4Q charges drive Bayer into loss

Related tags Bayer Chemical industry

German chemical and pharmaceuticals group Bayer has said it expects
to slip into the red in 2003.

The loss will come about because of €2.2 billion in charges taken in the fourth quarter related to the company's plans to restructure its business. Bayer stressed that these charges would not be met in cash and would have no impact on its cash flow

Last month, Bayer announced plans to spin out a chemicals company and refocus its pharmaceuticals business. This is expected to hit pretax earnings by €2 billion, the company said in a statement. The non-operating result should be reduced by about €200 million.

About €1.7 billion of charge is related to Bayer's chemicals and polymers activities, and the remaining €500 million would be made at the healthcare division, due in part to consolidation of its pharma research facilities. Last week, Bayer announced that it was closing a research unit in Kyoto, Japan, and a reduction in staff at another facility in California, US.

"In light of the planned impairment charges, the Bayer Group expects to post negative earnings before interest and taxes and a net loss for the full year 2003,"​ the company said.

Bayer plans to combine its chemicals division and part of its polymers business into a new entity, initially called NewCo, which is to be floated on the stock market by early 2005.

NewCo, to be headquartered in Leverkusen, would have sales of around €5.6 billion a year and employ 20,000 people in 20 countries. It will produce a wide range of industrial chemicals and polymers. Polymers are compounds made by linking molecules in long strings, including rayon, nylon and polystyrene.

However, Bayer's move has been seen in some quarters as a means of getting rid of its worst-performing businesses and retaining the best parts, such as the flagship materials science activities.

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