Bayer on 'the right course' for the future

Despite pressure on prices and margins and adverse shifts in exchange rates, Bayer's financial performance during the first quarter of 2003 was desribed by ceo and management board chairman Werner Wenning as 'very encouraging'.

And provided current economic conditions do not seriously worsen, the company expects a double-digit percentage increase in its operating result from continuing operations in 2003.

Group sales from continuing operations in the first quarter of 2003 increased by more than 4% to €7.3bn and by more than 15% in local currencies. According to provisional figures, the operating result also exceeded the figure for the same period of 2002 of €840m. 'So the year clearly got off to a good start, and we plan to build on that,' said Wenning.

However, he pointed out that growth forecasts for the current year are difficult to make at the present time, but a powerful upswing is unlikely in view of the current economic situation, the ongoing weakness of the financial markets and the continuing high price of oil. An economic recovery in Germany is not expected before the end of this year at the earliest.

Bayer's priority now is to resolve strategic issues and to improve its performance. It will therefore continue to pursue its efficiency improvement programmes with the aim of saving approximately €600m in 2003 and reducing its net debt to around €7bn. It is also planning a further cutback in its capital spending, limiting investment to 70% percent of depreciation as in the past year, although Wenning emphasised that strategically important investment projects would not be affected.

Last year was one of transition for Bayer, but the company had achieved the goals it had set itself and in some cases even exceeded them, said Wenning. Notably it had reduced its net debt by the end of the year to €8.9bn, significantly less than its €10bn target.

Wenning also outlined the latest situation regarding Lipobay/Baycol. Without concession of liability, Bayer so far has entered settlement agreements with 740 individuals, which will result in total payments of approximately US$219m (€199m). The company is currently in settlement negotiations for several hundred further cases, and some 8,600 suits are pending in the US.

Bayer will continue to offer fair compensation on a voluntary basis and without concession of liability, Wenning stressed, but will defend itself vigorously in all cases in which there is no connection between Lipobay/Baycol and the health problems that are the subject of the claims, or where a fair settlement cannot be reached. The company was cleared of all liability in the first two US trials, and will continue to present evidence in the courtroom that Lipobay/Baycol was a safe and effective drug when taken as directed.