Bayer CEO eyes falling margins in drugs, plastics

Bayer expects to see falling profit margins in drugs and plastics as the euro debt crisis sends tremors through economy, chief executive Marijn Dekkers told a German newspaper.

“There is an increasing trend towards cost-cutting on medicines, so the debt crisis is pressuring our margins,” Dekkers told Tagesspiegel newspaper in a interview released ahead of publication on Monday.

“Besides price pressure in HealthCare, demand is weakening for our plastics,” he said.

Dekkers complained about weak payment discipline in highly indebted euro area countries, especially Greece, Italy and Spain.

“Overall, accounts receivable is a significant, three-digit million euro amount. The countries in some cases have missed their payment dates by more than a year,” Dekkers said.

Bayer has also become more conservative in the face of the euro debt crisis, raising liquid funds fivefold to 3.8 billion euros ($5 billion) since 2008, but the two downswings were not comparable, Dekkers said.

“The current crisis is at most, only half as bad as the one three years ago,” he said. “After Lehman it was pure panic.”

Bayer has no big acquisitions on the cards and wanted to grow mainly on its own power, supported by small takeovers, he said.

The company is confident about the sustainability of growth in China, Dekkers said.

“There is so much demand in China, I couldn’t imagine what would interrupt our sales growth there,” he said.

The executive played down concerns over discussions in the United States on the labeling of birth control pills, such as Bayer’s popular Yaz and Yasmin.

Last week, outside experts advising the Food and Drug Administration (FDA), in a 21-5 vote agreed the current, rather complex label does not adequately help women and doctors understand the risks and benefits of such pills.

Nonetheless, in a close vote of 15 to 11, the panel concluded the benefits of preventing unwanted pregnancies did outweigh the risks.

“We are awaiting the FDA’s final decision and will work with the authority, as we do with other health authorities, on any changes to the product information needed as a result of new scientific data,” Dekkers said.

###

(Reuters)