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Future Perspectives
Economic outlook
In the second half of 2007 we expect the global economic upswing to continue. Robust growth in Europe and in the emerging economies of Asia and Latin America is expected to compensate for the slight downturn in the United States. China and India, in particular, with their rapidly expanding economies, are contributing increasingly to global economic growth. While taking a confident overall view of the world economy, we are aware that the trend in oil prices and geopolitical uncertainties pose certain risks.
We anticipate that the pharmaceuticals market will maintain its current pace of steady growth. We expect a further improvement in the crop protection market environment compared to the prior-year period. Markets for the products of MaterialScience will probably show only a slight overall improvement, with regional growth rates diverging considerably.
We anticipate that the pharmaceuticals market will maintain its current pace of steady growth. We expect a further improvement in the crop protection market environment compared to the prior-year period. Markets for the products of MaterialScience will probably show only a slight overall improvement, with regional growth rates diverging considerably.
Bayer Group sales and earnings forecast
We continue to target an increase of more than 10 percent in Group sales for the full year 2007. Adjusted for portfolio and currency effects, business should expand by about 5 percent.
In June we raised our full-year earnings guidance for the Bayer Group and Bayer HealthCare. We plan to increase the Group EBITDA margin before special items to more than 20 percent (previous forecast: slightly increase on the prior-year figure of 19.3 percent). We expect to expand the EBITDA margin before special items to more than 22 percent by 2009 (previous forecast: approximately 22 percent).
We are optimistic about the prospects for our HealthCare business. For the year as a whole, we continue to expect that all of its divisions will grow with or faster than the market. We have increased the target margin for HealthCare to 25 percent for the current year (previous forecast: improvement toward 24 percent). The integration of the acquired business of Schering, Berlin, Germany, is proceeding more quickly than planned. We are confident that we will be able to realize synergies of more than €800 million by 2009 (previous forecast: €700 million). Also by 2009, we aim to achieve an EBITDA margin before special items of approximately 28 percent (previous forecast: 27 percent) in our HealthCare business.
The market environment for our CropScience business was positive in the first half of the year, as anticipated. We expect year-on-year growth in sales in the second half (previous forecast: full-year sales to grow slightly faster than the market) and are now targeting an increase in the full-year EBITDA margin before special items to more than 22 percent (previous forecast: improvement toward 22 percent).
MaterialScience sustained a good, value-creating earnings level in the first six months of 2007. EBITDA before special items in the third quarter is likely to remain on a par with the second quarter.
In connection with the passage of corporate tax reform legislation in Germany, we expect to receive one-time non-cash tax income of approximately €0.9 billion in the third quarter of 2007. This results particularly from the remeasurement of the deferred tax liabilities accrued in connection with the Schering acquisition based on the lower nominal rates of corporate income tax applicable in Germany beginning in 2008. Because the assessment base has been significantly widened in order to finance the reduction in nominal tax rates, only limited relief in terms of the total tax payable is expected in the coming years.
In June we raised our full-year earnings guidance for the Bayer Group and Bayer HealthCare. We plan to increase the Group EBITDA margin before special items to more than 20 percent (previous forecast: slightly increase on the prior-year figure of 19.3 percent). We expect to expand the EBITDA margin before special items to more than 22 percent by 2009 (previous forecast: approximately 22 percent).
We are optimistic about the prospects for our HealthCare business. For the year as a whole, we continue to expect that all of its divisions will grow with or faster than the market. We have increased the target margin for HealthCare to 25 percent for the current year (previous forecast: improvement toward 24 percent). The integration of the acquired business of Schering, Berlin, Germany, is proceeding more quickly than planned. We are confident that we will be able to realize synergies of more than €800 million by 2009 (previous forecast: €700 million). Also by 2009, we aim to achieve an EBITDA margin before special items of approximately 28 percent (previous forecast: 27 percent) in our HealthCare business.
The market environment for our CropScience business was positive in the first half of the year, as anticipated. We expect year-on-year growth in sales in the second half (previous forecast: full-year sales to grow slightly faster than the market) and are now targeting an increase in the full-year EBITDA margin before special items to more than 22 percent (previous forecast: improvement toward 22 percent).
MaterialScience sustained a good, value-creating earnings level in the first six months of 2007. EBITDA before special items in the third quarter is likely to remain on a par with the second quarter.
In connection with the passage of corporate tax reform legislation in Germany, we expect to receive one-time non-cash tax income of approximately €0.9 billion in the third quarter of 2007. This results particularly from the remeasurement of the deferred tax liabilities accrued in connection with the Schering acquisition based on the lower nominal rates of corporate income tax applicable in Germany beginning in 2008. Because the assessment base has been significantly widened in order to finance the reduction in nominal tax rates, only limited relief in terms of the total tax payable is expected in the coming years.
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