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March 04, 2009 12:00 AM

Bayer has record year -- but MaterialScience feels the squeeze

Utech Staff
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    By Liz White, editor

    Leverkusen, Germany -- German chemicals and plastics group Bayer AG had record sales of Euro 32 900 million for 2008, a 1.6-percent rise over sales for 2007, with earnings (EBITDA before special items) up 2.3 percent to Euro 6900 million.

    But the good news applies to Bayer's health science and crop science divisions, with a different tale in Bayer's polyurethanes and polycarbonate businesses, which suffered a "dramatic decline" in the fourth quarter, said Werner Wenning, Bayer chairman, during the group's 3 March results meeting at its Leverkusen headquarters.

    Volumes at Bayer MaterialScience "fell by nearly 30 percent, and capacity utilisation also declined significantly," Wenning said, giving current utilisation rates as 70 percent in BMS' global isocyanates plants while its polycarbonates plants are operating at only 50 percent of total capacity.

    All regional markets and subgroups for BMS were affected: "We have not seen anything like this before," was Wenning's stark summary. BMS sales for 2008 were down 4.6 percent to Euro 9738 million, and earnings (EBITDA before special items) fell 32.3 percent to Euro 1088 million for the year.

    Despite measures such temporary plant shut-downs and cutbacks in production, fourth quarter earnings (EBITDA before special items) for BMS fell by 85 percent to just over Euro 50 million, said Wenning.

    Sales in the polyurethanes business declined by 3 percent to Euro 7100 million in 2008, while the polycarbonates unit's sales dropped 10 percent to Euro 2600 million.

    During the year, price rises for BMS materials almost compensated for the drop in volumes, Wenning said.

    One highlight of 2008 was BMS' inauguration of a 350-kilotonnes-per-annum MDI (methylene diphenyl diisocyanate) plant in Caojing, China, which is the world's largest single-train MDI plant globally, Bayer claims.

    This unit has been successfully ramped up to full capacity to test it out, but as a result of current low demand is running at 50 percent of its nameplate capacity, said Patrick Thomas, BMS chief executive officer, in a separate 3 March interview.

    According to Thomas, the different business divisions of Bayer provide synergies. BMS, as part of a cyclical chemicals/polymers industry, receives financial support in difficult times. And this is not a one-way street, Thomas stressed, with BMS providing a substantial amount of funding for Bayer's purchase of healthcare group Schering in 2007.

    While the 2009 outlook for crop science and healthcare remains good, Wenning expects "a very difficult year marked by a great deal of uncertainty, in the polymers business. The beginning of 20098 has been "even weaker than anticipated and we must expect a severe drop in this subgroup's sales and earnings for 2009," he said.

    Bayer expects to limit decline in group EBITDA before special items to about 5 percent, he concluded.

    PIC: Patrick Thomas of BMS, who will give the keynote address at UTECH Europe 2009 in Maastricht, 31 March-1 April.

    "

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