Bayer reports flat net profit due to charges
FRANKFURT, Germany -- German drug and chemical company Bayer AG said Tuesday that net profit remained flat in the second quarter due to one-time charges, but operating earnings rose 44 percent in the quarter.
The Leverkusen-based company said its net income was steady at 128 million euros ($154 million) in the April-June period compared with a year ago.
Bayer reported 136 million euros ($164 million) in one-time charges this quarter, primarily connected to the acquisition of U.S. group Lyondell Chemical, compared to a one-time net gain of 17 million euros last year.
But operating earnings -- which exclude financial items such as interest and taxes -- rose to 660 million euros ($795 million) from 458 million euros a year earlier.
"The good news is that the company managed to have higher operating earnings this quarter compared to last year, in spite of higher write-off expenses and special effects," said Nasseer Panju, analyst for the Munich-based Hauck & Aufhaeuser Privatbankiers.
"It shows that the company is on the right track, that the flat net profit can be explained completely by such one-time effects," Panju said.
Nonetheless, operating earnings tumbled 44 percent in its biggest division, health care. Bayer cited lower than expected market performance of its erectile dysfunction drug Levitra, launched last year to compete with Viagra, and a 54 percent decline in sales of its anti-infective Cipro drug, following expiration of its U.S. patent.
A pick up in demand for industrial products from Bayer's material science division and Lanxess, an independent company it created for its lower-margin chemicals and polymers businesses, increased overall sales by 4.5 percent to 7.583 billion euros ($9.14 billion) from 7.256 billion euros a year earlier, the company said.
"The second quarter has shown that our new strategic alignment and the associated measures are bearing fruit," Bayer chief executive Werner Wenning said in a statement.
As part of the restructuring, the company reported laying off some 1,800 employees over the last six months, a 1.6 percent decrease to 113,600. It had 117,500 employees in June 2003.
Sales at Lanxess grew almost 10 percent to 1.59 billion euros ($1.92 billion), while the material science division increased sales by 13 percent to 2.09 billion euros ($2.52 billion) and sales from its crop science division rose almost 5 percent to 1.64 billion euros ($1.98 billion).
The gains helped offset a 4.4 percent decrease in sales at Bayer's health care division to 2.108 billion euros ($2.54 billion).
Bayer said operating earnings in health care fell to 217 million euros ($262 million) from 386 million euros a year ago was due to high launch costs for new drugs, increased competition, and the positive impact in 2003 of one-time gains.
Net profit for the first half of the year dropped some 26 percent to 518 million euros ($624 million) from 714 million euros a year earlier.
Bayer's stock closed down 2.56 percent at 20.97 euros ($25.28) yesterday in Frankfurt.