This year, the Bayer Group is among the positive exceptions in German industry. While the outlook for the majority of businesses is bleak, for Bayer, it's continuously getting better.
The secret to its success: Bayer mainly moves in business areas which do not have a direct cyclical impact. But that alone does not explain its rise. Bayer is doing better at developing both its core businesses, pharmaceutics and agrochemistry, than most of its competitors. Marijn Dekkers, Bayer’s chief executive, has raised the forecast for the current business year.
“Operationally and strategically we are making progress,” Mr. Dekkers said.
For 2014, Bayer is expecting a rise in the mid single-digits area with the adjusted operating results. Sales should be at about €42 billion at the end of the year. Bayer was one of the few German DAX groups that made gains in the stock market on Thursday. In the afternoon, the share was quoted almost 2 percent higher, at €109.
Operationally and strategically we are making progress. Marijn dekkers, Bayer chief executive
The pharmaceutical division is again key to Bayer's success. Sales rose in the third quarter about 10 percent to €3 billion, after adjustment for currency effects. Bayer and U.S. companies such as Gilead, Biogen and Johnson & Johnson are among the fastest growing providers in the industry. The sales of Bayer's anticoagulant Xarelto rose about 70 percent to €440 million. In contrast to domestic competitor Boehringer, which had to raise more than €400 million for the defense against a wave of lawsuits for a similar drug, Bayer has so far had no big problems with lawsuits in the United States with Xarelto. According to Werner Baumann, chief strategy and portfolio officer, there have been only a few complaints so far. Bayer does not see this as a larger risk.
The integration of the business with over-the-counter drugs, acquired from Merck & Co., provided for the higher earnings forecast at Bayer. The business as well as other development projects of the U.S. group were taken over at the beginning of October at the price of about €11 billion. It will contribute €70 million to earnings before interest, taxes, depreciation, and amortization, but also still weigh down the profit below the line with €350 million for integration costs.
In the intermediate term, Bayer expects considerably higher earnings contributions from the Merck OTC division, especially with synergies in sales and cost savings in the administration.
The agrochemical business is also going well. Bayer Crop Science raised its profits about a quarter and its sales nearly 15 percent. The group came out considerably stronger than its competitor Syngenta from Switzerland. Most recently, Dupont and BASF registered falling revenues and profits.
The synthetic material-subsidiary Bayer MaterialScience, which Bayer wants to put on the stock exchange as an independent company in the coming year, registered a modest decline in profits in the past quarter, but for the whole year, Bayer raised the forecast as well in that division.
Siegfried Hoffmann writes about pharmaceuticals and chemicals for Handelsblatt. To contact the author: [email protected]