Bayer's hopes for 200425 April 2004
The Bayer Group have announced their intention to increase both their operating result before depreciation and amortisation (EBITDA) and their operating result (EBIT) before special items by more than 10% in 2004. This was announced by Bayer management board chairman Werner Wenning at the company's Spring financial news conference on Thursday March 18 in Leverkusen. 'We have also redefined our target returns in the context of our realignment. We plan to achieve an EBITDA margin of approximately 19% for the Bayer group as a whole by 2006', Wenning said. This corresponds to an increase of nearly 60% over the 12% EBITDA margin in 2003. 'Our goals are ambitious. We plan to achieve them through the announced portfolio changes, sales growth especially from new products in our life-science businesses, and considerable efficiency improvements in all subgroups.' Wenning added that there are signs of a gradual economic recovery, driven mainly by the United States and Asia. Despite sustained pressure on prices, currency- and portfolio-adjusted sales grew by 5% in the first two months of 2004. The EBIT figures also show an encouraging trend, said the Bayer ceo, explaining that this is true for the life-science businesses Bayer HealthCare and Bayer CropScience, but especially for the industrial businesses, including the activities placed in the independent company named 'Lanxess' that is scheduled to be listed on the stock market by early 2005. Overall Wenning displayed cautious optimism about the company's performance for the rest of the year. In 2003, Bayer improved their operating performance and increased EBIT before special items by 67%, to €1.4 billion - despite difficult economic conditions and negative currency effects. Although group sales declined by 3.6% to €28.6 billion, sales in local currencies advanced by 5%. Nonetheless, Wenning was clearly unsatisfied with Bayer's performance in 2003 in view of the company's net loss of €1.4 billion after net income of €1.1 billion in 2002. The loss was largely due to €1.9 billion in impairment losses and valuation adjustments that had been announced at the end of 2003 in connection with the strategic realignment of Bayer's portfolio. The company also took a total of €0.5 billion in other asset write-downs and restructuring charges, which related chiefly to site consolidations. Bayer recorded special income of €0.5 billion from portfolio measures, principally the divestment of the household insecticides business. The main items contributing to the remaining net special charges of €0.6 billion were expenses for achieving staff reductions and accounting measures taken in connection with the cholesterol-lowering drug Lipobay/Baycol, which was withdrawn from the market in 2001. Including a non-operating result of minus €0.8 billion and net tax income of €0.6 billion due to deferred taxes, the Bayer group posted a net loss of €1.4 billion in 2003. Positive aspects listed by the Bayer ceo included the improvement of the company's operating performance and the 5% increase in the gross cash flow to €3.2 billion. According to Wenning, this documents Bayer's solid financial strength which has not been diminished by the impairment charges. The efficiency-improvement programs, with which Bayer expects to realise savings of more than €2.5 billion between 2002 and 2005, enabled the company to cut costs by around €730 million in 2003. Net debt was reduced by €2.9 billion to below €6 billion. Said Wenning: 'We significantly exceeded our stated goal of reducing net debt to €7 billion.'