Archive for February, 2010

Bayer Q4 net income up 44 percent (AP)

Friday, February 26th, 2010 | Finance News

FRANKFURT – German chemical and pharmaceutical company Bayer AG said Friday its net income rose 44 percent in the fourth quarter to euro153 million ($208 million) as cost savings and a pickup in some business offset negative currency effects and charges for the integration of Schering.

The company, famous for its Bayer aspirin, had earned euro106 million in the October-December period of 2008. Fourth quarter revenue for the company was nearly unchanged at euro7.9 billion.

For the full year 2009, the company said net income fell 21 percent to euro1.4 billion from euro1.7 billion in 2008, while revenue fell 5.3 percent to euro31.2 billion from euro33 billion in 2008.

Bayer said currency effects took a toll of some euro140 million on full-year earnings, euro80 million of which was charged to the fourth quarter.

The company also said the full year results were weighed by some euro766 million in charges, mainly related to the integration of pharmaceutical company Schering which Bayer bought in 2006. Bayer said it doesn't expect to see special charges during the current year.

"We believe the Bayer group is well positioned strategically and on course for success because of the potential our portfolio offers for innovation and growth," Werner Wenning, the company's chief executive, said in the report.

"We were successful in a difficult environment, and we are optimistic for the future."

The company said it plans to increase revenue by more than 5 percent in 2010, while earnings before interest, taxes, depreciation and amortization are planned to increase toward euro7 billion. In 2009 the company's EBITDA stood at euro5.8 billion.

Bayer missed the market's expectations for EBITDA, but reached its internal target of reducing net debt levels to below euro10 billion, UniCredit credit analysts said in a research note.

"Earnings in terms of EBITDA before special items are targeted to increase toward euro7 billion, with core earnings per share expected to improve by about 10 percent. The growth should be driven by health care and crop science, as well as the continued recovery of its material science unit. With regard to earnings, the company expects to book no more restructuring charges in 2010. We maintain our 'Underweight' recommendation on the name," UniCredit said.

Bayer's earnings per share were nearly 13 percent lower on the year at euro3.64.

The news sent shares of Bayer more than 3 percent lower to euro48 in Frankfurt morning trade.

Bayer, based in Leverkusen, said revenue for its health care business rose nearly 4 percent for the year to almost euro16 billion, while crop science saw a 2 percent improvement in revenue to nearly euro7 billion. The health care division saw a 21 percent increase in pretax earnings, while crop science saw a 13 percent decline.

The material science division, meanwhile, saw a near 23 percent decline in revenue to around euro8 billion as the downturn weighed on demand. The material science division makes products like chemicals and plastics for industry. The division reported a pretax loss of euro266 million for 2009.


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Oil rises toward $79 amid mixed crude demand signs (AP)

Thursday, February 25th, 2010 | Finance News

SINGAPORE – Oil prices crept toward $79 a barrel Friday in Asia amid mixed signals about global crude demand.

Benchmark crude for April delivery was up 39 cents to $78.56 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell $1.83 to settle at $78.17.

Oil prices have bobbed between $70 and $80 for most of the last six months as investors mull growing crude demand in developing countries such as China offset by flagging consumption in developed countries.

Even a cold winter in the U.S. has failed to boost demand for heating oil.

"The absence of any sustained seasonal draw in heating oil inventories is still striking," Barclays Capital said in a report. "The inventory overhang remains stubbornly high."

"We continue to expect strong demand growth from China in 2010."

Crude prices were bolstered by a weaker U.S. dollar, as dollar-based commodities such as oil become cheaper for investors with other currencies when the dollar falls. The euro rose to $1.3585 on Friday from $1.3547 the previous day.

In other Nymex trading in March contracts, heating oil rose 0.88 cent to $1.995 a gallon, and gasoline was steady at $2.038 a gallon. Natural gas prices gained 4 cents to $4.807 per 1,000 cubic feet.

In London, Brent crude was down 37 cents at $76.66 on the ICE futures exchange.


Hummer: In the end, just too big for its own good (AP)

Thursday, February 25th, 2010 | Finance News

NEW YORK – One thing you can say about the Hummer, roaring down the road, towering over subcompacts like an NBA center in a sea of toddlers: It always drew a reaction.

The beefy, military-inspired SUV began as a macho icon for enthusiasts like Arnold Schwarzenegger, who held photo ops in Hummers in his early days as governor. For others it was a symbol of excess, environmental ruin and tackiness — a view that seemed to grow in direct proportion to gas prices and economic distress.

And now the brand is likely no more. General Motors Co. said Wednesday its bid to sell Hummer to a Chinese heavy equipment manufacturer had collapsed. Government regulators in Beijing failed to approve the sale and GM said it would have no choice but to let the brand die, 18 years after its first and most enormous model started lumbering off the assembly line.

"Finally," said Ann Mesnikoff, director of the green transportation campaign at the Sierra Club in Washington. "The Hummer was the epitome of gas guzzling."

Schwarzenegger, who was instrumental in popularizing the vehicle, had a much different reaction two decades ago when he first saw the Hummer's direct military ancestor. Then a body builder turned movie star, he was on his way to the set of "Kindergarten Cop" in Oregon when an Army convoy packed with Humvees thundered past.

"I put the brakes on," Schwarzenegger said at the 1992 ceremony that AM General held to start production of civilian Hummers. "Someone smashed into the back of me, but I just stared. 'Oh my God, there is the vehicle,' I said. And from then on, I was possessed."

Hummer's earliest predecessor was the jeep, the boxy multipurpose vehicle built in large numbers for the Army in World War II. The jeep evolved into the Humvee, which saw heavy action — and entered Americans' consciousness — during the Gulf War.

In the late 1990s, GM bought Hummer from AM General and began selling a smaller but still outsized model, the H2. Sales boomed after its 2005 introduction of an even smaller model, the H3, that was roughly equivalent in size to other automakers' full-size SUVs.

Hummer's image began to change as gas prices began creeping higher, the economy started to crack and the U.S. entered the most difficult period of the Iraq war. Sales, which peaked at 71,524 in 2006, plunged to just more than 9,000 vehicles in 2009. In January, GM sold just 265 Hummers in the U.S.

Robert Thompson, professor of popular culture at Syracuse University, said that just as the Hummer had cemented an image of military might combined with off-road brawn, changes in public sentiment turned SUVs "into tantamount to the creation of the devil himself."

"Hummer almost becomes the extreme case of that — the ruler of the devils," Thompson said.

For Eric Sitterle, a technical recruiter in Cincinnati, his Hummer H2 isn't a devil — it's a great big toy.

"You feel like a kid driving a Big Wheel, a Tonka toy," said Sitterle, 28, who also sits on the board of Hummer's national owners club. "There's not very many vehicles that can climb the side of a mountain and take you on a luxury cruise at 80 miles per hour on the way home."

Sitterle bought his H2 in 2007. He noticed other people's attitudes toward Hummers started changing soon after. Some even approached him at gas stations in the summer of 2008, when gas prices shot above $4 a gallon for the first time ever.

"Why that vehicle? Why so much gas?" Sitterle said they would ask. "Sometimes I'd give them a completely arrogant response."

Sitterle said critics are misinformed. "The vehicle turns a lot of heads but the vehicle also gets similar gas mileage to vehicles of its size," he said.

It's not a complete exaggeration. The 2010 Hummer H3 gets as up to 18 highway mpg, according to U.S. Environmental Protection Agency fuel economy estimates. Nothing to brag about, but no worse than a 2010 Toyota Sequoia.

As for the H2 and H1, they are so heavy — more than 8,500 pounds — they have been exempt from federal fuel-efficiency rules. However, drivers typically reported getting around 10 mpg. Sitterle said with all his H2's add-ons, he often gets less than that.

In time, even Schwarzenegger became critical of Hummer's gas-guzzling ways. Schwarzenegger spokesman Aaron McLear said three of the California governor's four Hummers have been converted to alternative fuels: One runs on hydrogen, one on biodiesel, one on vegetable oil.

"The governor believes the Hummer is a great vehicle that just needed to be reintroduced with a more green engine like electric or hydrogen," McLear said.

Poor fuel economy hasn't hurt Hummer's popularity among one group: Mexican drug cartels.

Modified with bulletproof glass and armor-plating, Hummers are often used in gunbattles and seized by Mexico's military after raids. One cartel boss even adopted the nickname "El Hummer" as a demonstration of how tough he is.

When Sichuan Tengzhong Heavy Industrial Machinery Co., announced plans to buy Hummer last June, it knew it would have to make the vehicles more fuel efficient. It had plans to develop Hummers powered by alternative fuels, more efficient gas engines, six-speed transmissions and diesel engines.

The deal fell through because of resistance from Chinese regulators. Now, the only hope for Hummer's survival is for a last-minute investor to snap up the brand.

It's happened before. Last month, GM began dismantling its Swedish Saab brand after a sale to another Swedish automaker fell through. But Saab found a savior in niche sports car maker Spyker Cars NV, headquartered in The Netherlands. Spyker bought the brand for $74 million.

Hummer spokesman Nick Richards declined to comment Thursday on whether any Spyker-like buyer had emerged. Erich Merkle, who runs the consulting company, does not expect such a rescue of the hulking Hummer brand.

"The products aren't really in line with what people are looking for in the marketplace, and certainly not in line with what the new government (fuel-economy) regulations will be," Merkle said.

Raymond Ciccolo, who owns a Hummer franchise outside Boston, is holding out hope. And he's contacting other dealers, looking for more vehicles. Even if Hummer disappears, he said, there's a cadre of fans who won't.

"We have one doctor I know of who said he would buy two Hummers if Hummer ever shut down," he said.


Associated Press Writers Martha Mendoza in Mexico City and Juliet Williams in Sacramento, Calif., contributed to this report.

(This version corrects that Schwarzenegger held photo ops in Hummers while governor, not while campaigning.)