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Bayer Raises 2012 Forecasts on Crop Chemicals, Drugs

Bayer AG (BAYN) raised its 2012 revenue and earnings forecasts, citing increased sales of crop chemicals and drugs as well as favorable exchange rates, sending its shares to the highest price in more than four years.

Bayer said revenue will gain about 4 percent to 5 percent this year to 39 billion euros ($48 billion) to 40 billion euros, excluding currency and portfolio changes. The company previously forecast a sales increase of about 3 percent.

Bayer is counting on its health and crop chemicals units to drive growth after saying sales and profit from plastics will be unchanged this year. Core earnings per share will rise about 10 percent and earnings before interest, taxes, depreciation, amortization and special items will increase by a high single- digit percentage, the Leverkusen, Germany-based drugmaker said. The company previously predicted a slight improvement for both.

The forecast came after Bayer reported “very strong” second-quarter earnings, said Sebastian Frericks, an analyst at Bankhaus Metzler in Frankfurt, adding that the health-care unit in particular performed better than expected.

Bayer’s stock rose 1.2 percent to 61.91 euros in Frankfurt trading in a fifth day of gains and the highest price since January 2008.

Ebitda before special items rose 6.7 percent to 2.17 billion euros in the quarter, from 2.04 billion euros a year earlier, the drugmaker said in a statement today. That beat the average estimate of 2.08 billion euros compiled by Bloomberg from 14 analysts.

High Charges

The results beat expectations despite high one-time charges, Peter Spengler, a Frankfurt-based analyst for DZ Bank AG, wrote in a report.

Sales rose 10 percent to 10.2 billion euros, beating an average analyst estimate of 9.75 billion euros. Core earnings rose to 1.47 euros a share, compared with an average estimate of 1.37 euros.

The German company’s “major focus” is organic growth, and it’s looking for “bolt-on” acquisitions in pharmaceuticals, animal health and in consumer health products, Chief Executive Officer Marijn Dekkers said in a Bloomberg Television interview today.

Bayer’s stock has gained 25 percent this year, compared with a this year through yesterday, including reinvested dividends, compared with 11 percent for the Bloomberg Europe Pharmaceuticals Index. Bayer said April 26 it might adjust its forecast for crop chemicals because it expected market conditions to remain good this year.

Farming Products

Agricultural sales including insecticides, herbicides and seeds grew 17 percent to 2.28 billion euros, helped by high prices for agricultural commodities. Bayer increased its forecast for the unit, saying revenue will rise by about 10 percent, adjusted for currency fluctuations and portfolio changes. Ebitda before special items will rise by about 20 percent, the company said.

Sales from health care, the largest of Bayer’s three main divisions, will rise 3 percent to 4 percent this year after currency and portfolio adjustments, Bayer said. Ebitda before special items for the unit will rise by a mid- to high-single- digit percentage, more than the slight improvement Bayer had previously forecast. Second-quarter sales at the health unit increased 10 percent to 4.63 billion euros.

The strength of the dollar and other currencies against the euro boosted sales of Bayer’s health unit by 6.2 percent in the second quarter. Exchange rates expanded agricultural sales by 5.2 percent and sales at the plastics unit by 5.3 percent.

Bayer had 762 million euros of one-time costs, including 496 million euros to settle lawsuits over blood clot injuries in connection with the contraceptives Yasmin and Yaz.

Blood Thinner

Sales of Xarelto, the blood thinner Bayer markets together with Johnson & Johnson (JNJ), reached 68 million euros in the second quarter. The partners introduced the drug to U.S. irregular heartbeat patients in the fourth quarter last year. Bayer estimates the medicine’s annual sales will grow to more than 2 billion euros a year.

Xarelto’s second-quarter sales were in line with expectations, Bankhaus Metzler’s Frericks said by telephone today. He said he estimates the medicine will have sales of about 300 million euros this year.

Revenue at Bayer’s plastics division, which makes materials used in cars, electronics and other products, rose 6.5 percent to 2.96 billion euros.

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

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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