Oct. 27 (Bloomberg) -- Bayer AG stood by its 2009 forecast even after a loss at its crop chemicals unit caused third- quarter profit to fall 10 percent.

The German drugs and chemicals maker still expects to limit the decline in underlying earnings before interest, taxes, depreciation and amortization to 5 percent this year, though it reduced the margin target for crop treatments. Net income dropped to 249 million euros ($371 million) from 277 million euros a year earlier, Leverkusen-based Bayer said today.

Lower prices, bad weather, unfavorable currency exchange rates and lagging demand for weed- and insect-killing chemicals resulted in a 16 million-euro loss before items at the CropScience division. Bayer, also a supplier of plastics and foams to the automotive industry and maker of the Nexavar cancer drug, said recovering demand for plastics and rising drug revenue would help it meet its full-year group targets.

“MaterialScience had a clear quarter-on-quarter improvement with a positive outlook” for the rest of the year, said Ulrich Huwald, a Hamburg-based analyst for MM Warburg Investment Research, referring to the plastics unit. “It’s clearly disappointing to see weakness in CropScience, but I wouldn’t throw the baby out with the bath water. In total, it’s a good result.”

The shares advanced 21 cents, or 0.4 percent, to 48.46 euros in Frankfurt trading. Bayer has gained 17 percent this year, compared with a 4.7 percent increase in the Bloomberg Europe Pharmaceutical Index and a 28 percent rise in the Bloomberg Europe Chemicals Index.

Keeps Forecast

Chief Executive Officer Werner Wenning, who has led Bayer since April 2002, now expects the Ebitda margin before special items at the crop chemicals division to be 23 percent to 24 percent, lower than the 25 percent he previously forecast.

He repeated Bayer’s goal of 31 billion euros to 32 billion euros in sales this year. Third-quarter sales declined 7 percent to 7.39 billion euros.

Revenue from health care rose 3.5 percent to 3.94 billion euros in the three months through Sept. 30. Bayer is counting on the Betaseron multiple sclerosis treatment, the Yasmin family of contraceptive pills and Nexavar to help it weather the recession. Yasmin sales rose a currency-adjusted 4.6 percent, while revenue from Betaseron fell 3.7 percent.

U.S. regulators will probably decide on Bayer’s anti- clotting drug Xarelto in the second half of 2010, after the German company and its U.S. partner Johnson & Johnson submit an application for review by the end of this year, Wenning said on a conference call.

MaterialScience

Sales of Nexavar, which is designed to cause fewer side effects than chemotherapy and competes with Pfizer Inc.’s Sutent, climbed 30 percent.

Revenue at Bayer’s MaterialScience unit rose a currency- adjusted 14 percent from the second quarter to 2 billion euros, as demand recovered in the industries that use its plastics. Sales fell 20 percent from the previous year. Bayer forecast underlying Ebitda for the unit in the fourth quarter to be “well ahead of the prior-year period” as the economic environment continues to stabilize.

Bayer reduced production and trimmed working hours at the plastics unit, which is among the largest makers of the polycarbonates used to make compact discs and polyurethanes that go in foams and shoe soles, as the global recession hampered demand. Bayer said in July it would accelerate restructuring plans and shut some production of polyurethanes, coatings, adhesives and basic chemicals by the end of the year.

Restructuring

The restructuring, which Bayer now expects to be completed by the end of the year, will cost about 350 million euros, or 100 million euros more than originally planned, the German company said.

Bayer also reduced its net financial debt by 1 billion euros to 10.7 billion euros as of Sept. 30. The debt reduction gives scope for the company to make acquisitions, Wenning said.

“Should there be possibilities in the market for a takeover that would strengthen our portfolio, we would certainly analyze the possibility and then act accordingly,” he said.

To contact the reporter on this story: Naomi Kresge in Frankfurt at nkresge@bloomberg.net

Last Updated: October 27, 2009 12:38 EDT