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Bayer Profit Misses Forecasts; Upbeat on 2008

Bayer's quarterly profits missed market expectations, but the German drugs and chemicals group was upbeat about 2008 and said its healthcare and agrochemicals units would drive earnings.

Bayer shares were indicated 2 percent lower on Thursday with the overall market seen weaker also.

Fourth-quarter earnings before interest, taxes and special items rose 24 percent to 774 million euros ($1.2 billion), but were lower than the 795 million euro average estimate in a Reuters poll of 17 analysts.

Net profit fell 79 percent to 67 million euros, due partly to higher taxes and charges for the integration of Schering, which it bought for 17 billion euros in 2006.

Sales edged up 1 percent to 8 billion euros thanks to its contraceptive and multiple sclerosis drugs, as well as farming products used to fight weeds and fungi.

Analysts had on average expected 184 million euros in net profit on sales of 8.1 billion euros.

Bayer, which invented aspirin more than a century ago, said it expected to further improve its core earnings before exceptional items and its operating margin in 2008.

"Bayer expects a gratifying earnings trend for HealthCare and CropScience, while MaterialScience anticipates a more difficult market environment this year," the company said.

The healthcare unit, with multiple sclerosis drug Betaseron and contraceptive medicine Yasmin among its top products, posted a 27 percent increase in fourth-quarter operating profit before special items.

Like rival Syngenta, Bayer's crop protection also had a strong quarter, with operating profit before special items soaring to 43 million euros thanks partly to robust demand in Latin America.

At its material science unit, which focuses on plastics and chemicals, operating profit before special items rose 29 percent as price increases helped offset higher feedstock costs.

The stock has fallen 14 percent this year, in line with the German blue-chip DAX index, partly on worries over the impact of a slowdown in the U.S. economy.

Bayer trades at about 14 times estimated 2008 earnings, about the same as its chemicals peers and higher than drugmakers at 12 times, according to Reuters data.