Chairman of the Board of Directors of Bayer affirms good operational and strategic progress

The Bayer Group can look back on a successful but difficult year. "We have made great progress - both operationally and strategically," said Chairman of the Board of Management Werner Baumann on Friday (19/04) at the company's annual shareholder meeting in Bonn. On the other hand, shareholders saw a substantial drop in the share price, he added. “There is no way around it. The lawsuits and first verdicts regarding glyphosate are burdening our company and worrying many people,” explained Baumann. The current share price does not reflect the company's true value, he said, adding that Bayer is working tirelessly to successfully defend itself in the appeals process and upcoming trials.

The CEO also spoke again in detail about the Monsanto acquisition. According to Baumann, Bayer is now the leader in agriculture. “Given the outstanding positions of our business, the great potential for our customers, the possibilities for more sustainable agriculture and also the economic logic, the acquisition of Monsanto was and continues to be the right decision for Bayer,” he continued. The integration is progressing faster than planned and successfully overall, he added.

Baumann also justified the acquisition as an important step in the company's strategic development. “Over the past few years, we have consistently aligned our business with long-term growth trends in attractive markets and, in doing so, developed Bayer into a focused, fast-growing and profitable company.” As a life sciences company for health and nutrition, Bayer is positioned to help solve some of the biggest societal challenges of our time, such as fighting hunger and improving health care, Baumann said.

In the agriculture industry, Bayer has companies in the field of chemical and biological crop protection, seeds and digital agriculture. “Today we are already more profitable than our direct competitors. We have the right people and an excellent regional positioning, which allows us to continue increasing our purchasing power and outpace market growth in the coming years,” he explained. “Additionally, our ability to innovate puts us in a better position than any other company to contribute to more sustainable agriculture while ensuring an adequate supply of healthy food.”

Plus, the transaction is financially worthwhile, he noted. “We will realize one billion euros per year in synergies from the Monsanto acquisition from 2022 onwards,” Baumann added. The divestments to BASF that were necessary for antitrust reasons were carried out at an attractive price of 7,3 billion euros and with a gain of 4,0 billion euros, Baumann noted. Furthermore, the company's financial debt level is now much lower than expected, he added.

“The safety of our customers always comes first,” says Baumann 

“Around the world, Bayer stands for quality, transparency and trust. This reputation is in line with our mission as a leading life sciences company and at the same time provides an incentive for our work in the future. This is also the case for the combined Crop Science business, which will be run according to Bayer standards – just like all of our businesses,” said Baumann. “For all of us here at Bayer, the safety of customers, patients and consumers always comes first everywhere.” 
Before signing the acquisition agreement with Monsanto in September 2016, the Board of Directors discussed the transaction in detail and carefully weighed the opportunities and risks involved, Baumann highlighted. This naturally included an assessment of the risks associated with glyphosate, he noted. Based on all available information, the Board of Directors considered that the liability risk related to glyphosate was low, Baumann said. Overall, the Board of Directors acted conscientiously in all aspects, the CEO added. This is the conclusion reached by an external expert from the law firm Linklaters, which the Supervisory Board commissioned in September 2018, and in a second independent opinion by Professor Mathias Habersack, from the University of Munich, in spring 2019. 
Bayer's assessment of glyphosate is based on science and farmers' practical experience over a period of more than 40 years, Baumann continued. Regulatory authorities around the world have approved glyphosate-based products and confirmed that, when used as directed, glyphosate is a safe product that does not cause cancer. After the International Agency for Research on Cancer - IARC - classified glyphosate as “probably carcinogenic” in 2015, key regulatory authorities carried out a complete re-evaluation - and confirmed their previous assessment. Bayer therefore remains convinced of the safety of glyphosate, Baumann said.
Number of Bayer shares continues to increase as expected

Baumann also highlighted the importance of glyphosate for the global food supply and for sustainable agriculture that uses less land, causes less soil erosion and releases less carbon dioxide. “Farmers around the world are using glyphosate responsibly to protect their crops and provide people with food. For these reasons, we will continue to vigorously defend glyphosate – also on behalf of our customers,” he said.

Meanwhile, the number of shares continued to increase, as expected. As of April 11, 2019, lawsuits for approximately 13.400 plaintiffs had been served by Monsanto. "This figure says nothing about whether the allegations are justified or not," Baumann noted. Furthermore, there is not a single final judgment related to glyphosate at the present time, but two trial jury verdicts, he added. Bayer appealed the first decision, in the Dewayne Johnson case, and will also question the second decision, in the Edwin Hardeman case.

Bayer's successful start to fiscal year 2019

Bayer achieved 2018 operating targets based on updated forecast since the acquisition closed. To allow its shareholders to properly share in its success, the company proposes to pay a dividend of 2,80 euros per share, as in the previous year. This gives a record payment for the company due to the greater number of shares.

Bayer Group sales in 2018 increased by 4,5% on a currency and portfolio adjusted basis. For around 39,6 billion euros. On a reported basis, sales rose 13,1 percent. EBITDA before special items increased by 2,8% to approximately 9,5 billion euros, despite negative currency effects. Basic earnings per share from continuing operations were above expectations at 5,94 euros, with the 10,5% reduction partly related to the greater number of shares.

Baumann thanked the company's employees for their commitment. “With their enormous dedication that in many cases far exceeded the norm, they also played a crucial role in achieving our operational goals last year.”

Bayer also had a successful start to 2019, with first-quarter sales rising 4,1% to around 13 billion euros. On a reported basis, sales increased by 42,4%, mainly due to the acquisition. EBITDA before special items rose 44,6% to 4,2 billion euros, despite negative currency effects that reduced Bayer's pre-acquisition business profits by 110 million euros.

For the year 2019, the company expects sales to reach around 46 billion euros. This corresponds to an increase of approximately 4% on a currency and wallet adjusted basis. EBITDA before special items is seen rising to approximately €12,2 billion in 2019, and core earnings per share to approximately €6,80.

Bayer's good progress with portfolio measures announced

Referring to the comprehensive series of portfolio, efficiency and structural measures decided by the Management and Supervisory Board last November, Baumann said: “In this way, we aim to further strengthen our core businesses and significantly increase the company's productivity and purchasing power.” . Along with the announcement of the divestment of the Coppertone and Dr. Scholl brands, the portfolio measures include the sale of the company's 60% stake in Currenta and the exit from the animal health business. "We are making good progress on all of these projects," said Baumann, who underlined the company's intention to sell Animal Health, as communicated the previous day. However, Bayer will continue to consider all exit options that maximize value, he noted.

The efficiency and structural measures involve the planned reduction of around 12.000 jobs worldwide by the end of 2021, including 4.500 in Germany. “We are aware of the implications of these decisions for our employees and therefore implement the measures fairly, responsibly and in close collaboration with employee representatives,” said Baumann.

He also confirmed Bayer's ambitious medium-term goals. Disregarding portfolio measures and based on 2018 exchange rates, Bayer aims to increase EBITDA before special items to approximately 16 billion euros by 2022, and core earnings per share to approximately 10 euros. Bayer also intends to invest a total of 35 billion euros in the company's development by 2022, with research and development accounting for more than two-thirds of this amount. "This spending represents our confidence in the future and our firm belief that we can shape the future with innovative solutions," said Baumann.

The full statement in English is available here.