FRANKFURT—Chemicals and pharmaceuticals conglomerate Bayer AG Thursday confirmed its full-year guidance as strong business in emerging markets and continuing high demand for its crop protection products boosted results, but high raw material and energy costs clouded prospects for its plastics and foam unit MaterialScience.
Bayer's third-quarter net profit soared to €642 million from €285 million, after the previous year's quarterly profit was cut by high provisions for legal costs. Analysts expected net profit of €547 million. Sales rose only 4.8% in currency and portfolio-adjusted terms to €8.67 billion, somewhat below forecasts for €8.71 billion.
Ebitda before special items rose 8.5% to €1.81 billion, exceeding analysts' expectations for €1.69 billion.
The company said it still expects group sales, adjusted for currency and portfolio effects, to grow between 5% and 7% in 2011. Earnings before interest, taxes, depreciation and amortization before special items is expected to rise above €7.5 billion. Core earnings per share, a measure of profitability that excludes non-cash expenses and other items, is expected to rise about 15%.
While the crop protection business continued to benefit from sustained high prices for agricultural raw materials, results at Bayer's plastics unit MaterialScience, once the company's main earnings driver, were hit by high energy and raw material costs, prompting the German conglomerate to lower the division's 2011 guidance. It now expects Ebitda before special items to fall to about €1.3 billion from a previous forecast for growth at a higher rate than sales. Third-quarter Ebitda before special items declined 15% to €348 million, as higher selling prices couldn't fully offset high raw material and energy costs. Increases in project-related operating costs and downtime costs also had a negative impact on earnings, Bayer said.
"We're experiencing a slight weakening in demand," said Bayer Chief Executive Marijn Dekkers, pointing in particular to the construction industry in
Still, that weakness was offset by strong results in the crop protection and pharma divisions. In both units, Bayer was able to lift its earnings guidance.
Investors reacted positively, and by early afternoon Bayer's shares traded 3.5% higher, while
"The company enjoyed excellent profitability," said Daniel Wendorff of Commerzbank, pointing to the "outstanding" profitability in Healthcare, normally a weak spot in Bayer's earnings.
Bayer's troubled HealthCare business reported better than expected earnings due to lower costs, although health system reforms continue to weigh, the company said.