Bayer Reports Strong Growth and Raises Full-Year Outlook Following Robust Q2 2021 Performance

LEVERKUSEN, Germany, Aug. 5, 2021 /PRNewswire/ -- Bayer AG posted strong growth in the second quarter of fiscal 2021. "Adjusted for currency and portfolio effects, sales in all divisions achieved double-digit percentage growth, and we expect all our businesses to continue growing with this positive sales momentum. Therefore, we have raised our full-year performance outlook and now expect both sales and core earnings per share to exceed previous forecasts," Werner Baumann, Chairman of the Board of Management, said on Thursday. Presenting the company's half-year financial report, he emphasized：“We have achieved significant success in drug R&D and market launch, some of which have the potential to becomeBlockbusterThe drug's potential. We have successfully expanded the anticancer drug Nubeqa^®...launch regions, and continue to exceed our expectations. We continue to advance the market launch of Verquvo™ for the treatment of symptomatic chronic heart failure, which has received approval in the European Union and Japan. Meanwhile, we are preparing for the U.S. launch of Kerendia™.” Kerendia™ received approval from the U.S. Food and Drug Administration in July for the treatment of adult patients with chronic kidney disease associated with type 2 diabetes. Bayer also announced the acquisition of Vividion, making substantial progress in implementing its Pharmaceuticals Division strategy. Baumann emphasized, “Vividion’s unique technology and specialized expertise will significantly enhance our drug discovery capabilities.” The recently established cell and gene therapy platform is also part of the company’s transformation strategy for its Pharmaceuticals Division. This platform holds the potential to deliver breakthrough medical innovations in clinical development, such as therapies for Parkinson’s disease.

Bayer Group’s second-quarter sales grew by 12.9% on a currency- and portfolio-adjusted basis to €10.854 billion, following a significant impact in the prior-year period from restrictions implemented in response to COVID-19. EBITDA before special items decreased by 10.6% to €2.577 billion. Unfavorable currency effects reduced sales by €524 million and EBITDA before special items by €153 million; the latter was further reduced by an accrual for variable compensation. After deducting net special charges of €3.901 billion (Q2 FY 2020: €12.511 billion), EBIT stood at negative €2.281 billion (Q2 FY 2020: negative €10.784 billion). The special charges primarily related to the previously announced provision for glyphosate litigation, which was reduced by approximately €3.5 billion. Other special charges were related to impairment and restructuring. Net income was negative €2.335 billion (Q2 FY 2020: negative €9.548 billion), while core earnings per share from continuing operations increased by 1.3% to €1.61.

Free cash flow decreased by 17.8% to €1.152 billion. As of June 30, 2021, net financial debt increased to €34.361 billion, up 1.3% compared to March 31, 2021. Cash inflows from operating activities and favorable foreign exchange effects largely offset the outflows for dividend payments and litigation settlements in the United States.

# Crop Science Division Achieves Sales Growth Across All Markets

Sales in Bayer's Agriculture business (Crop Science Division) grew 10.6% (currency- and portfolio-adjusted) to €5.021 billion, with growth across all markets. On a currency- and portfolio-adjusted basis, the division achieved double-digit percentage growth in Latin America and the Asia-Pacific region, alongside substantial growth in North America. Performance was particularly strong in fungicides (up 22.9% currency- and portfolio-adjusted) and herbicides (up 16.2% currency- and portfolio-adjusted). Fungicide sales volumes increased significantly, especially in Latin America, driven by the Fox Xpro™ product. Similarly, North American sales grew following the launch of new products such as Delaro Complete™. Herbicide sales increased due to volume growth and price increases, particularly in North America, where XtendiMax™ saw substantial volume gains and Roundup^®(Roundup™) prices increased. The Soybean Seed & Traits business also saw growth, with sales rising 9.1% (adjusted for currency and portfolio changes) due to higher volumes in North America. Sales for the Corn Seed & Traits business grew 8.6% (adjusted for currency and portfolio changes), driven particularly by increased volumes in Latin America and price increases in North America.

EBITDA before special items for the Crop Science Division decreased by 25.4% to €1.018 billion, at a margin of 20.3%. Price increases, volume growth, and ongoing efficiency enhancement programs contributed positively to earnings but only partially offset cost increases, particularly in cost of goods sold. Product mix, adverse currency effects of €111 million, and delayed remittance of licensing income offset earnings.

Prescription Pharmaceuticals Division Reports Growth in Sales and Profit

Sales in the Prescription Pharmaceuticals Division (Prescription Pharmaceuticals business) increased by 16.2% (currency and portfolio-adjusted), reaching €4.494 billion. The division's business rebounded strongly from the impact of the COVID-19 pandemic, particularly in the areas of ophthalmology, women's healthcare, and diagnostic imaging. Meanwhile, such as the oral anticoagulant Xarelto^®and the newly launched cancer treatment drug Nubeqa^®...and other products also achieved significant growth. Xarelto^®Sales increased by 12.6% (currency- and portfolio-adjusted), primarily due to a substantial increase in sales volumes in the Chinese and Russian markets. Ophthalmology product Eylea^®Sales increased by 27.4% (currency- and portfolio-adjusted), primarily driven by strong sales growth resulting from high demand in the European market.

Driven by strong sales growth, EBITDA before special items for the Prescription Pharmaceuticals division rose by 3.0% to €1.409 billion, representing a margin of 31.4%. R&D expenses increased compared to the same period last year, partly due to investments in the Cell & Gene Therapy business. Higher cost of goods sold, increased launch expenses, and a €26 million adverse currency impact partially offset the earnings improvement.

Consumer Health Division Achieves Growth and Improved Profitability

Sales of Self Care products (Consumer Health division) increased by 12.8% (currency and portfolio-adjusted) to €1.290 billion, with growth recorded across all regions and categories following a weak performance in the same period last year. The business benefited from sustained high demand in the nutritionals category, driving a 15.7% increase in sales (currency and portfolio-adjusted). Additionally, supported by a strong allergy season in North America, sales in the allergy and cold care category rose by 15.8% (currency and portfolio-adjusted).

EBITDA excluding special items for the Consumer Health Division increased by 9.4% to €278 million. Consequently, the EBITDA margin excluding special items improved by 0.5 percentage points to 21.6%. This profitability growth was primarily driven by the division’s strong operational performance and ongoing cost management initiatives, partially offset by additional marketing investments to support new product launches and a negative foreign exchange impact of €20 million.

Outlook: Bayer Is Optimistic About Second-Half Development

Following strong results in the first half of 2021, Bayer remains optimistic about its prospects for the second half of the year and has accordingly raised its guidance.Adjusted for exchange rates (i.e., based on2020after the monthly average exchange rate for the year), Bayer currently expects sales to reach approximately €44 billion (previously expected: approximately €42 billion to €43 billion). Adjusted for currency and portfolio effects, this currently represents growth of approximately 6% (previously expected: approximately 3%). At constant exchange rates, Bayer currently expects an EBITDA margin excluding special items of around 26% (previously expected: approximately 27%). At constant exchange rates, this continues to correspond to an EBITDA excluding special items of approximately €11.2 billion to €11.5 billion. At constant exchange rates, core earnings per share are currently expected to reach approximately €6.40 to €6.60 (previously expected: approximately €6.10 to €6.30). At constant exchange rates, free cash flow is currently expected to be approximately minus €2.0 billion to minus €3.0 billion (previously expected: approximately minus €3.0 billion to minus €4.0 billion). Additionally, at constant exchange rates, Bayer currently expects net financial debt to reach approximately €36 billion at year-end (previously expected: approximately €36 billion to €37 billion).

According to2021Year6Month30day's closing exchange rate, Bayer currently expects sales for fiscal year 2021 to reach approximately €43 billion (previous expectation: approximately €41 billion). Currency- and portfolio-adjusted, this currently corresponds to an increase of approximately 6% (previous expectation: approximately 3%). Currently, Bayer targets an EBITDA margin before special items of approximately 25% (previous expectation: approximately 26%). This corresponds to EBITDA before special items of €10.6 billion to €10.9 billion (previous expectation: €10.5 billion to €10.8 billion). Core earnings per share are currently expected to reach approximately €6.00 to €6.20 (previous expectation: approximately €5.60 to €5.80). Free cash flow is currently expected to be approximately -€2 billion to -€3 billion (previous expectation: approximately -€3 billion to -€4 billion), while net financial debt is currently expected to reach approximately €35 billion (previous expectation: approximately €35 billion to €36 billion).

Bayer Combines Core Financial Instruments with Ambitious Sustainability Goals

Bayer has also made solid progress in the field of sustainability. For example, Bayer recently amended its existing €4.5 billion revolving credit facility to link it to climate protection, closely aligning one of its financial instruments with its sustainability targets for the first time. This amendment incorporates the company's greenhouse gas emission reduction targets into the revolving credit facility: if Bayer fails to meet its emission reduction targets, it will make compensatory payments to charitable organizations. Through this revision, Bayer underscores its commitment to achieving climate neutrality by 2030 and its comprehensive sustainability strategy.

Bayer launched a soil carbon sequestration program to assist farmers in 2020, and has recently expanded this energy decarbonization initiative to Europe. Additionally, the long-acting contraceptive Mirena^®It has been included in the product catalogs of the United Nations Population Fund (UNFPA) and the United States Agency for International Development (USAID), facilitating distribution to low- and middle-income countries and regions. This initiative marks a milestone in providing family planning services to women in these countries and regions. Bayer is currently investing €250 million in Turku, Finland, to expand and modernize the manufacturing of contraceptive products.