UPDATE 2-Bayer Q3 results marred by legal provision

* Q3 adj EBITDA 1.66 bln eur vs 1.59 avg poll of bln

* Confirms full-year group outlook

* Sets aside 436 million euros for litigation

* Shares up 0.5 pct, outperforming DAX benchmark

(Adds details, background)

FRANKFURT, Oct 28 (BestGrowthStock) – Looming damages to U.S. rice
farmers tarnished Bayer’s (BAYGn.DE: ) third-quarter underlying
earnings, which beat forecasts on a rebound in demand for its
plastics and foam chemicals.

German maker of drugs and chemicals said on Thursday its
third-quarter earnings before interest, taxes, depreciation and
amortisation (EBITDA) before special items rose 10.5 percent to
1.66 billion euros ($2.29 billion).

The figure was better than the 1.59 billion expected by
analysts, as Bayer got a boost from its MaterialScience unit,
which became the latest plastics maker to benefit from the
global economic upswing. [ID:nLDE69O1GS]

However, the company said it had set aside 436 million euros
($602 million) for litigation costs, mainly related to hundreds
of U.S. rice farmers seeking damages for an export ban four
years ago for which they blame Bayer.

This charge weighed on the bottom line, which came in at 280
million euros, far below the 486 million in net income predicted
by analysts.

“The legal provisioning is a disappointment at first glance.
Judging from the amount, Bayer arguably wanted to make a clear
cut,” said LBBW analyst Karl-Heinz Scheunemann.

“But MaterialScience has seen a great recovery. Earnings are
clearly better than consenus there.”


Graphics on Bayer’s key drugs, Material Science earnings




The shares were up 0.7 percent at 55.28 euros by 0842 GMT,
recouping losses at the open, slightly above Germany’s bluechip
benchmark DAX (.GDAXI: ), which was up 0.45 percent.

Bayer took the provision for litigation costs stemming from
the discovery of a type of rice genetically changed by a Bayer
subsidiary for research purposes in the U.S. food supply chain
in August 2006, after it had been tested by a university.

As a result, Japan and the European Union banned rice
imports from the U.S., causing massive losses at U.S. rice
farmers, who have sued Bayer. [ID:nN19123708]

Bayer maintains it was not to blame for the contamination.

U.S. chemicals rival DuPont (DD.N: ) this month also posted a
higher-than-expected quarterly profit and BASF (BASFn.DE: ), with
whom Bayer competes in insulation foam chemicals and pesticides,
predicted a forecast-beating gain in 2010 operating profit.
[ID:nLDE69J07L] [ID:nN26105203]

Massive overhead costs due to large-scale plants used in the
chemical industry mean that even modest gains in sales can
translate into a considerable rebounds in earnings.
BASF on Thursday said quarterly net income shot to 1.2
billion euros from 237 million a year earlier. U.S peer Dow
Chemical (DOW.N: ) is also due to report results on Thursday.

Bayer, however, cautioned that this year’s aim for its drugs
division to match 2009 underlying profit has proven to be
ambitious because of competition for its best-selling

Novartis’s (NOVN.VX: ) oral alternative to Bayer’s multiple
sclerosis injection Betaferon and copy-cat versions of its
Yasmin birth-control pill are dampening revenue prospects.

Therefore all eyes will be on the key trial results of Bayer
and Johnson & Johnson’s (JNJ.N: ) anti-blood-clotting pill
Xarelto, expected in the next couple of weeks. Bayer says
Xarelto could generate more then 2 billion euros in annual
($1=.7242 Euro)
(Reporting by Ludwig Burger; Editing by Knut Engelmann)

UPDATE 2-Bayer Q3 results marred by legal provision