Schering AG buy boosts Bayer but charges take toll on profit; 3rd-qtr beats forecasts

Bayer's acquisition of fellow German drugmaker Schering AG (Marketletter passim) has had a significant impact on the group's performance, and could well bring it back into the big league in pharmaceuticals. However, as a result of charges associated with the deal, Bayer reported a 35% downturn in third-quarter 2006 net profits to 320.0 million euros ($419.8 million). This was still ahead of consensus expectations, and saw the group's share price rise 2.2% to 39.87 euros on the day the figures were released, November 27.

Group sales rose 26.0% to 7.78 billion euros, with earnings before interest, taxes, depreciation and amortization before special items up 38.5% to 1.51 billion euros. EBIT before special items increased 22.2% to 798.0 million euros. Net charges for the quarter were 139.0 million euros, including 106.0 million euros for Bayer HeathCare alone, mostly due to the Schering integration, Bayer management board chairman Werner Wenning revealed at the company's fall press conference in Leverkusen.

Underlying EBIT for the full year 2006 is predicted to be in the order of 3.5 billion euros, with the Schering business contributing only about 100.0 million euros due to acquisition-related charges.