for currency and portfolio effects, the increase came to 4.4%. While HealthCare and CropScience contributed to this performance with strong growth of 6.9 and 13.9%, respectively, sales at MaterialScience fell by 4.6%. Group earnings before interest, taxes, depreciation and amortization (EBITDA) – before special items – improved by 2.3% to EUR 6,931 million (2007: EUR 6,777 million). Here, too, HealthCare and CropScience registered strong gains, while MaterialScience saw underlying EBITDA fall sharply. The underlying EBITDA margin for the Bayer Group came in at 21.1% (2007: 20.9%). The operating result (EBIT) before special items advanced by 1.3% to EUR 4,342 million (2007: EUR 4,287 million).

Bayer HealthCare: above-market growth in all divisions

“2008 was a strong year for Bayer HealthCare,” said Wenning. Sales of this subgroup climbed by 4.1% to EUR 15,407 million (2007: EUR 14,807 million). Adjusted for currency and portfolio effects, business expanded by 6.9%. Contributing to this increase was the positive business performance of both the Pharmaceuticals and Consumer Health segments. “We are particularly pleased that all divisions posted dynamic growth in sales, outperforming their respective markets,” Wenning commented.

Sales of the Pharmaceuticals segment expanded by 4.3% (currency- and portfolio-adjusted: 7.1%) to EUR 10,704 million. Particularly notable was the performance of the YAZ® family of oral contraceptives, sales of which rose by 22.2% on a currency-adjusted basis (Fx adj.). The highest growth rates were registered by the cancer drug Nexavar® with 75.7% (Fx adj.) and the intra-uterine system Mirena® with 35.5% (Fx adj.). The multiple sclerosis treatment Betaferon®/Betaseron® gained 15.0% (Fx adj.), while business with the hemophilia medicine Kogenate® expanded by 7.3% (Fx adj.). “Among the highlights of 2008 were the first marketing authorizations for our innovative anticoagulant Xarelto®,” said Wenning. The drug can now be administered in tablet form for prophylaxis of venous thromboembolism following elective hip or knee-joint replacement surgery in adult patients. Xarelto® is already in the final phase of clinical development for the remaining indications – including the important long-term indications. “We believe this innovative drug has the potential to achieve peak annual sales of more than EUR 2 billion,” said the Bayer Chairman.

The Consumer Health segment increased sales by 3.6% to EUR 4,703 million. On a currency- and portfolio-adjusted basis, sales were up by 6.3%, with all divisions contributing similarly to growth. In the non-prescription medicines business (Consumer Care), the Bepanthen®/Bepanthol® product line posted the strongest growth, with a 20.7% (Fx adj.) increase. The antifungal Canesten® also performed very well, with sales up 16.1% (Fx adj.). In the Diabetes Care Division, the Contour® blood glucose monitoring devices were once again the fastest-growing product line, with a gain of 18.4% (Fx adj.). The top-selling products of the Animal Health Division – the flea and tick control products of the Advantage® line – recorded 11.1% higher sales (Fx adj.).

EBITDA before special items of Bayer HealthCare improved by 9.6% to EUR 4,157 million (2007: EUR 3,792 million). This earnings growth was mainly attributable to the successful development of the business and the synergies realized from the Schering integration. Earnings were diminished by negative currency effects and considerably higher marketing costs for the expansion of activities in emerging markets and the introduction of new products. The subgroup met its target with an underlying EBITDA margin of 27.0%.

Record year for Bayer CropScience

“Bayer CropScience achieved the best performance in the history of our crop protection business,” Wenning reported. Sales of the subgroup grew by 9.5% to a record EUR 6,382 million (2007: EUR 5,826 million). The currency- and portfolio-adjusted increase was even more substantial, at 13.9%.

Business in the Crop Protection segment expanded by 11.7% (Fx adj.: 16.4%) to EUR 5,339 million. In a positive market environment with more favorable weather patterns than in the previous year, sales of all business units improved significantly. Particularly strong growth was recorded in the fungicides business, where sales rose by 28% (Fx adj.). Key growth drivers at Crop Protection were the young products based on active substances introduced since 2000. Sales of these products climbed by some 36% (Fx adj.) to EUR 1.8 billion.

Sales in the Environmental Science, BioScience segment held steady year on year at EUR 1,043 million. On a currency- and portfolio-adjusted basis, business expanded by 2.4%, to which BioScience contributed with a gratifying 18.8% improvement. Sales at Environmental Science, however, were down by 7.0% after adjusting for currency effects. This was mainly due to lower sales of products for professional users in the North American green industry on account of adverse market conditions.

Bayer CropScience as a whole improved EBITDA before special items by 21.1% last year, to EUR 1,603 million (2007: EUR: 1,324 million). The underlying EBITDA margin of 25.1% meant that the figure originally targeted for 2009 was achieved a year earlier than planned.

Business of Bayer MaterialScience hampered by the global economic crisis

The high-tech materials business was hampered by the effects of the global financial and economic crisis in nearly all its product groups and regional markets. Volumes fell in the fourth quarter of 2008 by almost 30% year on year, and capacity utilization was also substantially lower. “We have not seen anything like this before,” declared Wenning. For 2008 as a whole, sales of Bayer MaterialScience receded by 6.7% to EUR 9,738 million (2007: EUR 10,435 million). The currency- and portfolio-adjusted decrease came to 4.6%.

Sales in the Systems segment fell by 3.6% from the previous year, to EUR 7,130 million. On a currency- and portfolio-adjusted basis, business shrank by 2.7%. There were declines both for foam raw materials (Polyurethanes), and in the Coatings, Adhesives, Specialties business.

Sales in the Materials segment declined by 14.2% (currency- and portfolio-adjusted: 9.5%) to EUR 2,608 million. While business with polycarbonates fell by 10.1% after adjusting for currency and portfolio effects, the Thermoplastic Polyurethanes business unit saw sales recede by an adjusted 2.4%.