By Liz White, UTI editor
Leverkusen, Germany -- Bayer AG said 28 Feb that group sales for 2011 increased by 4.1 percent to Euro 36 528 million ($49 091 million), while operating earnings (EBIT) improved by 52 percent to Euro 4149 million.
But growth in Bayer's HealthCare and CropScience units was accompanied by "a decline in momentum" at MaterialScience, the company commented.
"The MaterialScience business unfortunately performed below expectations in 2011," said ceo Dr Marijn Dekkers at the group's results meeting in Leverkusen. "A positive factor is that we increased sales, and were able to raise selling prices, in all business units and regions. On the other hand, we scarcely achieved any volume increases."
Sales of BMS's high-tech materials rose by 6.7 percent (Fx & portfolio adj. 8.2 percent) overall to Euro 10 832 million. from In polyurethanes, sales improved by 9.5 percent (Fx/portf. adj.) to Euro 5435 million, while high-tech plastics (polycarbonates) grew by 5.6 percent, and materials for coatings, adhesives and specialties were up by 4.5 percent to Euro 1845 million.
But earnings at BMS (EBITDA before special items) fell by 13.6 percent to Euro 1171 million (2010: Euro 1356 million), a decline primarily from higher raw material costs not fully offset by selling-price increases. The most dramatic effect, Werner Baumann, Bayer cfo noted, was in the fourth quarter, where EBITDA before special items for BMS fell 64.3 percent to Euro 106 million, versus Q4 2010.
Amongst BMS's higher operating costs were those for commissioning its 250 kilotonnes per annum capacity TDI (toluene diisocyanate) plant in China. Patrick Thomas, ceo of BMS, commented in a 28 Feb discussion at Bayer's results meeting that in the second half of 2011, "TDI demand in China slumped because the furniture sector was badly affected by the Chinese government's moves to slow down house building to reduce the risk of a housing bubble."
The moves were so effective that the furniture market slumped quite dramatically, Thomas agreed. Now the government is worried that they've overdone and Thomas said the dire effect on furniture makers is being countered by a stimulus package to encourage people to buy new mattresses, beds, and seating.
Thomas also noted that China's ban in mid-2011 on using cellular plastics as construction insulation, although being gradually rescinded now, has nevertheless affected MDI demand. The ban was a reaction to some high-profile fires during construction, blamed on foam insulation.
For the year ahead, Thomas said the MaterialScience unit forecasts sales and earnings to remain level with 2011. BMS said that if the market develops more favourably than anticipated, sales and earnings would increase accordingly.
MaterialScience forecasts sales in Q1 2012 to be roughly level with those of Q4 2011. It also expects EBITDA before special items in Q1 2012 to be well above the figure for Q4 2011 but below those of Q1 of 2011.
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