Three reasons why Bayer is currently losing value on the stock exchange

Both were well above analyst forecasts. In fact, reason enough to give Bayer’s share price the desired boost. But that didn’t happen on Tuesday – on the contrary: the course fell by four percent to 52 euros by noon. Bayer was at the bottom of the leading index Dax, which increased overall.

Bayer stock remains at a low level, as a comparison with important competitors shows. The Leverkusen group is currently worth around 52 billion euros on the stock exchange.

The US company Corteva, which focuses purely on the agricultural business, has almost the same market capitalization at $48 billion. However, with an expected annual turnover of 17 billion dollars, the Americans are three times smaller and also less profitable than Bayer.

Baumann himself says: “Bayer is experiencing an extremely strong financial year. But we also know that the stock has some special issues. We’re working on that, and everything else will come about.” In fact, there are three reasons why Bayer is currently losing value despite record profits on the stock exchange.

1. Glyphosate, of all things, is the profit driver in the agricultural business

Bayer’s agricultural division Crop Science saw sales increase by 8.4 percent to EUR 4.69 billion in the third quarter and earnings increased by 33.5 percent to EUR 629 million. A closer look at the results shows that the strong growth in profits this year is predominantly driven by price increases for the weed killer glyphosate.

In the third quarter, the herbicides business, which mainly includes glyphosate, grew again by 45 percent compared to the same period last year. This gain masked weaknesses in the seeds business in North America. Sales fell in the important market because farmers planted less land and returned seeds.

Baumann explained this as a “completely normal process” at the end of the growing season, which affects all seed producers. Farmers in the USA buy the plants at the beginning of the season, but subsequent cultivation varies depending on the weather. Overall, Bayer has not lost any market share, he emphasized.

But investors are watching glyphosate closely. “Bayer’s good figures were partly due to the special effect of high glyphosate prices following production bottlenecks from the Chinese competition,” says Markus Manns, portfolio manager at the fund company Union Investment. “It has now started production again and prices are beginning to normalize again.”

According to Bayer, glyphosate prices are currently more than twice as high as when the shortages began. The group assumes a decline in the fourth quarter, but cannot make a forecast for the coming year.

Investors therefore remain cautious as far as the further development of the agricultural division is concerned. After all, the herbicide business accounts for a quarter of the total sales of 20 billion euros that the division achieved last year.

2. The glyphosate lawsuit continues to weigh on the stock

When he says “certain issues” that generally weigh on the share price, the Bayer boss means the legal disputes with plaintiffs in the United States. They blame the use of the controversial weed killer for their cancer.

“The glyphosate litigation is still fresh in the minds of many investors,” said Union portfolio manager Manns. “A new wave of lawsuits in a few years’ time cannot at least be completely ruled out, especially since glyphosate is still being sold.” Focus results.”

In fact, Bayer has recently received a tailwind in the disputes. The group has won five lawsuits in a row in the USA. This led to Bayer taking a more restrictive approach to out-of-court settlements with plaintiffs. For such comparisons, Leverkusen will spend less money this year than planned.

3. Mixed signals from the pharmaceutical segment

Bayer’s largest business remains the sale of prescription drugs. The pharmaceutical division increased sales by 2.9 percent to 4.96 billion euros in the third quarter. But here, too, a mixed picture emerges.

The newly launched drugs Nubeqa (against prostate cancer) and Kerendia (against chronic kidney disease) sold well, as did the eye medicine Eylea. Bayer lost sales of the established drugs Nexavar and the anticoagulant Xarelto, mainly due to price pressure in China and the first patent expirations in Brazil.

Unlike the USA, China is not the decisive pharmaceutical market for the profit of Bayer’s pharmaceutical division, but it does play an important role in growth. Baumann expects ongoing marketing problems in the country. Due to the strict regulations, the sales teams cannot go to the clinics as usual. “Our pharmaceutical business in China is currently below our expectations,” says Baumann.

On the other hand, Bayer’s smallest division, Consumer Health, presented itself positively with over-the-counter health products. Here, Bayer benefited from the ongoing wave of colds. The division’s sales rose by 4.4 percent to 1.55 billion euros, and profits increased by 9.1 percent to 336 million euros.

The Consumer Health division is mentioned in investor circles as a candidate for a possible spin-off to create new value. Baumann rejected such claims on Tuesday.

Valuation comparisons such as those with the US agrichemicals group Corteva could further fuel the debate about splitting up Bayer. “Many competitors have added value with spin-offs. In terms of timing, however, this would be more of a task for Baumann’s successor,” says fund manager Manns. The CEO will remain in office until May 2024.

More: Bayer wants to increase pharmaceutical sales by 50 percent – and has one disease in its sights.