Bayer posts record losses
18 March 2004
LEVERKUSEN – Pharmaceuticals and chemicals concern Bayer AG reported Thursday that it fell into the red in 2003, posting the highest losses in its 140-year history amid the high costs of restructuring, but said it now aims for double-digit earnings growth.
Bayer said it lost EUR 1.4 billion compared with a profit of EUR 1.1 billion in 2002.
The company said that before special charges, its operating results were in the black by Eur 1.4 billion, up 67 percent from the year before.
Turnover, at EUR 28.6 billion was down 3.6 percent from 2002, mainly reflecting adverse currency effects, Bayer said.
Company chairman Wernder Wenning said the costs of restructuring and writedowns last year came to EUR 2.6 billion.
“The major restructuring measures have now been accomplished,” Wenning said, while acknowledging that even though debts had been reduced and operating profits improved, the company was not pleased by showing a net loss.
For this year, the company management is planning to boost earnings before interest and taxes (EBIT) by 10 percent.
Among other improved factors, the number of damage suits in the United States over the anti-cholesterol drug Lipobay/Baycol had declined further.
By current calculations the company is expecting to pay total claims of EUR 1.5 billion from the Lipobay affair, with Bayer already having paid out EUR 842 million.
The company figures come as Bayer is preparing to split off much of its chemical operations, to be launched as a new unit called “Lanxess” in an Initial Public Offering by early 2005 at the latest.
“The new company (Lanxess), as an autonomous unit, will be able to respond more quickly and flexibly to the challenges facing the European chemical industry,” Wenning said.
Once the spinoff is completed, Bayer’s structure will be that of a holding with three chief segments – Health Care, Crop Science and Material Science, or industrial chemical products.
Wenning said this will all help to improve Bayer’s earnings power, so that in 2006, earnings before interest, taxes and depreciation (EBITDA) is to show 19 percent growth. In 2003, EBITDA improved by 12 percent.
At the same time, Bayer is proceeding with cost-cutting measures, with savings of EUR 2.5 billion to be achieved by 2005, with payrolls now being slashed by 14,000. At the end of 2003, Bayer had worldwide payrolls of 115,400, a decrease of 7,000 during the year.
Subject: German News