(May 12): Bayer AG posted better-than-expected profit in the first quarter, underpinned by a robust performance in its crop science unit, including a boost from soybean seeds and traits. Shares gained.
Adjusted first-quarter earnings rose to €4.45 billion before interest, taxes, depreciation and amortisation, Bayer said Tuesday. That exceeded the €3.9 billion consensus forecast in a Bloomberg survey of analysts.
The company confirmed its full-year outlook on a currency-adjusted basis, saying the conflict in the Middle East doesn’t have any material impact on guidance as things stand. At the same time, it said it’s remaining vigilant in case of higher prices for energy, raw materials and logistics and will implement “appropriate countermeasures” if needed.
“Operationally, the turnaround has taken hold and the period of repeated disappointments and profit warnings appears to be over,” Markus Manns, portfolio manager at Bayer shareholder Union Investment, said by email.
The shares rose as much as 5% in early trading in Frankfurt. They’re up by more than half over the past 12 months due to improvements in Bayer’s drug pipeline and investor optimism it can successfully manage its legal problems in the US.
The German conglomerate is navigating a critical phase in efforts to contain mass litigation tied to the Roundup weedkiller — a saga that has haunted the Leverkusen, Germany-based company since its 2018 acquisition of Roundup creator Monsanto and has already cost more than US$10 billion.
See also: Bayer gets mixed reception at US Supreme Court on Roundup suits
Since taking over in mid-2023, CEO Bill Anderson has been grappling with the Roundup fallout while also trying to improve performance by trimming management layers and eliminating thousands of jobs.
Growth in Bayer’s crop-science business in the first quarter was mainly driven by the soybean seed and traits business, where sales doubled thanks to a €448 million licensing payment tied to a seed-technology dispute. Prices also recovered thanks to the re-approval of the soy crop herbicide dicamba.
The crop-protection business, however, remained under pressure with declining sales. Bayer has tried to improve the crop-science unit’s margins as part of its efficiency programme that also includes exiting less-profitable products.
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In its pharmaceutical division, Bayer continued to suffer from generic competition to Xarelto, with sales of the blockbuster blood thinner slumping by 40% in the quarter, as well as the eye medicine Eylea. The company is counting on growth from cancer drug Nubeqa and kidney therapy Kerendia, as well as new launches, to return the unit to growth by 2027.
Performance at the smallest division, consumer health, was held back by continuing weakness in the US and relatively weaker demand for drugs for the cold season.
Overall, the results are “strong” and show better-than-expected profitability in both the pharmaceutical and crop-science businesses, JPMorgan analysts including Richard Vosser said in a note, highlighting that the company expects a weaker currency-related headwind.
Beyond operating performance, Bayer and its investors are closely watching a US Supreme Court decision expected by the end of June that could undercut the failure-to-warn legal argument underpinning most Roundup claims.
In addition to a favourable ruling, Bayer must also secure broad participation in its US$7.25 billion settlement. Claimants have until June 4 to opt in or out.
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