Bayer benefits from the agricultural business – but expects profits to fall in 2023

Dusseldorf The chemical and pharmaceutical group Bayer achieved record results in 2022, but will not be able to maintain this in the current year. For 2023, Bayer forecasts a decline in adjusted profit, the company announced on Tuesday morning. The reason for this is the effects of inflation and a foreseeable calming down in the prices for the weed killer glyphosate.

Bayer’s agricultural division and especially glyphosate were one of the biggest drivers of profit and sales at Leverkusen last year. The prices for the weed killer sometimes tripled due to supply bottlenecks in the market. Bayer benefited from the fact that Chinese glyphosate producers could not deliver. Selling the drug is still one of the Crop Science division’s biggest businesses.

Group-wide, adjusted profit (Ebitda before special items) rose by 21 percent in 2022 to a record value of 13.5 billion euros. Sales increased by nine percent to 50.7 billion euros. Bayer met the expectations of the analysts exactly. Sales are expected to grow again by two to three percent in 2023.

Bayer stock falls after weak outlook

However, Bayer boss Werner Baumann forecasts adjusted profits to fall to between 12.5 and 13 billion euros. He cites higher costs due to inflation as the reason. He also anticipates falling prices for both agricultural weed killers and some established pharmaceutical products.

Bayer shares fell 2 percent pre-market due to the weak outlook. For Baumann, it is the last annual report that he presents as Bayer CEO. He will be replaced at the beginning of June by the American Bill Anderson, who comes from the Swiss pharmaceutical company Roche. Anderson will familiarize himself with the Bayer board of management as early as April.

Bayer boss Baumann

Bayer’s acting CEO Werner Baumann will retire at the end of May.

(Photo: dpa)

Bayer had been looking for a successor since autumn 2022 and now wants to make a quick change. Baumann’s contract actually ran until April 2024. The group is under pressure from activist investors who want to force changes at Bayer – even to the point of splitting up the conglomerate from pharmaceutical and chemical businesses.

>> Read about this: After the change of management at Bayer: Hedge funds see these values ​​in the event of a split

The shareholders had sharply criticized the Bayer management and above all Baumann himself because of the destruction of value on the stock exchange in the course of the Monsanto takeover. However, the shareholders should now benefit from the record year 2022: Bayer is proposing a 20 percent higher dividend of EUR 2.40 per share.

“Despite the adverse conditions, 2022 was a very successful year for Bayer. We delivered even in difficult times,” said Baumann on Tuesday. But a closer look also reveals the adversities and problems Bayer is struggling with.

Glyphosate special effect masks declining business

With sales growth of 15 percent to 25 billion euros, the agricultural business clearly established itself as Bayer’s largest division. Adjusted profit rose 46 percent to 6.9 billion euros. But the special effect of the extremely high glyphosate prices is unmistakable. This covered the declining business in the important North American agricultural market and the falling license income.

Sales in the central pharmaceutical division increased by only 1.1 percent to 19.3 billion euros. The newly launched drugs such as the cancer drug Nubeqa and the kidney drug Kerendia developed strongly. However, Bayer recorded strong declines in Xarelto, the drug with the highest sales, as well as in the cancer drug Nexavar.

Pharma’s adjusted profit increased only slightly by 1.6 percent to 5.9 billion euros. Earnings were held back by the costs of marketing new products and higher procurement prices.

The smallest unit, Consumer Health, with over-the-counter products related to aspirin, developed comparatively more strongly. Sales grew by eight percent to 6.1 billion euros. In particular, business with allergy and cold products grew strongly. Consumer Health’s EBITDA before special items increased by 14.9 percent to 1.37 billion euros.

The bottom line is that Bayer achieved a net profit of 4.2 billion euros in 2022. That’s significantly more than the one billion from 2021, but less than in 2016, when Baumann took up the job as Bayer CEO.

More: Pfizer is allegedly sounding out a billion-dollar deal – the pharmaceutical industry is facing a new wave of takeovers.

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