ROUNDUP Bayer Q3 pre-ex EBITDA beats consensus as Schering drugs outperform

ROUNDUP Bayer Q3 pre-ex EBITDA beats consensus as Schering drugs outperform

	Published : Tue, 06 Nov 2007 14:23 By : Agencies Print this Story

LEVERKUSEN, Germany (Thomson Financial) - Bayer AG said EBITDA before one-time charges rose 6.9 pct to 1.559 bln eur helped by higher sales of the Yasmin and Mirena contraceptives, acquired as part of the takeover of rival Schering.

This surpassed the 1.546 bln eur average estimate compiled in a Thomson Financial News survey of seven analysts.

Third-quarter revenue advanced 4.5 pct to 7.793 bln eur, compared with an average analyst forecast of 7.764 bln.

'Not least because of the Schering acquisition, we have enhanced our earnings power (in the long term),' chief executive Werner Wenning said.

'The results were solid,' said Martin Brunninger, an analyst at Cazenove in London. 'But once again the main profit contributors and growth drivers were Schering products and pharmaceuticals from the traditional Bayer business were very disappointing.'

The shares gained as much as 1.67 pct in early trading but later swung into losses in what traders described as profit taking. The stock traded at 56.54 eur, down 0.47 eur, or 0.82 pct as per 2:13 pm, while the benchmark DAX fell 0.56 pct.

Bayer last year bought rival German drug maker Schering for 17 bln eur, to increase the size of its pharmaceuticals for faster growth and more efficiency.

Yasmin generated 35 pct more quarterly revenue than last year, while the growth rate was 29.7 pct for Mirena. The two Schering products were the fastest growing among Bayer's 10 best selling pharmaceuticals.

Cazenove's Brunning also pointed to Trasylol, an injection to prevent excessive blood loss during surgery, which Bayer yesterday temporarily pulled off global markets because of reported side-effects. Trasylol is part of Bayer's traditional business, as is the Cipro antibiotic, which saw a loss in sales of 17.9 pct in the third quarter.

'These results highlight the necessity of the Schering acquisition,' Brunning said.

The German company also said it expects the 2007 margin of EBITDA before one-time charges over sales to reach at least 20.3 pct, up from 19.3 pct last year.

Chief executive Wenning has declared EBITDA before one-time charges as a percentage of sales Bayer's yardstick of success, having said previously the margin is set to exceed 20 pct this year and rise above 22 pct by 2009.

The full-year sales target was also increased, to more than 32 bln eur, a gain of about 6 pct when excluding the effect of portfolio changes and currency swings and higher than the earlier comparable goal of an about 5 pct rise.

Quarterly revenue at the HealthCare unit, Bayer's largest, rose 5.7 pct to 3.680 bln.

'Crop chemicals and plastics remain important units at Bayer but after the Schering acquisition everyone's focus is really more and more on health care,' said Ulle Woerner, analyst at Landesbank Baden-Wuerttemberg (LBBW).

The company sees the 2007 pre-exceptional EBITDA margin at the division, whose products range from the Aspirin painkiller to blood-clotting drug Kogenate and the Betaferon multiple sclerosis injection, at more than 25 pct. The previous goal was to reach 25 pct.

Wenning said he deems the experimental anti-thrombosis pill Xarelto Bayer's most promising product, saying it has 'blockbuster potential'.

In addition to the four uses Xarelto is being tested for, a further indication for hospitalised patients with internal diseases will be pursued.

Other drugs that will drive the unit's expansion include the Nexavar kidney cancer treatment, which was recently cleared to treat liver cancer patients in Europe as well.

Bayer's CropScience unit posted a 10.3 pct revenue gain on strong demand for pesticides in Latin America. Pre-exceptional EBITDA jumped 16.8 pct to 167 mln eur at the unit, 'due largely to higher volumes', the company said.

The company-wide net profit soared to 1.175 bln eur, up from 320 mln eur last year on tax effects. Bayer said it freed up 911 mln eur of money set aside for future tax liabilities because of a cut in the corporate tax rate next year.

Bayer also said it plans to restructure its MaterialScience unit and to cut jobs there to save 300 mln eur a year by the end of 2009. This will prompt total special charges of 150 mln eur to 200 mln in 2008 and 2009, it added.

Job cuts of 1,500 worldwide will be pursued in a 'socially compatible way and through normal attrition', and should be achieved without redundancies, Wenning said.

ludwig.burger@thomson.com

lb/slj/lb/wj/mog/slm/lb/ajb

The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.