Bayer put a smile on the faces of investors this morning after announcing an expectation-beating set of third quarter results, with its operating result of earnings before interest and tax hurtling towards the 800 million euro figure (798 million) from 653 million the previous year (up 22%) as its healthcare business put in a pleasing performance and its acquisition of Schering started to make its mark. This is the first quarter that Schering makes a contribution to Bayer's financials and it too showcased an impressive set of figures this morning, with nine-month net sales up 9% and operating profit - excluding exceptional items - jumping 20% to 853 million euros.
Sales at the German behemoth rose 26% to 7.78 billion euros, with Schering contributing 1.41 billion euros to the pot. For the full year, the firm's chief Werner Wenning has raised targets for the healthcare business after its sales climbed a whopping 73% to 3.48 billion euros, with revenues from pharmaceuticals more than doubling (+137%) to 2.44 billion as it recorded strong showings for the haemophilia drug Kogenate (recombinant factor VIII), certain flagship primary care products and its cancer portfolio. Earnings before interest, taxes and special items surged 113% to 882 million euros, and the company boasts that the unit's operating result - even before the contribution from Schering - was up a not-insignificant 19%.
Although Bayer is hamstrung by debt in excess of 19 billion euros, its decision to sell HC Starck to Advent and Carlyle should bring this down by 1 billion, with other divestitures expected to make more inroads into this sum. After special items, earnings dropped 17% in the third quarter to 659 million euros, although Bayer notes last year's figure was helped by a 244 million one-time gain relating to changes in its pension system. Group net income was also down to 320 million euros from 493 million euros last year.
Bayer now holds some 96.1% of the outstanding shares in Schering, for which it has paid a total of 16.2 billion euros. Adding revenues of Schering to those from Bayer's existing pharmaceuticals business would mean pro forma sales of 7.5 billion in the first nine months of the year, up 8.6% over last year and a healthy comparison to market growth of 7%. Full year sales are forecast to be 30 billion euros, including an estimated 3 billion euros from Schering, and the company is hoping to “significantly improve” its operating result, with underlying EBITDA (earnings before interest, tax, depreciation and amortisation) put at 5.7 billion euros from 4.7 billion euros last year.