The pharmaceuticals division made significantly less profit in the first quarter.
(Photo: Reuters)
Dusseldorf The pharmaceutical and agrochemical group Bayer got off to a weak start in the new year. The main reason for this is the sharp fall in the price of the weed killer glyphosate. Last year, Bayer had benefited greatly from the fact that there were supply bottlenecks for glyphosate worldwide and prices sometimes tripled. Now the situation is calming down again.
Bayer’s adjusted profit fell by 15 percent to 4.47 billion euros in the first quarter of 2023, slightly below analysts’ average expectations. The board also sees further risks for profit development this year, as glyphosate prices are apparently falling faster than expected.
CEO Werner Baumann confirmed the forecast on Thursday, but the result will end up at the lower end of the range mentioned. Bayer has announced an adjusted profit (Ebitda before special items) of between 12.5 and 13 billion euros for 2023. In 2022 Bayer had made a record profit of 13.5 billion euros.
The announcement was not well received on the stock exchange. At the start of trading in Frankfurt, Bayer shares fell by 5.8 percent to 55 euros, making them one of the biggest losers in the Dax alongside Volkswagen.
Bayer figures: China business depresses the result of the pharmaceutical division
The new CEO Bill Anderson will probably have to announce a drop in profits of up to seven percent at the end of his first year at Bayer. Anderson will take up the post in early June, with Baumann then retiring. He leaves his successor some construction sites.
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Because it is not just glyphosate and the general inflation in precursors that are currently affecting Bayer. The pharmaceutical business also weakened in the first quarter. The high costs of marketing new products and of research and development were expected. But business in China also weighed on the result.
China is not the largest single market for Bayer’s pharmaceutical division. But the price pressure in the country is particularly high. The government uses so-called tender procedures. Provinces and municipalities are joining forces to become bulk buyers of medicines and pushing down prices. This particularly affected Bayer’s top revenue generator, the anticoagulant Xarelto and the heart drug Adalat.
Bayer cites the situation in China as the main reason for the pharmaceutical division’s three percent drop in sales to EUR 4.4 billion. The negative effects of the corona pandemic were also felt there. As a result, adjusted profit even fell by 20 percent to 1.1 billion euros. New products like the cancer drug Nubeqa and the kidney drug Kerendia are selling well, but marketing them costs a lot of money.
Bayer’s net debt rises to 36 billion euros
In the Crop Science agricultural division, sales and profits also fell, but Bayer still achieved a return before special items of 39 percent there, and in pharmaceuticals it was 25 percent. Without the effects of the drop in glyphosate prices, the division would have grown by eight percent, according to Bayer.
At Crop Science, Bayer felt the higher purchasing costs caused by inflation, which also applied to the third division with the non-prescription medicines related to aspirin. While Consumer Health was able to increase sales slightly, adjusted profit fell.
Baumann’s farewell quarter is again characterized by many special effects, which are mainly due to the legal disputes in the USA. The group has booked the large foreseeable burdens in the result of the first three months: Around 1.5 billion euros flowed out for the settlement of proceedings with glyphosate and the legal case about the chemical PCB, which was also purchased with Monsanto.
Bayer had previously formed provisions for this. Because of the faster than expected drop in the price of glyphosate, the group had to make write-downs again. In total, free cash flow fell to minus EUR 4.1 billion in the first quarter and as a result debt also rose significantly: As of March 31, Bayer reported net debt that was 13 percent higher at EUR 36 billion.
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