Bayer Confirms 2008 Forecast on Strong Drugs Sale

Bayer stood by its full-year guidance on Wednesday, defying a slump at its plastics and foams unit and citing strong demand for its prescription drugs and its farming pesticides.

Bayer confirmed it plans to increase 2008 core earnings from last year's level and also said it aims for a further increase in 2009.

Third-quarter core profit slid 4.2 percent, slightly worse than forecast, as weak demand and surging feedstock costs weighed on its Material Science unit, whose products include plastics for compact disks and foams for padding or insulation.

The group's earnings before interest, taxes, depreciation, amortization (EBITDA) and special items, fell to 1.493 billion euros ($1.87 billion), below the average estimate of 1.53 billion euros in a Reuters poll of 13 analysts.

Sales of Bayers's pharmaceuticals segment rose 2.6 percent to 2.64 billion euros on strong sales of cancer drug Nexavar, one of its most promising treatments.

"(Bayer showed a) very strong performance of Healthcare driven by excellent top-line performance," analysts at WestLB said in a note to investors, also pointing to a "very weak" Material Science unit.

Operating earnings at Material Science dropped by more than half to 138 million euros on soaring energy and raw materials prices and because of production outages caused by Hurricane Ike in the United States.

"Price increases and cost savings from our restructuring program only partly offset the higher costs," Chief Executive Werner Wenning said.

Bayer, which boosted its healthcare business with the 17 billion euros takeover of Schering in 2006, sees no direct impact of the credit crisis on its finances, it added.

"We currently have no need for refinancing and debt that matures in the coming years is intended to be paid down out of operating cash flow," the CEO said.

The shares jumped 13.4 percent to 43.44 euros, matching a spike in the European DJ Stoxx Chemicals Index.

Bayer shares are valued at about 9.4 times estimated 2009 earnings, more than the 7.7 multiple for the European chemicals sector but below the healthcare industry, which trades at a 10.7 ratio.

Shares of the German chemical-drugs hybrid have lost almost 40 percent this year, trailing the 14.6 percent decline in the DJ Stoxx healthcare index but outperforming the 46 percent slump in the chemicals benchmark.

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