Aventis's CropScience Results Seen Boosting Price Tag

Carey Sargent / Dow Jones Newswires 9may01

ZURICH -- Strong results from Franco-German life sciences group Aventis SA's (AVE) CropScience unit mean the parent company should be well-placed to extract a good price in selling what it regards as a non-core business.

Cropscience posted first-quarter earnings before income taxes and depreciation (EBITDA) up 20.7% to EUR265 million on sales up 9.4% to EUR1.2 billion, with strong growth in Brazil, the U.S. and Canada. Gross margin increased slightly to 53.4%. The results come against a background of other major agribusinesses - including Monsanto Co (MON), Dow Chemical Co (DOW), DuPont (DUP) and Bayer AG (G.BAY) - reporting sales decreases, citing poor weather conditions and a general cyclical slowdown.

"It's true that the business is impacted by things like the weather and foot and mouth," said Aventis Chief Financial Officer Patrick Langlois, "but we're enjoying good growth because we've cleaned up the product line in some countries where we had weak positions.

"CropScience is doing very well compared to the rest of the industry," he added.

Zurcher Kantonalbank analyst Bernd Pomrehn agreed, saying that the company is now able to benefit from a shift in the product portfolio that saw the company focus on higher-margin and more strongly-growing products.

"It's now quite clear that Aventis has quite a good portfolio in the CropScience business and I think it'll have an impact on the price they're able to ask," he said.

The company reiterated its March announcement that it intends to divest the CropScience unit by the end of the year, but didn't provide further details. Analysts have been expecting an imminent announcement since the unit's other shareholder, Schering AG (G.SCH), said it was willing to sell its stake.

Schering, which holds 24% of the unit's shares but 25.1% of the voting rights, had said repeatedly that it was unwilling to sell in current market conditions, but when it announced first- quarter results in April, the company said it would consider offers.

"We've always said that this is a financial investment," Schering CFO Klaus Pohle told Dow Jones Newswires. "Our question has just been finding the right moment. But if someone puts a good offer on the table, why not?"

Pohle has also said that the number of potential bidders has been narrowed down to three. Market watchers have singled out Bayer, BASF AG (BF) and Dow Chemical Co.

Aventis reiterated Wednesday that though they're leaning towards a sale, they haven't entirely ruled out a market flotation for CropScience.

Aventis announced net income in core businesses - including Aventis Pharma and a 50% stake in the animal health business Merial - up 64.5% to EUR306 million compared to pro forma first quarter 2000 results on sales up 12.1% to EUR4.125 billion. The sales jump in these divisions was also better than expected.

Results at core businesses were underpinned by strong growth, especially in the U.S. market, for key allergy drug Allegra, anti-thrombotic Lovenox and cancer drug Taxotere.

Blockbusters Allegra and Lovenox increased sales 75% to EUR384 million and 82% to EUR343 million, respectively, while Taxotere posted sales of EUR211 million, a 63% rise from first quarter 2000.

The company didn't release an update on Ketek, a drug scheduled for launch in the second half of this year. It suffered a setback when a U.S. Food and Drug Administration panel recommended the FDA approve the drug for treating pneumonia outside hospital but not for treating bronchitis and sinusitis.

At 1055 GMT, Aventis shares were trading up 3.6% at EUR87 in Frankfurt.