(BFM Bourse) – The German chemicals giant has indicated that it has abandoned its split plan, after announcing a heavy loss for the year 2023. The stock is widening its losses on the Frankfurt Stock Exchange.
The German giant Bayer has announced that it is postponing possible split plans, considering it more urgent to reorganize the pharmaceutical and chemical conglomerate which has been accumulating problems since the takeover of Monsanto and plunged into the red last year.
The question of a separation of Bayer’s pharmaceutical and agrochemical activities, long promoted by investors, does not arise “now”, declared its chairman of the board Bill Anderson on Tuesday on the sidelines of the publication of the annual results.
This response should not be interpreted as “never” and “of course we have to keep an eye open” on the subject, he added.
His predecessor, Werner Baumann, had to leave after categorically opposing a vast offensive by activist funds to force a split in the group in order to free up cash to bail it out.
Not a good time for a split
The time is not right to separate parts of the business, argued the American boss who has been running this ailing flagship of German industry since last June.
The agrochemical division remains mired in legal risks amounting to billions of dollars because of the product Round Up from the Monsanto subsidiary, containing glyphosate accused of causing cancer. The inventor of aspirin, 125 years ago, must rejuvenate its pharmacy branch weakened by a portfolio of aging products.
From his interviews with other CEOs also facing structural problems, Mr. Anderson drew a “clear message: You can either reorganize operations to improve performance or make major structural change – but you can’t do both at the same time”.
The American leader affirmed that the group “will devote its energy and efforts” over the next 24 to 36 months to re-inflate the pharmaceutical “pipeline”, reduce legal risks and net debt, amounting to more than 34 billion dinars. euros at the end of 2023.
With this in mind, Bayer announced in February that it would reduce its dividend by 95% for three years. He also wants to simplify the levels in the hierarchy from 12 currently to a maximum of 6, according to an organizational model expected to generate two billion euros in savings each year from 2026.
Bill Anderson did not specify on Tuesday how many jobs could be eliminated in this way, after having announced a few months ago a “significant reduction” of the workforce in Germany by the end of 2025, targeting management functions.
Messy trials
The group is also struggling with a number of lawsuits in the United States linked to the alleged carcinogenic effects of the herbicide produced by Monsanto, bought in 2018 for $60 billion.
At the end of January, 54,000 files remained to be settled out of a stock of 167,000 registered requests. Bayer has recently been hit with billions of dollars in fines, with appeals still ongoing.
The issue of litigation is examined “from all angles, inside and outside the courtrooms,” Bill insisted. Anderson. This “involves considering all possible means” to put an end to it and therefore “more action” to come, according to details which will be revealed later, he added.
Resolving all of the current problems “will give us strategic flexibility” in the long term, according to Bill Anderson.
A loss of around 3 billion euros in 2023
In 2023, Bayer still suffered a loss of 2.9 billion euros, due to heavy depreciation in the agrochemicals branch, compared to a net profit of 4.2 billion euros in 2022.
Overall sales adjusted for currency and portfolio effects totaled 47.6 billion euros, down 1% year-on-year, in line with its trimmed forecast from last summer.
It targets “roughly stable” revenue for 2024, always adjusted for currency and portfolio effects, and “declining” adjusted operating profit per share. As already announced, shareholders will have to accept a drastic reduction in the dividend: from 2.40 euros last year, it will drop to 0.11 euros this year.
On the stock market, Bayer widened its losses (-5.8%) this afternoon on the Frankfurt Stock Exchange. The stock has lost more than 50% over the past year.
(With AFP)
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