Plastics propel Bayer's 2Q earnings
Strong sales of plastics in North America helped Bayer AG beat profit predictions in the second quarter.
The German company, which plans to spin off its plastics business this year, said earnings before interest, taxes, depreciation, amortization and special items climbed 33 percent to $3.2 billion in the April-June quarter. The result surpassed the $3 billion average estimate of nine analysts surveyed by Bloomberg.
Bayer's plastics business, MaterialScience, with its North America headquarters in Robinson, grew sales in North America by 18 percent to $843 million in the quarter. Overall, sales in the division rose 11 percent to $3.5 billion.
Chief Executive Officer Marijn Dekkers is jettisoning some units to focus on life-sciences operations. Last month, he agreed to sell a diabetes device business hobbled by aging products to a joint venture backed by buyout firm KKR & Co. for about $1 billion.
By September, Bayer aims to split off plastics and rename the unit Covestro.
The unit's performance was strong, with EBITDA before special items at $557 million, about $110 million above consensus estimates, as Bayer prepares for a possible initial public offering of Covestro stock.
“The preparations for the planned stock market flotation are on schedule,” Dekkers said on a conference call.
Bayer's health care unit, including blood thinner Xarelto, boosted earnings as well, the company said.
Xarelto sales surged 43 percent to $604 million in the quarter. While the drug, which was approved by the FDA four years ago, is getting competition from Pfizer Inc.'s Eliquis, both blood thinners have snagged market share from decades-old warfarin.
“The most important thing now is that we are a true life-science company,” Dekkers said. Bayer confirmed an earlier full-year forecast: it expects earnings before interest, taxes, depreciation, amortization and special items to show a percentage gain in the “high teens.”
Bayer's stock has gained about 20 percent this year, beating rivals Novartis AG, Roche Holding AG and GlaxoSmithKline PLC, but lagging behind Sanofi of France.
The Leverkusen, Germany-based drugmaker acquired Merck & Co.'s consumer health business last year for $14.2 billion, adding brands such as allergy medication Claritin to its portfolio of over-the-counter products.
In drug development, the company is focusing on heart disease, cancer, hematology and gynecology. Bayer said sales of pharmaceuticals will probably reach $15.4 billion for the full year.
“It's definitely positive that guidance has been confirmed for the pharma division,” said Ulrich Huwald, an analyst at Warburg Research in Hamburg.
