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Bayer Cuts Forecast for 2012 Sales Growth

Bayer Cuts Sales Outlook
Bayer AG branded lab coats are seen during a press conference in Leverkusen, Germany. Photographer: Wolfgang von Brauchitsch/Bloomberg

Bayer AG cut its forecast for sales growth this year amid a disappointing performance for its plastics business.

Revenue will climb about 3 percent this year on higher sales of medicines and crop chemicals, the Leverkusen, Germany-based company said in a statement today. Bayer previously forecast an increase of about 5 percent. Sales and profit in the MaterialScience plastics division will be unchanged this year after performing below expectations in 2011, Bayer said.

After relying on its chemical units for growth last year, Bayer said it will have to wait until 2013 to see a significant profit boost from new drugs. The company expanded the use of its blood-thinning medicine Xarelto to patients with atrial fibrillation, the most common type of irregular heartbeat, in the fourth quarter. Over-the-counter products will probably lift 2012 sales more than new prescription drugs, Bayer said.

“Compared with our numbers, they are a little weak in pharmaceuticals with very good results in consumer health,” Jack Scannell, a London-based analyst with Sanford C. Bernstein Ltd., said by phone today. He rates Bayer’s shares “market perform.”

Bayer fell 0.1 percent to 55.84 euros in Frankfurt. The stock has returned 13 percent this year compared with no gain including reinvested dividends for the Bloomberg Europe Pharmaceutical Index.

Pradaxa Competition

In the U.S., Xarelto had about 9 percent of the market for blood-thinning pills in the week ended Feb. 17, according to Bloomberg Industries analysts. German competitor Boehringer Ingelheim GmbH’s Pradaxa continues to dominate the class.

Xarelto may be approved more quickly for another set of patients, people with acute coronary syndrome, after Bayer’s U.S. partner Johnson & Johnson announced yesterday that U.S. regulators awarded the drug priority status. That means the Food and Drug Administration review will take six months instead of the usual 10 months.

Health is among the units Bayer wants to strengthen with acquisitions, Chief Executive Officer Marijn Dekkers said at a press conference today. He also named life sciences and crop science. Dekkers declined to comment on whether Bayer would pursue the animal health unit that Pfizer Inc. plans to divest.

“Pfizer animal health is a great business,” Dekkers said. “I don’t want to comment on our interest.”

‘Significant’ Acquisition

The German company has the means to finance a “significant” acquisition using debt, equity and its portfolio assets, Chief Financial Officer Werner Baumann said in an interview.

The drug and chemical maker won’t sell any strategic businesses to finance a deal, Baumann said.

“You will not find us in a situation where we say we want to buy this, therefore we have to sell that,” the CFO said. “We always look at the intrinsic appeal of a business inside of its industry.”

Revenue this year will total about 37 billion euros ($49.7 billion), assuming an exchange rate of $1.40 to the euro, Bayer said. The sales growth forecast excludes currency and portfolio changes. Analysts predicted 37.29 billion euros, the average of 26 estimates compiled by Bloomberg.

Health Care, Plastics

Sales from health care, which includes prescription drugs and over-the-counter products, will rise in the low- to mid-single-digit percentage range, the company said. Earnings before interest, taxes, depreciation and amortization before special items in the unit will see a “slight improvement,” Bayer said.

The plastics unit, which makes materials used in autos, electronics and other products, “scarcely achieved any volume increases” last year, Bayer said. Earnings before special items declined 14 percent to 1.17 billion euros because of higher raw material costs.

Revenue at the agricultural chemicals unit will rise faster than the market, Bayer said. Sales and earnings will rise in mid-single-digit percentages, the company said.

Core earnings per share, which exclude one-time items such as litigation costs, totaled 97 cents in the fourth quarter, meeting the 97-cent estimate of 14 analysts surveyed by Bloomberg. Net income totaled 397 million euros compared with a 145 million-euro loss a year earlier, the company said today. That missed the 454.8 million-euro estimate of 10 analysts surveyed.

Sales in the quarter rose 2 percent to 9.19 billion euros.

Earnings before interest, taxes, depreciation and amortization before special items were 1.54 billion euros, missing the 1.6 billion-euro estimate of 14 analysts surveyed.

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