Bayer Reports Strong Strategic and Operational Performance for Fiscal Year 2019

Leverkusen, February 28, 2020 /PRNewswire/ -- Bayer delivered strong strategic and operational performance last year. “In 2019, we reaped abundant rewards and fulfilled our commitments across all areas,” said Werner Baumann, Chairman of the Board of Management of Bayer AG.·Werner Baumann stated at the earnings press conference held in Leverkusen on Thursday, “Despite a challenging market environment, particularly in the agriculture sector, we have achieved our financial targets.” Bayer also expressed optimism about its performance this year, aiming for comprehensive growth in sales, earnings, and free cash flow.

Baumann also stated, “We have also achieved significant results in the portfolio, efficiency, and structural measures announced at the end of 2018.” In 2019, Bayer announced the divestiture of its Animal Health business to Elanco for $7.6 billion, completed the sale of its stake in Currenta, a service provider for its German production sites, and divested the Dr. Scholl’s™ and Coppertone™ brands. Including synergies from agricultural acquisitions, the efficiency and structural measures implemented last year have already generated substantial gains, accounting for approximately 30% of the €2.6 billion annual earnings contribution target set for 2022.

The company also significantly strengthened its sustainability efforts in 2019 and set ambitious goals for itself. Baumann stated, “We have integrated sustainability as an integral part of our corporate strategy, reflecting our responsibility as a company and society’s growing expectations of us.”Wang. I“We are pursuing sustainability goals with the same vigor as we do financial goals. To this end, we will submit a proposal at the Annual General Meeting in April to incorporate sustainability goals into the compensation system of the Management Board.”

Group Sales and Earnings Growth

Bayer AG’s sales grew by 3.5% (adjusted for currency and portfolio effects) to €43.545 billion last year. According to the report, sales increased by 18.5%. EBITDA before special items rose by 28.3% to €11.503 billion, including an adverse currency impact of €43 million.

After deducting net special charges of €2.818 billion, earnings before interest and taxes (EBIT) increased by 21.3% to €4.189 billion. The special charges were primarily related to ongoing restructuring programs, the acquisition and integration of Monsanto, impairment losses associated with dicamba production facilities in the Crop Science division, the divestiture of the Dr. Scholl’s™ brand in the Consumer Health division, and legal fees. Net income rose by 141.4% to €4.091 billion, including gains from the sale of Bayer’s stake in Currenta Group (€1.637 billion). Core earnings per share from continuing operations grew by 14.3% to €6.40.

The Management Board and Supervisory Board of Bayer AG will propose at the Annual General Meeting to be held on April 28, 2020, that a dividend of €2.80 per share entitled to dividends be paid for the 2019 fiscal year (2018 fiscal year: €2.80 per share). The number of shares entitled to dividends is 982.42 million (2018: 932.55 million), resulting in a total dividend payment of €2.751 billion (2018 fiscal year: €2.611 billion).

In 2019, free cash flow declined by 9.4% to €4.214 billion. In this regard, Chief Financial Officer Wolfgang Nickl stated, “This performance remains well above our initial expectation of €3–4 billion, so we are very satisfied.” Bayer’s net financial debt decreased by 4.5% year over year to €34.068 billion.

Crop Science Division Achieves Significant Revenue Growth Driven by Acquisitions

Bayer’s Agriculture Division (Crop Science) saw sales rise by 1.4% (adjusted for currency and portfolio effects), reaching €19.832 billion. The revenue growth was primarily driven by business expansion in Latin America; despite floods and heavy rainfall in the U.S. Midwest during the first half of the year, sales in the North American market remained flat compared to the same period last year.

On a pro forma basis, assuming Monsanto’s sales were included and related assets divested starting January 1, 2018, the Crop Science Division’s sales decreased by 1.4% (currency-adjusted). Against this backdrop, sales in segments such as insecticides, fungicides, and corn seeds and traits registered growth. The soybean seeds and traits business experienced the largest decline, particularly in North America, where reduced planting acreage, intense competition, weather conditions, and ongoing trade-related uncertainties adversely impacted business performance.

The Crop Science Division’s EBITDA before special items increased by 80.9% to €4.796 billion. This growth was primarily driven by profit contributions from acquired businesses and the gradual realization of synergies as business integration deepened.

As of February 6, 2020, approximately 48,600 plaintiffs had filed lawsuits in the United States concerning glyphosate-based crop protection products. Bayer maintains that the trial evidence and relevant law in the first three cases to go to trial did not support the verdicts, and is therefore firmly appealing them. “The U.S. government has recently indicated its clear support for our core defense arguments,” said Baumann, citing an official court filing related to the matter (issued in December 2009). “If necessary, we will pursue all available judicial avenues to appeal these three cases.” Meanwhile, Bayer continues to engage constructively in the court-ordered confidential mediation process, seeking a settlement on reasonable terms to resolve this series of litigations.

Prescription Drug Division Achieves Strong Profit Growth

Prescription Drugs Business (Prescription Drugs Division) sales grew by 5.6% (adjusted for exchange rates and portfolio effects), reaching €17.962 billion. Business growth in the China market remained strong, while the oral anticoagulant Xarelto^®and the ophthalmic drug Eylea^®Sales also saw another significant increase, with both growing by 12.6% (adjusted for exchange rates and portfolio changes). Xarelto^®Mainly driven by increased sales in China, Russia, and Europe, while Eylea^®Particularly strong growth was achieved in Japan and the Europe/Middle East/Africa (EMEA) region, especially in the United Kingdom and Germany. The performance of the diagnostic imaging business was equally encouraging.

In addition, Bayer's cancer treatment drug Stivarga^®sales also saw a significant increase (adjusted for exchange rates and portfolio: up 27.3%), with Angio, a drug for the treatment of pulmonary hypertension,^®a 14.4% increase (adjusted for exchange rates and portfolio composition). Angio^®performance was driven by strong performance in the U.S. market, while Bavencio^®primarily benefited from the increase in its sales volume in the Chinese market. Betaseron, a drug for the treatment of multiple sclerosis^®/Betaseron™ sales continued to decline (down 18.0% after adjusting for exchange rates and portfolio effects), primarily due to intense competition in the U.S. market.

The Prescription Drugs Division’s EBITDA growth, excluding special items, rose by 6.7%, reaching €5.975 billion. The profit growth was driven by increased sales volume and reduced costs of products sold. However, the rise in selling expenses for product launches and new indications partially offset the profits. Last year's profits included a one-time gain of approximately €190 million related to a collaborative development project.

Health Consumer Goods Business Achieves Growth Across All Categories

Sales of Bayer’s Consumer Health division (self-care products) rose by 2.6% (adjusted for currency and portfolio effects) to €5.462 billion. After adjusting for currency and portfolio effects, the Consumer Health division achieved growth across all categories and in three of its four regions. Sales growth was strongest in the Allergy & Cold category (up 5.0%, adjusted for currency and portfolio effects) and the Dermatology category (up 3.8%, adjusted for currency and portfolio effects).

The Health Consumer Care Division reported an EBITDA before special items of €1.09 billion, flat year-on-year (a 0.5% decline). Profitability was primarily driven by business growth and ongoing efficiency enhancement initiatives, which significantly reduced selling expenses. However, profit growth was dampened by the loss of earnings from the divested prescription dermatology business.

Outlook: Bayer is committed to achieving growth in sales, earnings, and free cash flow

In 2020, Bayer expects sales from continuing operations to reach approximately €44 billion to €45 billion on a currency-adjusted basis. This represents growth of around 3% to 4% on a currency- and portfolio-adjusted basis. Bayer’s target is to increase the Group’s EBITDA margin before special items to approximately 28% (adjusted for currency effects). On a currency-adjusted basis, EBITDA before special items is expected to rise to €12.3 billion to €12.6 billion. Core earnings per share are projected to increase to €7.00 to €7.20 on a currency-adjusted basis, while free cash flow is anticipated to reach approximately €5 billion after adjusting for currency impacts. This forecast does not yet include the impact of the coronavirusOutbreakestimate of the potential impact. Furthermore, this outlook is based on the assumption that the animal health business will be transferred to the acquirer effective July 1, 2020, and that the purchase price will be received in cash and Elanco stock on such date as agreed.

Following last year’s divestitures, Bayer changed the method for allocating costs necessary to ensure normal functional operations across its divisions, a change that impacted the EBITDA margin excluding special items. The Crop Science Division reported a 2019 margin of 24.2%, which adjusted to 23.8% to reflect the impact of this change. On this basis, Bayer expects a 26% growth after adjusting for currency effects. The Pharmaceuticals Division reported a margin of 33.3% (adjusted to 32.6%), and is projected to reach approximately 33% this year after currency adjustments. The Consumer Health Division reported a 2019 margin of 20.0% (adjusted to 20.9%), and is expected to achieve growth of 22% to 23% in 2020 (after currency adjustments).

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Forward-Looking Statements 

This press release contains forward-looking statements made by the management of Bayer AG based on current assumptions and forecasts. Various known and unknown risks, uncertainties, and other factors could cause the company’s actual future operating results, financial position, development, or performance to differ materially from the estimates presented in such forward-looking statements. These factors include those disclosed on Bayer’s official websitehttp://www.bayer.com/Bayer’s various reports publicly disclosed. The Company has no obligation to update these forward-looking statements or to align them with future events or developments.