Agricultural Chemistry: Bayer Makes Better Business – Agricultural Chief Condon Goes

A strong demand for seeds and crop protection products as well as for over-the-counter medicines gave Bayer a tailwind in the past quarter. CEO Werner Baumann spoke on Tuesday of a “strong growth dynamic”.

One reason is volume and price increases in the agricultural business in North America. Things are also going well in Latin America. The two regions account for 70 percent of the agrochemicals business of the Leverkusen-based group, which took over US competitor Monsanto in 2016. Baumann is now somewhat more optimistic about the profit development in the current year.

Meanwhile, the company announced a change: The head of the agricultural division (Crop Science), Liam Condon, is leaving the Dax group at the end of the year. Condon asked to terminate his contract, which ran until December 31, 2023, early. His successor will be the 48-year-old Rodrigo Santos, who has been responsible for the division’s day-to-day business as Chief Operating Officer since June 2021. Previously, he was head of the Crop Science business in Latin America. In the past, the development of the agricultural business fluctuated strongly, which also led to criticism from analysts on several occasions.

In the past quarter, however, things went smoothly again in the division, after product returns of corn seeds in the USA in particular had a negative impact in the same period of the previous year. Sales increased significantly here. Soy seeds and weed killers were also in demand. An interruption in glyphosate production as a result of a hurricane at a large US plant had only limited consequences. Overall, the agricultural division achieved adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) of EUR 471 million in the months from July to September, after a minus of EUR 34 million in the same period of the previous year.

Business with over-the-counter drugs (consumer health) also did a little better. In the pharmaceutical division, operating profit fell by almost 10 percent to 1.37 billion euros; But this was mainly due to costs in connection with the market launch of the kidney drug Kerendia as well as higher research costs, for example in the cell and gene therapy business. Meanwhile, sales in the pharmaceutical business grew, thanks in part to the demand for the anticoagulant Xarelto and the eye medicine Eylea.

Group-wide, Bayer increased sales in the third quarter by almost 15 percent year-on-year to 9.8 billion euros. Adjusted operating profit increased by a good 16 percent to just under 2.1 billion euros. The bottom line was that the Leverkusen-based company earned 85 million euros – this was particularly the case for the cost of renovation work. A year ago, however, a loss of 2.7 billion euros was incurred due to depreciation on the agricultural business.

With the Monsanto takeover, Bayer had brought legal trouble around glyphosate, which costs many billions and weighs on the share price. The price losses since the first defeat in the summer of 2018 still add up to around 45 percent despite the recent recovery. In the meantime, the hype has subsided and Bayer is settling the lawsuits according to an agreement in principle: “Of the approximately 125,000 cases mentioned in the annual report, about 98,000 cases are involved, including those that do not meet the settlement criteria” Bayer in its quarterly report their number as of October 22nd.

But the topic is not off the table. One judge did not accept an important part of the compromise negotiated with plaintiffs – namely how to deal with future lawsuits. Bayer is now relying on a decision by the US Supreme Court to turn things around. The company filed a motion to revise a judgment in one of the lost glyphosate lawsuits in August. A supreme court decision in favor of Bayer would have a signal effect and would amount to an exemption. The Supreme Court has yet to make a decision as to whether it will even accept the case for trial.