After a heavy loss in 2020, the group is back in the black.
(Photo: dpa)
Dusseldorf Bayer AG has grown significantly in the past year: sales increased by 8.9 percent to 44.1 billion euros in 2021, which was above analysts’ expectations. However, expensive precursors and high marketing expenses for newly launched drugs as well as negative currency effects squeezed profits.
Adjusted earnings (Ebitda before special items) fell by 2.5 percent to 11.2 billion euros, exactly in line with the analysts’ forecast. In the current year, Bayer promises profit growth to more than twelve billion euros and a sales increase of five percent to 46 billion euros.
However, this does not include possible upheavals caused by the war in Ukraine. “The outlook is based on a stable geopolitical environment in Eastern Europe, where the situation has changed dramatically in the meantime,” the group announced on Tuesday morning. “Bayer will monitor these risks closely and minimize them as far as possible.”
The stock market reacted enthusiastically to the Bayer forecast: the share went against the trend on Tuesday morning by 2.7 percent to 52.90 euros.
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The decline in profits came from the pharmaceuticals division alone and is not surprising. Bayer is currently realigning its pharmaceuticals business and increasing spending on research and development. This primarily affects the future business with cell and gene therapies, which should become a sales driver over the course of the decade.
New kidney drug and drug for chronic heart failure
In addition, there are higher marketing costs due to the introduction of new medicines, which should compensate for the dent caused by patent losses in the next few years. Bayer has launched the kidney drug Kerendia, which is expected to generate billions in sales at its peak. Bayer has been marketing the new drug Vericiguat for chronic heart failure since early 2021.
The bottom line is that Bayer ended up in the black again after the loss-making year 2020. At that time, the billions in costs for the out-of-court settlement of the glyphosate lawsuit had brought the company a net loss of ten billion euros. In 2021 Bayer achieved a net profit of over one billion euros.
But even in 2021, the traces of the glyphosate legal burden are still visible in the balance sheet. Bayer recorded special charges of 3.9 billion euros for further provisions in the matter of glyphosate and for the ongoing restructuring program. In total, the group had to put up with special charges of 27 billion euros in 2020 and 2021, most of which was due to the solution of the glyphosate legal complex.
What this will look like for Bayer in the end is unclear. The US Supreme Court has not yet decided whether it will review the verdict in one of the key glyphosate lawsuits. If the Supreme Court upheld the verdict, Bayer would have eliminated the issue in one fell swoop and could release billions in provisions that Bayer would otherwise need for further settlements.
Operationally, the Crop Science agricultural division is doing better thanks to higher prices and sales volumes. In 2021, it exceeded the sales mark of 20 billion euros and increased adjusted profit by 3.6 percent to 4.7 billion euros. Both were slightly above analysts’ expectations. Strong profit growth of 6.8 percent to 1.2 billion euros was achieved in the non-prescription medicines business (Consumer Health).
More: Bayer cleans up the pharmaceutical business: testosterone business is for sale.