Bayer to step up cost cuts at plastics unit

LEVERKUSEN, Germany, Sept 17 Tue Sep 17, 2013 2:00pm IST

Stocks

   

LEVERKUSEN, Germany, Sept 17 (Reuters) - German diversified healthcare and chemicals group Bayer is stepping up cost cuts at its MaterialScience unit to counter production overcapacity in the industry and high raw material prices.

"We are speaking to labour representatives. We are looking into smaller adjustments," the group's Chief Executive Marijn Dekkers told journalists late on Monday, declining to provide specific cutback targets because talks are still ongoing.

"It's difficult to pass on higher costs to the customers in the face of overcapacity. In addition, growth in demand from China has weakened considerably."

Bayer's MaterialScience unit makes polycarbonate plastics for panoramic roofs in Daimler's Smart and Mercedes SLK convertibles and for blu-ray disks. It is also the world's largest maker of chemicals for insulation and padding foams.

Dekkers reiterated that he considers the margin squeeze to be temporary because growth would absorb excess production capacity over the next two to three years.

Bayer, which celebrates its 150 year anniversary this year, warned in July that its full-year profit target had become more challenging as difficult plastics and chemicals markets temper sales growth from new pharmaceuticals.

Its competitors include Saudi Arabia's Sabic in the polycarbonates sector and BASF in polyurethane foam chemicals. (Reporting by Ludwig Burger and Frank Siebelt; Editing by Louise Heavens)