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Our successful performance in the first half strengthens our confidence for the full year. We are now targeting over 5 percent currency- and portfolio-adjusted growth in Bayer Group sales (previously: approximately 5 percent) and plan to further improve EBITDA before special items and the underlying EBITDA margin.
We remain confident about the performance of our HealthCare business and expect all divisions to grow with or above the market after adjusting for currency changes. We aim to improve our EBITDA margin before special items toward 27 percent.
Our CropScience business performed very well in the first half of 2008. Against the background of the positive market environment, which we expect to continue, we are again raising the full-year guidance for this business. We now believe that we can increase sales by well over 10 percent on a currency- and portfolio adjusted basis (previously: more than 5 percent) and improve the EBITDA margin before special items to about 25 percent (previously: about 24 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.
Our MaterialScience business turned in a pleasingly robust performance in the first half of the year. However, we anticipate a slackening pace of growth in the third quarter, accompanied by further increases in raw material and energy costs. We therefore expect to report lower EBITDA before special items in the third quarter of 2008 than in the second quarter. For the year as a whole, we continue to expect that we can achieve a good, value-creating earnings level, though without matching the 2007 figure.
For the Bayer Group we continue to predict special charges in the region of €650 million for the full year, of which €400–450 million will be cash items.
The start to 2008 exceeded our expectations, strengthening our confidence for the year as a whole. We continue to target about 5 percent currency-adjusted growth in Bayer Group sales, an increase in EBITDA before special items and a further improvement in the underlying EBITDA margin.
We confirm our target margin for 2009 and continue to aim for an improvement in the Group’s underlying EBITDA margin to over 22 percent.
We remain confident about the performance of our HealthCare business, and are targeting a market or above-market rate of currency-adjusted sales growth in all divisions in 2008. Following the negative ruling in the United States regarding our Yasmin® patent (see Risk Report), we have made a minor adjustment to our HealthCare guidance. We now aim to improve our EBITDA margin before special items toward 27 percent (previously: approximately 27 percent). There is no change to our target margin of approximately 28 percent for 2009.
Our CropScience business shared in the positive performance of the world’s agricultural markets in the first quarter of 2008. We now believe that we will exceed our forecast of 5 percent currency-adjusted sales growth. Our goal is to improve the EBITDA margin before special items for the full year to about 24 percent (previously: more than 23 percent). We plan to further increase our profitability by 2009 and continue to target an EBITDA margin before special items of around 25 percent in a normal market environment.
Our MaterialScience business turned in a pleasingly robust performance in the first quarter. Its development over the remainder of the year is difficult to forecast due to the considerable uncertainty regarding the business environment and the movement of raw material prices. Against this background, we expect second-quarter EBITDA before special items at MaterialScience to be close to the level of the first quarter. For the year as a whole, we continue to expect that we can achieve a good, value-creating earnings level, though without matching the 2007 figure.
In 2008 we expect the global economy to continue expanding, with regional variations. We believe the strongest growth will occur in Asia and Latin America. In Europe we anticipate that economic expansion will remain robust. Uncertainty surrounds the economic trend in the United States and its possible impact on the global economy. Exchange rates also remain unpredictable. Our planning is based on an exchange rate of US$ 1.45 to the euro, compared to the average rate of US$ 1.37 in 2007.
In this environment we aim to continue growing the business in 2008 and anticipate that we can raise Bayer Group sales by about 5 percent on a currency-adjusted basis. This would mean a slight nominal increase over 2007.
We also expect to further increase EBITDA before special items and improve our operating margin, in anticipation of a gratifying earnings trend for HealthCare and CropScience along with a difficult market environment for MaterialScience.
We plan to take special charges of about €650 million, of which between €400 million and €450 million will be cash items. These charges will result primarily from the integration of Schering and also from ongoing restructuring projects at CropScience and MaterialScience. We are budgeting for cash expenses of approximately €200 million in 2008 and €50 million in 2009 for the Schering integration.
To safeguard long-term growth, we plan to spend €1.7 billion for property, plant and equipment in 2008. We estimate total depreciation and amortization at about €2.6 billion, with property, plant and equipment accounting for €1.2 billion of this figure. We expect to increase our research and development spending to €2.8 billion.
We can confirm that we still plan to achieve an EBITDA margin before special items in excess of 22 percent in 2009.
HealthCare is targeting a market or above-market rate of currency-adjusted sales growth in all divisions in 2008, and an improvement in its EBITDA margin before special items to approximately 27 percent. We confirm our goal of reaching an EBITDA margin before special items of around 28 percent in 2009.
For CropScience we expect a generally positive market environment in 2008 and aim to raise sales by approximately 5 percent on a currency-adjusted basis. Our goal is to improve the EBITDA margin before special items to more than 23 percent. We plan to further increase our profitability by 2009 and continue to target an EBITDA margin before special items of around 25 percent in a normal market environment.
MaterialScience is planning to achieve good volume growth once again in 2008. Due to the uncertain business environment and highly volatile raw material prices, it is currently not possible to make a firm prediction concerning earnings for the full year. We expect to achieve a good, value-creating earnings level, though without matching the 2007 figure. For the first quarter of 2008 we believe EBITDA before special items will remain practically level with the fourth quarter of 2007.
We continue to believe that in the future, under favorable economic conditions, we can post an EBITDA margin before special items of more than 18 percent. Our cost-structure program is designed to help achieve this objective.
