Bayer braces for falling profits in challenge for new CEO

By Ludwig Burger

FRANKFURT (Reuters) -Bayer warned operating earnings would decline in 2023, adding to the challenges for its new CEO who will take the helm in June, as the agriculture and healthcare company is hit by higher costs and the reversal of last year’s price boost for its weedkillers.

The downbeat outlook, which pushed its shares nearly 5% down to a four-week low on Tuesday, comes after a new chief executive was appointed to take over in June, sparking speculation the company might prepare to break up.

Bayer said in a statement that earnings before interest, taxes, depreciation and amortisation (EBITDA), adjusted for special items, would likely be between 12.5 billion euros and 13 billion euros ($13.2 billion – $13.8 billion) this year, excluding the effect of currency swings.

That would be a decline from the 13.5 billion reported for 2022, which was up 20.9% from a year earlier and slightly higher than analysts had expected on average, according to a consensus estimate posted on the company’s website.

Chief Executive Werner Baumann, who is scheduled to quit at the end of May, defended the company’s presence in agriculture and healthcare.

“We really are living through a time of major upheavals,” he told journalists on a call. “It means that we’re active in the right fields, since health and nutrition are fundamental human needs,” he added.

Bayer said this month it would replace its CEO early, recruiting former Roche executive Bill Anderson, amid demands by some investors that Bayer should simplify its diversified structure and split into separate groups.

U.S. SETTLEMENT

Bayer, which acquired glyphosate-based weedkillers as part of its 2018 takeover of Monsanto, said the settlement of U.S. lawsuits claiming that glyphosate caused cancer and over environmental pollution related to chemicals known as PCBs would cost it 2-3 billion euros this year.

A $6.4 billion provision remained on the balance sheet for glyphosate payouts, the larger of the two legal burdens. Bayer has previously paid out about $9.5 billion to settle those claims, though it has repeatedly stressed that glyphosate is safe to use and that environmental regulators share that view.

Its shares were down 4.6% at 0947 GMT. Juergen Molnar, capital market strategist at brokerage RoboMarkets, said the guidance was a disappointment and hedge funds had recently cashed in on the stock’s rally following the appointment of CEO-designate Anderson.

“That means there is little upside potential. So Bayer should really not be on the buy list of many investors at the moment,” said Molnar.

Apart from lower glyphosate prices, stroke prevention pill Xarelto – the group’s pharmaceutical bestseller – would also be hit further by markdowns, the company said. The pill has suffered from competitive purchasing tenders in China, loss of patent protection in Brazi and price cuts in Britain.

Bayer saw herbicide sales jump 44% in 2022 after hurricane Ida damaged rival producers and constrained Chinese suppliers failed to plug the gap.

($1 = 0.9437 euros)

(Additional reporting by Patricia Weiss and Stefanie Geiger; editing by Kirsten Donovan, Jason Neely and Emelia Sithole-Matarise)

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