Bayer has a slow start to 2023, but maintains perspective for the year

The Bayer Group had a slower start to 2023 than expected, as revealed by CEO Werner Baumann this Thursday, when presenting the first quarter report. Businesses involving glyphosate are returning to historic levels. This effect was offset by growth in other areas of the Agricultural Sciences business, the company explained in a statement.

The Pharmaceutical Division performed very well with its new products, while sales in China were heavily impacted by bidding procedures and pandemic-related effects.

The group's profits were mainly affected by the glyphosate business and inflation. And they were impacted by investments in research and development in the pharmaceutical area, which remained high.

Baumann confirmed the group's outlook for the year 2023 based on average monthly exchange rates for 2022. However, for the remainder of the year, Bayer sees potential risks mainly arising from significantly reduced market price expectations for products based on glyphosate, he said.

"We continue to expect performance to improve in our other businesses in the second half of the year," Baumann noted. "Overall, we expect target achievement to be at the lower end of our guidance."

Group sales reached €14,389 billion in the first quarter of 2023, down 1,1% in exchange rate and portfolio adjusted terms. Sales benefited from a positive exchange rate effect of €102 million euros. EBITDA before special items decreased by 14,9% to €4,471 billion. EBIT fell 29,4% to €2,973 billion after net special charges of €431 million euros. The special charges primarily comprised an impairment loss due to significantly reduced market price expectations for glyphosate. Net profit decreased by 33,8% to €2,178 billion; core earnings per share fell 16,4% to €2,95.

Free cash flow was €-4,102 billion (Q1 2022: €-1,187 billion). This amount included higher payments to settle disputes involving glyphosate, dicamba, Essure and, in particular, PCBs, which had already been communicated and took effect in the first quarter.

Crop Science expands beyond glyphosate

Bayer's agricultural business division shows signs of promising growth despite facing challenges regarding declining glyphosate sales. According to information released by the company, Crop Science sales fell 1,1% to €8,351 billion, adjusted for currency effects and portfolio changes. However, excluding the glyphosate business, Crop Science's sales increased by about 8%.

The division recorded double-digit growth in the Europe/Middle East/Africa and Asia/Pacific regions. However, sales fell in Latin America and North America, mainly due to lower volumes.

Herbicide sales suffered a sharp drop of 24,3%, due to lower volumes and prices of glyphosate-based products. On the other hand, sales of corn seeds and traits increased substantially by 15,8%, driven primarily by higher prices in the North America and Europe/Middle East/Africa regions.

Insecticide sales grew 12,6%, with significant price and volume increases in Europe/Middle East/Africa thanks to Movento and in Latin America due to Curbix, offsetting lower volumes in North America.

Sales of soybean seeds and traits also increased by 1,4%, driven mainly by higher volumes in Latin America.

Fungicide sales remained at the previous year's level, with higher prices in all regions offsetting lower volumes, especially in Latin America and North America.

Crop Science's earnings before interest, taxes, depreciation and amortization (EBITDA) decreased by 11,0% to €3,267 billion. This decline was mainly due to falling sales in Latin America and North America.

Profits were also affected by rising costs of goods sold, which were driven by high inflation. There was a positive currency effect of €54 million. The EBITDA margin before special items decreased by 4,3 percentage points, totaling 39,1%.

Despite the challenges faced by Crop Science in the glyphosate business, the division has demonstrated resilience and growth in other areas, such as corn seeds and traits, insecticides and soybean seeds. The company says it is focused on expanding its activities beyond glyphosate and exploring opportunities in emerging markets.