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The Baycol / Lipobay - Scandal

Bayer's operating profit down

LEVERKUSEN (Reuters / March 13, 2003) -- Germany's Bayer AG posted a 46 percent fall in 2002 operating profit on continuing operations on Thursday and said it faced even more lawsuits for its recalled cholesterol drug Baycol.

The operating profit figure came in at 989 million euros ($1.09 billion), roughly in line with expectations, and the company reiterated it saw an improvement this year.

Bayer, which said it continued to seek a partner for its ailing drugs business, reported 2002 sales from continuing operations of 29 billion euros, down one percent from the year before.

It achieved a 10 percent rise in net income to 1.1 billion euros, largely on the back of asset sales.

Analysts in a Reuters poll of 15 analysts predicted an operating profit on continuing businesses, before exceptional items, of 967 million euros on average.

Chief Executive Werner Wenning said in a statement the company now faced 8,400 lawsuits over Baycol, of which 4,600 were virtually identical complaints filed by a single law firm.

Before Thursday, the number of suits had been at 7,800.

Bayer said it had so far settled with more than 500 individuals over the recalled cholesterol drug for about 140 million euros, and is currently in talks to settle several hundred further cases.

The company said that if the plaintiffs prevailed, Bayer could incur charges in excess of insurance coverage, but it was currently not possible to estimate potential liability.

Provisions had therefore not been made, it said.

"We continue to watch the situation very closely and, as the litigation progresses, we will regularly reconsider the need to establish provision," Bayer Chief Executive Werner Wenning said in a statement.

Bayer reiterated that it expected operating profits to improve in 2003.

Wenning said the development of sales and operating result in the first two months had been encouraging.

Bayer also said it planned to cut net debt to seven billion euros by the end of this year from 8.9 billion at the end of 2002, and aimed for a margin on earnings before interest, tax, depreciation and amortisation of 21 percent by 2006, up from 10 percent in 2002.

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