GERMAN CHEMICALS and drugs group Bayer posted a 9 per cent drop in fourth-quarter profits as price rises failed to offset soaring oil-derived raw materials costs at its plastics division.
Bayer’s MaterialScience unit, the world’s top maker of foam chemicals and transparent plastics for car lights and sports goggles, reported a 64 per cent slump in adjusted earnings.
The result yesterday was in sharp contrast to rival BASF, with whom Bayer competes in insulation foam chemicals and pesticides, which surprised investors with its bullish outlook last week.
Unlike BASF, Bayer is reliant on polycarbonates, used for instance in DVDs and for the panoramic roof in Daimler’s Mercedes SLK convertible. The polycarbonates industry has seen a margins squeeze as new plants come on line, driven by Saudi Kayan Petrochemical’s expansion.
“It always takes a while until a temporary imbalance is absorbed by market demand,” finance chief Werner Baumann said, adding that both the polycarbonates and foam chemicals markets were growing at a healthy 4-6 per cent per year on average.
Mr Baumann said the company would continue hiking prices to counter the impact of raw materials costs driven up by rising oil prices, which neared 10-month highs last week. “In some markets and regions we’re quite happy with the progress we are making. It’s a mixed picture.”
Bayer sees the MaterialScience unit’s earnings recovering markedly in the first quarter from the previous three months, but without matching last year’s level.
The company said it expected a slight increase in adjusted group Ebitda this year, with an increase in sales by about 3 per cent when adjusted for currency swings and takeovers.
Shares of Bayer were down fractionally yesterday on the news. The stock has gained almost 30 per cent in the past three months. While its chemicals division struggles, Bayer, Germany’s largest drugmaker, is pinning its hopes on new drug launches to lift earnings. Bayer has said its four most promising drugs, led by newly launched anti-clotting pill Xarelto, have a combined annual peak sales potential of about €5 billion, but very little of that will be seen in 2012. – (Reuters)
