Strong demand lifts Bayer past profit estimates
By Mantik Kusjanto
MANNHEIM, Germany (Reuters) - Bayer's <BAYG.DE> quarterly profit surged ahead of market expectations thanks to strong demand for its prescription drugs and farming products, sending its shares to a two-month high on Thursday.
"The very good first quarter also strengthens our confidence for the year as a whole," Chief Executive Werner Wenning said.
First-quarter earnings before interest, tax and special items rose 9 percent to 1.5 billion euros ($2 billion), beating analysts' average estimate of 1.36 billion in a Reuters poll.
Net profit came in at 762 million euros, sharply higher than the market had expected. Sales rose 2.4 percent in the quarter.
Wenning said Bayer continued to expect currency-adjusted growth of about 5 percent in group sales, an increase in core profit before special items and a further improvement in the underlying core profit margin.
At 0930 GMT, Bayer shares were up 2.8 percent at 53.52 euros, the leading gainer in the German blue-chip DAX index <.GDAXI>, which fell 0.6 percent.
"I'm satisfied with the results. All three business units have delivered convincing performance," said Heinz-Josef Stenten, a fund manager at Generali Asset Management, which has shares in the drugs and chemicals group.
Bayer, which invented Aspirin more than a century ago, boosted its healthcare business with its 17 billion euro buy of Schering in 2006. It is now Germany's biggest drugmaker.
Helping boost profits were rising sales in cancer drug Nexavar, up 130 percent, and also by a 33 percent increase in oral contraceptive Yasmin and multiple-sclerosis drug Betaseron.
At its CropScience unit, which is the world's biggest player in insecticides, second in fungicides and third in herbicides, operating profit before special items rose almost a third.
The unit, which competes with Swiss Syngenta <SYNN.VX>, Dupont <DD.N> and BASF <BASF.DE> for a slice of the 47 billion euro market, benefited from farmers rushing to boost output with weed and bug killers due to soaring grain prices.
All its major rivals have also posted strong results.
While the group outlook for 2008 was maintained, Bayer raised the forecasts for its agrichemicals business thanks to booming agricultural markets.
Bayer now said the unit will exceed its forecast of 5 percent currency-adjusted sales growth and expected to improve core profit margin before special items to about 24 percent, against more than 23 percent previously.
Even at the plastics unit -- at which investors feared rising feedstock prices could crimp earnings -- Bayer managed to roughly maintain its profitability.
"The main worry was MaterialScience. But it has performed better than expected," fund manager Stenten said.
Bayer stock has fallen 18 percent this year, underperforming a 15 percent fall in the European DJ Stoxx drugs index and a 4 percent dip in chemicals <.SX4P> on worries over generic competition to its contraceptive drug Yasmin and over the impact of rising oil prices on its plastics business.
Bayer trades at 13 times estimated 2008 earnings, about the same as drugmakers but lower than the chemical sector's multiple of 14, according to Reuters data.
(Editing by David Hulmes)