Bayer Fourth-Quarter Net Falls on Year-Earlier Gain

Bayer Fourth-Quarter Net Falls on Year-Earlier Gain

Feb. 28 (Bloomberg) -- Bayer AG, Germany's largest drugmaker, said fourth-quarter profit fell 78 percent, more than analysts estimated, after a one-time tax gain boosted year- earlier results.

Net income fell to 67 million euros ($101.2 million), from 311 million euros a year earlier, the Leverkusen, Germany-based company said in a statement today. Bayer was expected to earn 210 million euros, the average estimate of nine analysts surveyed by Bloomberg News.

Chief Executive Officer Werner Wenning today forecast a 5 percent increase in group revenue this year, adjusted for currency. Bayer bought German rival Schering AG for 17 billion euros in 2006, gaining the Betaseron multiple sclerosis drug. Farm chemical sales are rising as higher crop prices let farmers spend more on herbicides and fungicides. The plastics unit, which makes materials for DVDs and foams, is dealing with increased crude oil prices.

``Bayer is doing well, it's still an interesting story,'' Ulle Woerner, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart, said in an interview before results were released. ``There are still some cost savings to be found in the drug unit, and crop chemicals should see some growth in 2008.''

The company repeated its 2009 underlying earnings before interest, tax, depreciation and amortization, or Ebitda, margin of 22 percent for the whole group. Sales rose 1 percent to 8.04 billion euros.

Drug Unit

The drug unit should increase at or above market rate and see the underlying Ebitda margin rise to about 27 percent, the company said. Crop chemicals revenue should rise by 5 percent this year, as the unit expects to improve its Ebitda margin to more than 23 percent. The material science unit couldn't give a forecast for the whole year because of unstable raw material prices. The first quarter Ebitda margin should be on par with that of the previous quarter, Bayer said.

Bayer shares fell 5.7 percent in Frankfurt trading last week after a study showed that Nexavar failed to help lung-cancer patients. Bayer expected the drug to earn over 750 million euros from that use. Bayer and its partner, Onyx Pharmaceuticals Inc., are still testing the therapy in breast cancer.

Bayer shares have fallen 14 percent this year, matching the decline of Germany's benchmark DAX stock index. Of 32 analysts who cover Bayer, 21 recommend buying the stock, nine advise holding it, and two advise investors to sell.

Bayer had a one-time gain of 203 million euros from tax changes, and a 236 million-euro gain from the sale of its stake in GE Bayer Silicones in the last quarter of 2006.

Bayer said earlier this week it will reward investors with a 35 percent increase in the dividend payout for 2007 to 1.35 euros a share.

Wenning has said he wants more acquisitions to fill gaps in the health-care unit. The company is staking growth prospects on two new drugs, the Nexavar cancer treatment used to treat kidney tumors, and the Xarelto anti-clot drug awaiting approval in Europe.

BLOOMBERG