Bayer AG (BAYN)’s first-quarter profit rose 12 percent, helped by new medicines and a rebound at its plastics unit.
First-quarter earnings before interest, taxes, depreciation, amortization and special items rose to 2.74 billion euros ($3.79 billion) from 2.45 billion euros a year earlier, the Leverkusen, Germany-based company said in a statement today. That beat the 2.56 billion-euro average estimate of six analysts surveyed by Bloomberg.
Bayer has signaled for more than a year that new drugs including the blood thinner Xarelto and eye medicine Eylea will drive growth together with its agricultural unit. The company has struggled to increase profitability at its third division, the Material Science plastics unit. It’s exploring a sale of the business to focus on health, people with knowledge of the matter said over the weekend.
The plastics unit is “still not where it needs to be,” said Fabian Wenner, an analyst at Kepler Chevreux in Zurich. “It’s important to see volume growth pick up, but pricing was still a drag.”
The performance of the new drugs and of the plastics unit will likely be the focus of attention today, Odile Rundquist, an analyst for Helvea SA in Geneva, said in a note to investors before the results were released. She rates the stock a buy.
Bayer’s new pharmaceutical portfolio had sales of about 600 million euros in the first quarter, while the health unit as a whole had revenue of 4.57 billion euros. Meanwhile, the plastics division saw volumes increase, the company said. Sales rose 1 percent to 2.8 billion euros, while Ebitda before special items soared 79 percent to 366 million euros.
The company said last month the unit aims for a return on investment that’s greater than its cost of capital by 2016 at the latest.
Bayer left the forecast it issued in February intact, repeating that revenue this year will be 41 billion euros to 42 billion euros, adjusted for currencies and the company’s portfolio. Ebitda before special items will rise by a low- to mid-single-digit percentage, the company said.
Sales rose 2.8 percent to 10.56 billion euros, about 43 percent of which came from the health-care unit that includes consumer and animal health along with prescription drugs. Analysts predicted 10.54 billion euros.
Bayer fell 1.3 percent on April 25 to close at 95.77 euros. The stock returned 21 percent including reinvested dividends in the past year, outpacing the 14 percent return for the Bloomberg Europe Pharmaceutical Index.
The company plans a conference call with investors today at 2 p.m. Frankfurt time.
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