Bayer AG’s third-quarter profit rose 12 percent as sales at the plastics unit, the laggard last year among the company’s three divisions, soared on a recovery in demand from carmakers and manufacturers.
Net income climbed to 280 million euros ($387.1 million) from 249 million euros a year earlier, the Leverkusen, Germany- based company said in a statement today. The result fell short of the 494.5 million-euro average estimate of 15 analysts surveyed by Bloomberg. Bayer confirmed its earnings forecast for the year and raised its outlook for the plastics unit.
The plastics recovery offset a drop in pharmaceutical revenue in North America as top-selling birth-control pill Yaz faced generic competition in the U.S. Investors are looking beyond the earnings to clinical trial results next month showing whether Bayer’s blood thinner Xarelto can compete in the stroke prevention market, said Tero Weckroth, a Zurich-based analyst for Kepler Capital Markets.
“This is positive, but will be overshadowed,” Weckroth, who recommends buying the stock, said in a telephone interview.
Bayer Chief Executive Officer Chief Executive Officer Marijn Dekkers estimated in a Bloomberg Television interview that Xarelto sales may peak at more than 2 billion euros annually and the market for new blood thinners including Xarelto may surpass 10 billion euros.
Bayer fell 90 cents, or 1.6 percent, to 53.98 euros at 5:35 p.m. in Frankfurt trading. Before today, Bayer had risen 1 percent this year including reinvested dividends, compared with a 7.4 percent return for the Bloomberg Europe Pharmaceutical Index.
Earnings at the MaterialScience plastics unit this year will be more than 1.3 billion euros, about three times the prior year’s level, the company said. Bayer previously predicted profit would more than double. Revenue from the unit rose 31 percent to 2.67 billion euros in the quarter. MaterialScience earnings plunged 59 percent last year amid the worst chemical- industry slump in 35 years.
Bayer said it plans to release results at the American Heart Association conference on Nov. 15 of a study comparing Xarelto with warfarin, the half-century-old former industry standard, in patients with an irregular heartbeat called atrial fibrillation.
Boehringer Ingelheim GmbH this month beat Bayer and its partner Johnson & Johnson to market with the first replacement for warfarin. Pfizer Inc. and Bristol-Myers Squibb Co. also are working on a replacement for the older treatment.
“There is a large opportunity, more than 10 billion euros,” Dekkers said of the blood thinner market. “There is room for various companies to do very well.”
Dekkers, who took over as chief executive on Oct. 1, said he’s focused on building Bayer through “innovations we’ve developed ourselves.”
Acquisitions are “not a priority for me as the new CEO,” he said. “When there are possibilities, opportunities for an acquisition, we’ll obviously take a serious look, but we don’t feel we need to do an acquisition real soon to augment our portfolio.”
Bayer still aims for profit at the health-care unit to at least reach last year’s level, though “this is considered an ambitious target” given the performance so far and the strength of the euro, according to the company’s statement. Health revenue in the quarter rose 8.5 percent to 4.3 billion euros.
Net income was depressed by 436 million euros of costs for litigation in the U.S. Most of the money was set aside to settle lawsuits against Bayer over claims its genetically engineered seed contaminated U.S. long-grain rice fields. Core earnings per share, which excludes one-time costs such as litigation expenses, rose 22 percent to 95 cents.
Core earnings per share this year will rise more than 15 percent as profit before interest, taxes, depreciation and amortization excluding special items climbs to more than 7 billion euros, the drug and chemical maker repeated.
Sales of crop chemicals rose 18 percent to 1.3 billion euros.