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Bayer 2Q Profit Up; Job Cuts Planned
Bayer 2Q Profit Up; Job Cuts Planned By GEIR MOULSON Associated Press Writer August 29, 2006, 10:00 AM EDT BERLIN -- German chemical and drug maker Bayer AG said Tuesday its second-quarter net profit increased by 11.3 percent, helped by sales growth at its health-care unit. Bayer also announced a restructuring plan for its CropScience unit that will lead to about 1,500 job cuts by the end of 2009, mainly in North America. Leverkusen, Germany-based Bayer's net income for the April-June period was 452 million euros ($578 million), up from 406 million a year earlier. That was slightly short of the 461 million euros ($590 million) analysts surveyed by Dow Jones Newswires had predicted. Total sales rose by 5.8 percent to 7.07 billion euros ($9.04 billion) from 6.69 billion euros. Bayer's core health care unit posted the strongest advance, with sales increasing by 12.7 percent. Bayer has acquired fellow German drug maker Schering in a deal worth nearly 16.9 billion euros ($21.6 billion), aimed at strengthening the health-care business and creating a "national champion." Bayer included Schering data in its figures starting June 23, just before the quarter ended, and the Berlin-based company contributed 144 million euros ($184 million) to second-quarter sales. Sales at Bayer's MaterialScience division also rose by 5.4 percent, but sales at CropScience, the company's crop protection unit, slipped by 1.6 percent. Bayer cited a "difficult market environment" for the unit, which has suffered from modest demand for fungicides due to dry weather in Europe. Bayer adjusted its full-year outlook to reflect Schering's inclusion, but excluded its diagnostics business, which it sold to Siemens AG in June. It expects higher operating profits this year. Second-quarter earnings before interest, taxes and amortization rose by 14 percent to 928 million euros ($1.19 billion), beating analysts' forecast of 871 million euros ($1.1 billion). Bayer raised the 2006 earnings target for its health-care unit, saying it now expects underlying EBIT from continuing operations -- excluding Schering -- to grow by about 20 percent, compared with a previous forecast of more than 10 percent. For the CropScience unit, it predicted a decline in sales and operating margin. It announced a restructuring program for the unit that is aimed at saving some 300 million euros ($384 million) per year and will "sustainably shrink the company's infrastructure and process costs." Bayer said a number of sites worldwide will be either restructured or closed and about 1,500 jobs will go. The unit employs 18,800 people worldwide, including 9,550 in Europe and 3,100 in North America. The program is expected to result in a cash charge of about 330 million euros ($422 million), along with writedowns of about 120 million euros ($154 million), to be taken mainly in 2007 and 2008, Bayer said. Bayer's first-half net profit dipped by 0.6 percent to 1.052 billion euros ($1.346 billion) from 1.058 billion euros. Sales over the first six months rose to 14.19 billion euros ($18.15 billion) from 13.07 billion euros a year earlier -- a gain of 8.5 percent. Bayer shares were down 0.4 percent at 39.39 euros ($50.38) on the Frankfurt exchange.
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