Litigation becomes cheaper
Bayer full of confidence after a strong summer
11/08/2022 3:49 p.m
The DAX group Bayer sees itself on course to achieve the recently raised annual targets. The people of Leverkusen owe this to a problem child, among other things: prices and sales of the weed killer glyphosate are increasing. In addition, the comparison sums in lawsuits are lower than last expected by this average.
A strong agricultural business gives Bayer momentum. In the summer, the Leverkusen-based pharmaceutical and agricultural group did much better than expected – the boost came mainly from higher prices for the weed killer glyphosate. “We are expecting an extremely strong financial year,” said CEO Werner Baumann. Bayer is on track to meet the annual targets it raised in August. Despite the surprisingly strong quarter, the Leverkusen company could not score on the stock exchange.
According to the information, adjusted operating profit climbed by a good 17 percent to around 2.5 billion euros in the third quarter, significantly exceeding analyst estimates. Sales increased by more than 15 percent to almost 11.3 billion euros, currency-adjusted there was an increase of 5.7 percent.
Bayer achieved a jump in earnings of a good third in the crop protection products and seeds business, despite higher returns of seeds, which led to a significant drop in sales in North America. But Baumann assumes that the average price for glyphosate this year will be around two and a half times as high as at the beginning of 2021, also due to supply bottlenecks, for example at manufacturers in China.
Bayer was also able to increase significantly in the pharmaceuticals sector and in over-the-counter health products from July to the end of September, although the group had to digest a drop in sales of its blockbuster Xarelto – mainly due to price pressure in China and the patent expiration of the anticoagulant in Brazil. Bayer’s over-the-counter health products were particularly successful with allergy and cold remedies.
For the year as a whole, Bayer continues to expect currency-adjusted sales growth of around eight percent to EUR 47 billion to EUR 48 billion and adjusted earnings of around EUR 12.5 billion. Baumann also expects higher costs in the coming year as a result of high inflation. The CEO therefore wants to make Bayer independent of Russian gas by the end of the year. Stable supply chains are also a top priority. “In addition, we continue to increase our stocks in order to be able to cushion delivery bottlenecks.”
Bayer increased its forecast for cash flow from operating activities (free cash flow) by EUR 500 million to EUR 3 billion, adjusted for currency effects, “because the settlement payments for legal cases are lower than expected,” said Chief Financial Officer Nickl. Most recently, the tide had turned for Bayer in the US in the wave of lawsuits over the alleged carcinogenic effects of glyphosate, and the company had won five cases in a row. The company therefore only allows comparisons in very strategic individual cases, explained Nickl. Most recently, agreements were still outstanding for 41,000 of the 149,000 current lawsuits.