September 21, 2012 / 2:40 PM / 5 years ago

Bayer plastics unit sees clients keeping stocks low

WIESBADEN, Germany, Sept 21 (Reuters) - Bayer’s plastics division does not expect its industrial customers to start piling up stock from low levels after the downturn, as they used to following previous slumps in the business cycle.

Bayer’s MaterialScience unit, which is the world’s largest maker of chemicals for insulation foam and of plastics in DVDs and car lights, is bracing for its industrial customers to permanently keep stock levels low, the unit’s head said on Friday.

“Everybody is living off very low levels of stock. It’s a new way of running the business that people have learnt through the previous crisis,” the head of Bayer’s MaterialScience unit, Patrick Thomas, told Reuters on the sidelines of an industry conference.

The unit, which makes transparent plastics for the panoramic roof in Daimler’s Mercedes SLK convertible, saw adjusted core earnings edge 3.5 percent higher in the second quarter, and Bayer has predicted that third quarter earnings at MaterialScience would remain flat from the previous three months, when adjusted for currency swings.

While a slump like in the previous economic crisis in 2009 was not on the cards, global demand presented a mixed picture and uncertainty prevailed, Thomas said.

U.S. furniture makers, which use padding foams based on Bayer products, provided lot of stimulus for example, while demand from the Asian electronics sector, another key client group, was unusually subdued, he added.

“It’s like driving on a motorway and you see a sign ‘construction works ahead’. It’s really difficult to get a forward view and as a driver you should be slowing down. That’s how it feels like at the moment,” Thomas said.

While Bayer’s transparent-plastics business is slowly recovering from the effects of new production capacity brought to market by Middle Eastern rivals, its padding and insulation foams business is getting an unexpected boost from competitors’ production outages, he added.

“Some of our competitors have had serious technical problems, so the market has been surprisingly tight throughout the whole of quarter two and quarter three. That actually outweighs a lot of the economic effects.” (Reporting by Ludwig Burger)

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