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Setting the course after a very successful first half of 2008:
Expansion of R&D program will strengthen basis for future growth / Achievement of target EBITDA margin of around 25 percent already expected in 2008 / Sales target of EUR 2 billion with new active ingredients now envisaged for 2009 / Launch of 10 new crop protection compounds with a peak sales potential of more than EUR 1 billion planned through 2012
Monheim, September 4, 2008 - After an outstanding business development in the
first six months in 2008, Bayer CropScience is now setting the course for the
future. The company is launching an extensive research program to seize the
long-term opportunities for growth on the agricultural markets. To this end, a
total of EUR 3.4 billion will be invested into research and development of
innovative crop protection products and new solutions in seeds and plant
biotechnology between 2008 and 2012. During the same period the company is
planning to bring 10 new crop protection active ingredients to market which
will have a combined peak sales potential of more than EUR 1 billion. This new
objective complements existing plans to achieve sales of EUR 2 billion with
active ingredients launched since 2000. The gratifying development of business
indicates that this target will be reached already in 2009 - two years earlier
than expected. The company also anticipates achieving an underlying EBITDA
margin of approx. 25 percent this year. This figure was originally planned for
2009.
Professor Friedrich Berschauer, Chairman of the Board of Management of Bayer
CropScience AG, said at the company's annual press conference in Monheim,
"Bayer CropScience is an innovation leader in the agricultural industry; our
three businesses - Crop Protection, Seeds & Traits and Plant Biotechnology -
are extremely well positioned and provide farmers with intelligent and
sustainable solutions to safeguard harvests and increase yields." In view of
the persistently high demand for agricultural raw materials, the limited amount
of arable land available, and the impending climate change, Berschauer said
that the agricultural industry is facing some major challenges.
Berschauer: "We need a second green revolution"
Bayer CropScience's Board Chairman believes that advances in agricultural
productivity in emerging economies, in particular, have slowed progressively in
the past decades, while at the same time the global population continues to
grow strongly. In addition, public funding for agricultural research is no
longer such a high priority. Berschauer emphasized that agriculture needs to be
put back at the center of international research and development policy, and
investment in technology, innovation and agricultural infrastructure needs to
be boosted. "We need intensive agricultural research if we are to meet the
challenges associated with producing food and making the best possible use of
the agricultural resources available to us," Berschauer said. "What we need is
nothing less than a second green revolution."
In view of the impending climate change, plant biotechnology will play an
increasingly important role in making plants less susceptible to climatic and
environmental stress. Targeted integrated management of all agricultural
activities - irrigation, fertilization, crop protection and innovative seed
technologies - will enable global harvests to be increased substantially.
Classic crop protection products alone can help to increase yields of major
crops by up to 70 percent when deployed optimally. Berschauer explained that
modern hybrid seed and more intensive use of the opportunities inherent in
plant biotechnology offer substantial further yield potential.
Investing in the future
As a global market leader in the agrochemical sector, Bayer will contribute to
increasing this yield potential, Berschauer said. Bayer CropScience is planning
to invest a total of EUR 3.4 billion in research and development between 2008
and 2012. Almost EUR 2.7 billion of this sum will be allocated to R&D into
innovative crop protection active ingredients, and EUR 750 million to
developing new seed and plant biotechnology products.
The company is also planning to gradually align its crop protection production
capacities with demand from the market. In 2008 Bayer CropScience will be
spending about EUR 280 million to modernize existing facilities and to
construct new ones (2007: EUR 223 million). The largest single project is the
construction of a new production plant for precursors of the herbicidal active
ingredient glufosinate-ammonium (marketed under the brand names Liberty®,
Ignite® and Basta®), which will be built in Knapsack near Cologne, Germany, at
a cost of some EUR 60 million and is scheduled to come on stream in 2009.
Record sales and financial performance in the first six months of 2008
Strong demand for innovative crop protection and seed products enabled Bayer
CropScience to expand its business substantially in the first half of 2008.
Adjusted for exchange rate and portfolio effects, sales grew 19 percent in the
first six months of the year to reach EUR 3.78 billion. The company was more
than able to compensate for negative currency effects with substantially higher
sales volumes and price increases. EBITDA before special items increased 24
percent to EUR 1.214 billion; underlying EBIT rose by as much as 34 percent to
the record level of EUR 953 million.
The major driver behind this development was the crop protection business,
which grew by 17 percent to achieve sales of EUR 3.15 billion (2007: EUR 2.7
billion). Adjusted for exchange rate and portfolio effects, this is equivalent
to a 23 percent increase - an excellent result vis-à-vis the industry at large.
All the business units grew, with the fungicides portfolio making a
particularly strong contribution with currency-adjusted sales growth of 39
percent.
Bayer CropScience saw particularly high growth rates in sales of its portfolio
of young, innovative active ingredients which have been launched in key markets
since 2000. Sales of these products grew by 45 percent in the first six months
of 2008 compared with 2007 to reach roughly EUR 1.15 billion. This performance
underlines the company's successful focus on research into and development of
new crop protection products, and highlights its position as an innovation
leader in the crop protection industry.
The seeds & traits business in the company's BioScience unit also developed
extremely well, increasing sales by 15 percent to EUR 304 million (+21 percent
adjusted for exchange rate and portfolio effects). This performance was the
result of the cotton seed business developing well in North America, Mexico and
India and strong demand for hybrid rice varieties in Asia. Sales of the hybrid
canola seed InVigor® in North America developed well, as did the global
vegetable seed business. In Environmental Science, however, currency-adjusted
sales in the first half of 2008 amounted to EUR 330 million, 10 percent lower
than the previous year. The main reason for this was lower sales of
professional products for landscape management in North America.
Positive outlook for the second half of 2008
Bayer CropScience has raised its forecast for the full year 2008 as a result of
the good business development in the first six months. "We expect the market
environment to remain positive in the second half of 2008 and are aiming to
increase our currency-adjusted sales by well above 10 percent on a currency-
and portfolio adjusted basis," Berschauer said. "We also believe that we can
improve the EBITDA margin before special items to about 25 percent. This would
mean that our goal of an approximately 25 percent EBITDA margin before special
items, originally targeted for 2009, would be achieved a year earlier than
planned." He also said that, as the prices of energy and raw materials continue
to rise, the company is planning to adjust its prices again in the second half
of 2008.
Seizing opportunities for growth with innovative products
The portfolio of young active ingredients will continue to drive the company's
sales and earnings development. Following the excellent performance of these
compounds in the first half of the year, Bayer CropScience is now expecting to
reach its sales target of EUR 2 billion by the end of 2009 instead of in 2011
as originally planned. The company also has a strong development pipeline and
has set itself the new target of bringing to market in the period from 2008 to
2012 ten new active ingredients with a combined peak sales potential in excess
of EUR 1 billion. "Given our product portfolio, strong pipeline and great
innovative strength, we want to secure an above-average share of this market
growth," Berschauer commented.
In BioScience, Bayer CropScience is targeting sales of EUR 1 billion by 2015,
with average growth of 12 percent annually, most of which is expected to be
organic. The increasing resistance of weeds to glyphosate represents a
particular opportunity for the company, which is developing new technological
solutions for resistance management programs. "However, in the future we will
also actively review any opportunities for cooperations and acquisitions that
present themselves in order to specifically develop our seed and plant
biotechnology business further," Berschauer said.
About Bayer CropScience
Bayer AG is a global research-based and growth-oriented enterprise with core
competencies in the fields of health care, nutrition and high-tech materials.
Bayer CropScience AG, a subsidiary of Bayer AG with annual sales of about EUR
5.8 billion (2007), is one of the world's leading innovative crop science
companies in the areas of crop protection, non-agricultural pest control, seeds
and plant biotechnology. The company offers an outstanding range of products
and extensive service backup for modern, sustainable agriculture and for
non-agricultural applications. Bayer CropScience has a global workforce of
about 17,800 and is represented in more than 120 countries. This and further
news is available at: www.newsroom.bayercropscience.com.
More information is available at www.bayercropscience.com
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