Bayer Aktienges Ads (BAYRY.PK)
Q1 2010 Earnings Call
April 29, 2010 05:00 pm ET
Richard Vosser - JP Morgan Cazenove
Ronald Koehler - MainFirst
Jean de Watteville - Nomura
Sachin Jain - Merrill Lynch
Fabian Wenner - UBS
Cornielia Thomas - WestLB
Andrew Benson - Citigroup
Andreas Heine - UniCredit
Florent Cespedes - Exane BNP Paribas
Daniel Wendorff - Commerzbank
Jo Walton - Credit Suisse
Martin Flueckiger - Helvea
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Ladies and gentlemen, dear friends, welcome also on behalf of my colleagues to our conference call to in which we want to review our first quarter numbers with you. With me on the call today are from the holding Werner Wenning, Marian Jacobs, Klaus Kuhn and Werner Bauman and from the subgroups Arthur Higgins, Friedrich Berschauer and Patrick Thomas. As always, Mr. Wenning will start off our conference call with a brief summary of the developments in the quarter. We assume you have all received and reviewed our stockholders news letter, the briefing documents and for slides. So we’ve just run you through the main points. Before handing over Mr. Wenning, I’d also like to draw your attention to the Safe Harbor statements.
Good afternoon ladies and gentlemen. It’s also my pleasure to welcome you to our conference call. At first, the overview. The Bayer Group achieved from gains in sales and earnings in the first quarter of 2010. The recovery at MaterialScience is taking place faster than anticipated. After the late start business at CropScience gained considerable momentum towards the end of the quarter. Lower sales of Yasim/Yaz in the United States and of Betaseron prevented a better performance at pharmaceuticals. Consumer Health reported a successful start to the year. Overall, we remained confident for 2010 and are raising our earnings forecast for the Bayer Group. We are now targeting to increase core earnings per share by more than 15%.
Now let’s take a closer look at the major business developments in the first quarter. As usual, we’ll be talking about portfolios and currency adjusted amounts in most cases. Group sales were 6% higher while underlying EBITDA was up by 13% and core EPS by 32%.
These increases were driven by the strong recovery of MaterialScience, the successful start to the year for the consumer health businesses and an outstanding performance at BioScience. As guided, growth at pharma was hampered by lower sales of Yasmin/Yaz in the United States, a decline in business with Betaferon in Germany and Russia. Mirena and Nexavar on the other hand continued to grow significantly. As a result, adjusted sales of Pharma were level with the same quarter of last year.
Ladies and gentlemen, we are convinced that Yasmin and Yaz are a good choice for women seeking convenient and reliable contraception. It’s a user product as directed and that the risk profile is comparable to that of other combination of oral contraceptive. This view is supported primarily by the results of two prospected observational studies in the U.S. and in Europe with more than 120,000 users. We are now implementing a number of new health care provider and consumer directed initiatives to support the recovery of the brand. We however expect sales of the Yaz family to decline in the U.S. by approximately 25% this year. Outside the U.S. we anticipate continued growth in the high single-digit percent range. This leads to a mid single digit decline of the global business.
Our consumer health business benefited from the economic recovery particularly in the United States. Sales rose by nearly 7% compared to the weak prior year quarter with all divisions contributing to growth. Underlying EBITDA of health care increased due to the improvement in sales especially at animal health and consumer care. Earnings were held back mainly by the lower sales of Yaz as well as by the last year’s oncology divestitures and increased expense expenditures for research and development.
In light of the business trends, in the first quarter, we are adjusting our 210 forecast for health care as follows. For pharmaceuticals, we anticipate below market growth. In consumer health however, we expect to spend faster then the market. This corresponds to currency and portfolio adjusted growth for healthcare of about 3% again, previous guidance of about 5%. We continued to target a further increase in underlying EBITDA.
With approvals and launches of Yaz plus and Crelan expected this year and its tremendous commercial promise of our R&D pipeline, we are convinced that we will re-gain business momentum and growth sales faster again is a future. Third quarter phase of CropScience, they are down 10% year-on-year due to lower volume with selling prices stable overall. This was mainly because of adverse weather conditions in major growing regions and high product inventories in the distribution channels.
Another factor was a drop in prices for key agricultural commodities. Phase in the Crop Protection segment therefore fell 16% year-on-year. In Europe, with the late start to the spring season hampered business at the beginning of the year. Sales were down significantly in front for market related reasons. By contrast, business in Germany, matched the strong level of the first quarter of By contrast, business in Germany matched the strong level of the third quarter of 2009.
In North America, we have reached a 30% drop in sales because of the adverse market environment and an adjustment to our pricing strategy. As in Europe, selling was delayed by the long winter. The market also developed unfavorably due to price erosion for corn and wheat as well as high inventories in the distribution channels.