Bayer unveils agrochem revamp

German drugs and chemicals group Bayer unveiled a revamp at its agrochemicals unit after healthcare earnings boosted quarterly profit, but its stock fell on worries over its take-over of Schering.
Second-quarter earnings before interest, tax and special items from continuing operations rose to 928 million euros ($1.19 billion), beating the average forecast of 875 million euros in a Reuters poll of 15 analysts.
And Bayer said it would cut 1,500 jobs and close or restructure factories at its CropScience unit in a plan designed to save 300 million euros a year.
CropScience, which vies with Switzerland's Syngenta for the top spot in the agrochemicals market, posted a higher-than-expected rise in earnings due to cost cuts.
But its stock fell 0.9 percent to 39.20 euros at 1046 GMT on Tuesday, compared to a 0.3-percent rise in the DAX blue chip index after rising more than 1 percent initially.
Traders said the stock fell because there was no forecast that included Schering, a drugmaker that Bayer bought for 17 billion euros, and declined further after Bayer said it expected underlying earnings this year to be hit by amortisation and inventory revaluation linked to the purchase.
Underlying earnings from continuing operations before interest and tax are seen rising this year excluding Schering.
"It's a mixed picture - HealthCare strong as expected, CropScience better than estimated, and MaterialScience somewhat disappointing," said Sal. Oppenheim analyst Ludger Mues. "At MaterialScience, there's price pressure on polycarbonate, and the unit is feeling the first impact of new capacities," he said.
Analysts say a chemical sector upswing that has boosted profitability for the past two years is fading amid capacity increases, a slowdown in demand and high raw material costs. In recent quarters, the upswing has benefited Bayer's MaterialScience unit, which makes plastics and chemicals.
Mues downgraded Bayer to "neutral" from "buy", citing doubts about the chemical sector's prospects, poor profitability at CropScience and slight setbacks to its drugs unit in the recent past, such as generic competition and pipeline problems.
Sales rose 5.8 percent to 7.07 billion euros in the quarter, compared with the 7.207 billion-euro poll average.