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Bayers Q2 agchem sales jump 21%

Date:08-04-2008

Bayer CropScience’s crop protection sales spikedby 20.9% in the second quarter of 2008 to €1,526 million ($2,404 million at the current rate). Adjusted for currency effects, revenues were up by 29.1%. Volumes and prices rose. Sales were up in all segments but fungicides performed particularly strongly. Sales of pesticides based on active ingredients launched in core markets since 2000 rose by about half to over €500 million ($788 million), the company says.
Bayer group chief executive officer Werner Wenning describes the performance of the business as “stellar” and raised its sales and profit targets. “We are confident of generating sales of €2,000 million with these products [based on newer ais] by 2009, two years earlier than our original goal,” he adds.
The company raised prices by around 2-3% at the start of the year, Bayer CropScience chairman of the board of management Professor Friedrich Berschauer says.
Fungicides overtook herbicides to become the largest second-quarter business unit. Sales rocketed by almost half to €576 million, boosted by sales in North America, Brazil, India and South-East Asia. Bayer highlights the performance of: the cereal fungicides, Input (prothioconazole + spiroxamine), and Fandango (prothioconazole + fluoxastrobin), in Europe; of Proline (prothioconazole), in North America and Europe; and of Flint (trifloxystrobin) in North America.
Herbicide sales also topped €500 million following an 8.8% rise. Higher acreages for cereals in the EU following the suspension of set-aside and favourable weather conditions in the region and Australia pushed revenues up. Bayer notes increased sales of its cereal herbicides, Puma (fenoxaprop-ethyl) and Hussar (iodosulfuron-methyl-sodium) in Europe, and of new products, Huskie and Infinity (both pyrasulfotole + bromoxynil), in North America. Bayer gained its first approval for the combination cereal herbicide in the US in August last year as Huskie, and as Infinity in Canada at the turn of the year.
Insecticide sales were relatively flat. They inched up to €321 million. The main contribution to rising sales came from the Asia/Pacific region.
Seed treatment sales rose by more than a quarter to €108 million in the three months to the end of June. Big players included the fungicidal seed treatment, Folicur (tebuconazole), which gained notable business in North America.
Earnings before interest, tax, depreciation and amortisation (EBITDA) before special items for the crop protection business jumped by 40.3% in the second quarter to €435 million. EBIT before special items surged by 67.9% to €329 million.
first half
Crop protection sales for the first half rose by 16.8% to €3,148 million. The currency-adjusted increase was 23.1%. EBITDA before special items rose by 35.1% to €1,042 million, while EBIT before special items jumped by more than half (+52.5%) to €822 million. Charges of €55 million ($87 million) for Bayer’s cost structure programme resulted in EBIT of €767 million, up 58.5% compared with the previous first half.
Bayer’s crop protection sales by category (€ million)
2nd qtr ended June 30th
2007
($ million)
% change
2008
($ million)
Fungicides
385
(606)
+49.6
576
(907)
Herbicides
479
(755)
+8.8
521
(821)
Insecticides
313
(493)
+2.6
321
(506)
Seed treatments
85
(134)
27.1
108
(170)
Total
1,262
(1,988)
+20.9
1,526
(2,404)
 
Six months
 
 
 
Fungicides
769
(1,211)
+33.2
1,024
(1,613)
Herbicides
1,047
(1,649)
+13.2
1,185
(1,867)
Insecticides
624
(983)
+3.0
643
(1,013)
Seed treatments
256
(403)
+15.6
296
(466)
Total
2,696
(4,247)
+16.8
3,148
(4,959)
regional sales
Crop protection sales rose in all regions. Europe remains the largest market following an increase of 22.8% in sales to €695 million. Currency-adjusted sales advanced by a quarter. A rise in the crop area boosted sales and fungicides for use on grapevines and potatoes contributed to growth. First-half European revenues were also up by over 20%.
Business grew by 13.8% in North America and by 26% after currency adjustments. Bayer notes pressure on prices due to competition from generic insecticide products. Its market share remained steady, the company adds. Sales were up by almost 8% for the first six months.
Sales rose strongly in the region covered by Latin America/Africa/Middle East. After currency adjustments, the business grew by more than half (53.8%). Almost all of the growth was in Latin America, which saw a 63% boom in sales. That was dwarfed by the growth in Brazil. Bayer expanded its entire portfolio in the country and sales grew by 150%. Fungicides saw particularly strong growth. Sales in Africa and the Middle East were flat. First-half sales across these regions rose by almost a quarter.
Sales in the Asia/Pacific region were up by almost 10% to top €200 million and by 20.6% after currency effects. Insecticides and fungicides advanced in India and South-East Asia, while herbicides recovered in Australia. Sales for the first six months rose modestly compared with last year.
Bayers crop protection sales by region (€ million)
2nd qtr ended June 30th
2007
($ million)
% change
2008
($ million)
Europe
566
(892)
+22.8
695
(1,095)
North America
319
(503)
+13.8
363
(572)
Latin America, Middle East and Africa
193
(304)
+37.8
266
(419)
Asia/Pacific
184
(290)
+9.8
202
(318)
Total
1,262
(1,988)
+20.9
1,526
(2,404)
 
Six months
 
 
 
Europe
1,289
(2,031)
+22.2
1,575
(2,481)
North America
611
(963)
+7.9
659
(1,038)
Latin America, Middle East and Africa
423
(666)
+24.6
527
(830)
Asia/Pacific
373
(588)
+3.8
387
(610)
Total
2,696
(4,247)
+16.8
3,148
(4,959)
top products
Sales of Bayer’s top ten products in its CropScience division accounted for 42% of its second-quarter sales, against 38% last year. They also made up 42% of first-half sales compared with 39% in the same period in 2007.
Imidacloprid-based insecticides, such as Confidor and Guacho, remained Bayer’s biggest second-quarter sellers, despite flat sales. There were rises of over 60% in the second quarter for the fungicides, Proline and Flint. They rose by 40.1% and 61.1%, respectively, in the first six months of the year. The former became the second-largest selling product in the second quarter, replacing the herbicides, Basta and Liberty (both glufosinate-ammonium), which had taken the spot in the same quarter of 2007. Flint has moved up to third place following a 71.7% rise in sales, the largest increase among all products.
Sales of Basta and Liberty inched higher and they remained the largest-selling herbicides in the Bayer portfolio. The fungicide, Fandango, entered the top ten with sales of €50 million, up from €15 million in last year’s second quarter. Sales for the first half more than doubled.
Other notable second-quarter risers were the fungicidal seed treatment, Folicur, and the herbicide, Puma. Sales of the herbicide, Atlantis (mesosulfuron-methyl), jumped by almost half (49.5%) over the first six months of the year.
Bayers 2nd-qtr top ten products (€ million)
Product (ai)
2008
($ million)
% change (€)
Confidor/Gaucho/Admire/Merit
(imidacloprid - I/ST/ES)
133
(210)
+0.8
Proline (prothioconazole - F)1
125
(197)
+66.7
Flint/Stratego/Sphere (trifloxystrobin - F)1
91
(143)
+71.7
Basta/Liberty (glufosinate-ammonium - H)
90
(142)
+1.1
Puma (fenoxaprop-ethyl - H)
84
(132)
+21.7
Folicur/Raxil (tebuconazole - F/ST)
83
(131)
+36.1
Decis/K-Othrin (deltamethrin - I/ES)
53
(83)
+1.9
Fandango (prothioconazole + fluoxastrobin – F)1
50
(79)
>100
Poncho (clothianidin - ST)
35
(55)
+12.9
Atlantis (mesosulfuron-methyl - H)
12
(19)
-20.0
Total
756
(1,191)
+27.7
* Key: F = fungicide; H = herbicide; I = insecticide;
ES = environmental science; ST = seed treatment. 1 launched since 2000.
CropScience division
Second-quarter sales of the CropScience division rose by 15.5% to €1,804 million. The division grew by 23% after currency and portfolio adjustments. EBITDA before special items rose by 26.5%, due to rising prices and volumes, Bayer says. EBIT not including special items advanced by 43.1%. EBITDA margins before special items were 27.8%, compared with 25.4% a year earlier. Mr Wenning calls the results “outstanding”.
First-half sales were up by 13% to €3,782 million. EBITDA rose by 23.9% €1,214 million before special items, and EBIT by 34.4% to €953 million. EBITDA margin for the first six months was up to 32.1% from 29.3%.
The results were impacted by the strengthening euro, Bayer says. The hit on sales for the quarter was approximately €130 million ($205 million), while underlying EBITDA lost €60 million ($95 million).
Sales of the non-crop pesticide Environmental Science business fell by 17.5% in the second quarter and by 10.9% after currency and portfolio adjustments. The business suffered a drop in sales of products for professional users in the North American golf industry as it had done last year, and of home and garden products in Europe. A further hit came from fewer sales of specialty ais to “downstream customers”.
The BioScience business seed and trait sales rose by 13% (+13.9% on an adjusted basis). Bayer acquired cotton and vegetable seed businesses over the year, such as the Korean seed company, SeedEx and the US cotton company, Stoneville. The improvement came from Bayer’s cotton seed business in North America, Mexico and India, and the expansion of its hybrid rice concerns in Asia.
Bayer CropSciences results (€ million)
2nd qtr ended June 30th
2007
($ million)
% change
2008
($ million)
Total sales
1,562
(2,461)
+15.5
1,804
(2,842)
Crop protection
1,262
(1,988)
+20.9
1,526
(2,404)
Environmental Science
200
(315)
-17.5
165
(260)
BioScience
100
(158)
+13.0
113
(178)
EBITDA1
396
(624)
+26.5
501
(789)
EBIT2
262
(413)
+43.1
375
(591)
 
Six months
 
 
 
Total sales
3,348
(5,274)
+13.0
3,782
(5,958)
Crop protection
2,696
(4,247)
+16.8
3,148
(4,959)
Environmental Science
388
(611)
-14.9
330
(520)
BioScience
264
(416)
+15.2
304
(479)
EBITDA1
980
(1,544)
+23.9
1,214
(1,912)
EBIT2
709
(1,117)
+34.4
953
(1,501)
1 division’s earnings before interest, taxes, depreciation and amortisation, before special items; 2 earnings before interest and taxes, before special items.
outlook
Bayer estimates that currency effects will cost the business €320 million ($504 million) in sales and €190 million ($299 million) on its EBITDA for the year, but remains upbeat and is upgrading its targets. “We are expecting sales growth of well above 10% on a currency-adjusted basis,” Mr Wenning says. The company has also brought forward its 25% EBITDA margin target from 2009 to this year.
Professor Berschauer is confident of further price rises, saying demand remains strong, “assuming weather remains supportive”. The CropScience chairman of the board foresees a 3-5% growth in the crop protection market in 2009, and targets above that growth for Bayer.
 
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