BUSINESS
BAYER SETS TARGETS FOR AGCHEM UNIT Synergies in chemistry and markets seen in merger of Bayer and Aventis operations
B
AYER'S CROPSCIENCE UNIT IS
straightforward about its goal: It wants to be number one in the industry worldwide. That was the message from the unit's management team as it officially debuted the "new" crop protection specialist to international press earlier this month at its headquarters in Monheim, Germany, near the Leverkusen home of parent company Bayer. The company emerged as an independent entity from the corporate restructuring of Bayer, a multiyear process that started with Bayer's desire to find a partner for its drug business and was shaped by the recently concluded integration of Aventis CropScience, acquired in June 2002. That buy, said Jochen Wulff, chairman of Bayer CropScience, was the biggest single purchase in nearly 140 years of Bayer history. Melding the two operations has been a daunting challenge. For example, antitrust authorities demanded the divestiture of businesses that would have contributed roughly $785 million to the new company's annual sales. With them, Bayer CropScience would have been virtually tied with Syngenta as industry leader. As it stands, pro formafiguresgive it about $6.6 billion in sales for 2002.
To achieve its targets, the company plans to have launched 14 new active ingredients from 2001 to 2005. Additional sales from new products could hit $900 million annually by 2006, Wulff said. Although the global crop protection market is forcast to grow at about 2% annually into the foreseeable future, he said the new company plans to increase sales by 4% per year. BUT SALES IS NOT the only category the new company wants to boost. It aims to attain earnings before interest, taxes, depreciation, and amortization of 29% of sales by 2006. Some of that improvement, Wulff predicted, will come from synergy savings following the purchase ofthe Aventis business of roughly $640 million per year starting in 2006. According to Esmail Zirakparvar, the board director responsible for business operations, results for the first half of 2003 confirm the positive outlook for Bayer CropScience. Markets have shown signs of recovery, especially in North and South America, he said. In the first half of 2003, official figures showed an increase in sales of66% over firsthalf 2002 to $3.62 billion, and an increase in earnings before interest and taxes of 187% to $533 million. The increase, of course, is mainly due to the acquisition of Aventis
GROWTH INDUSTRY Bayer CropScience researcher tests a new active ingredient on a citrus leaf. HTTP://WWW.CEN-ONLINE.ORG
CropScience. On apro fbrmabasis, the new company saw salesfellby 4% because ofcurrency effects; strip out those exchange-rate effects and sales were up by 8%. The new company is made up of three divisions: Crop Protection, Environmental Science, and BioScience. Crop Protection accounts for 85% of total sales, divided among business units for insecticides, fungicides, herbicides, and seed treatments. Of these, Zirakparvar says the seed treatment unit is the fastest growing. The Environmental Science Division, with pro forma sales of about $785 million in 2002, is also a strong growth segment, he said. It includes the company's lawn and garden business and products for nonagricultural, professional applications. The third division, BioScience, had pro forma sales in 2002 of about $270 million and nearly $190 million in thefirsthalf of 2003. "We are one of the fastest growing companies in the plant biotechnology market,'' says Bernward Garthoff, the board director for technology The Aventis integration has seen herbicide research concentrated in Frankfurt; insecticide research in Monheim; and fungicide research managed out of Lyon, France, with labs in Lyon and Monheim. Currently under construction and due to open in April is a $20 million R&D center in Gent, Belgium, that will specialize in biosciences. The investment is part of the unit's capital investment budget—more than $225 million next year, Garthoff says—to upgrade and expand existing facilities and build new ones. The company's technology drive is supported by an R&D budget of nearly $800 million this year, although that is expected to settle down "in line with the implementation of identified synergies," Garthoff notes, to about $725 million per year, slightly less than 10% of total sales. He adds that the new company's R&D interests include improving the agronomic performance ofcrops through such benefits as greater herbicide tolerance, disease and insect resistance, and yield and quality enhancements. Two current projects are potatoes with improved starch properties and improved cotton fiber from innovative cottonseed varieties. New chemistry is also ofinterest; hence the unit's work on ketoenoles, a new class of compounds under development as insecticides. GarthofFs goal "is to introduce two to three new compounds to the market every year^That's an ambitious target—but one that will have to be met if the company is to lead the industry-PATRICIA SHORT C&EN / SEPTEMBER 22. 2003
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