Bayer seeking remedy abroad: Chemicals group gives profits warning as reforms hit turnover

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The Independent Online
BAYER, the German chemicals giant, yesterday issued a profit warning for 1993 saying that turnover in the first two months had fallen by 11 per cent.

Manfred Schneider, the chief executive, expressed alarm at the effects of the Bonn government's health reforms which will curb spending in Bayer's domestic market. In the first two months of the year the company suffered domestic turnover losses of between 20 and 40 per cent.

'This has already cost us DM35m in profits,' Mr Schneider said, warning that the reforms endangered the survival of a pharmaceutical research industry in Germany. 'Bayer will concentrate on those countries which want and reward innovation,' he said.

The main focus of the company's activities will be on the US and Japan. Bayer is placing great hopes on its new anti- haemophilia drug, Kogenate, in America to compensate for the difficulties in the medical sector at home and the rest of Europe.

Mr Schneider also said the heavy cost disadvantages of producing in Germany in the face of massive Asian competition cast doubt over the continuation of the company's domestic organic sector. Rather than pull out, Bayer will switch production to the Asian region.

'It is clear that we will not achieve 1992's results. How far it drops will depend on the coming months,' Mr Schneider said.

Bayer made pre-tax profits of DM2.7bn ( pounds 1.2bn) in 1992, down 16 per cent on the previous year. The company cut its dividend from DM13 to DM11 per share.

Bayer has just introduced short-time working at its main plants after capacity utilisation dropped sharply. The 157,000- strong workforce is to be reduced by a further 3,000 this year after 7,800 cuts in 1992.

Bayer's health and pharmaceuticals sector, which accounts for two-thirds of its operating results, continued to perform well, making up for sharp drops in earnings, averaging 25 per cent, in sectors such as polymers, agriculture and industrial products.