Bayer Reports Encouraging Performance Across All Divisions in Q3 2019

GermanyLeverkusen, Oct. 31, 2019 /PRNewswire/ -- Bayer has made progress across all key areas, with steady advancement in both operations and strategy. “Bayer achieved success in the third quarter,” said Werner Baumann, Chairman of the Board of Management of Bayer AG·“Both the Group’s sales and its earnings before interest, taxes, depreciation, and amortization (EBITDA) excluding special items increased. All divisions performed well. At the same time, we have made significant strategic progress, particularly with regard to the efficiency, structural, and portfolio measures announced in late 2018,” added Werner Baumann during Wednesday’s quarterly results press conference. Despite lowered global economic growth forecasts, Baumann reaffirmed the company’s outlook for 2019.

He explained, “Our progress on the previously announced divestiture strategy has been faster than planned.” In August, Bayer reached an agreement to sell its Bayer Animal Health business to the U.S. company Elanco Animal Health for $7.6 billion. In another agreement, Bayer sold its 60% stake in Currenta, a German production site service provider, to a company controlled by Macquarie Infrastructure and Real Assets. The Animal Health and Currenta businesses are reported as discontinued operations in the current financial statements. Bayer expects the sale of the Animal Health business to be completed by mid-2020, while the divestiture of its stake in Currenta is scheduled for completion in December 2019. The previously announced July deal to sell the Dr. Scholl’s™ foot care product portfolio to Yellow Wood Partners is expected to close in November. The sale of the Coppertone™ brand to Beiersdorf was completed in August.

Bayer AG’s third-quarter sales rose 5.4% (adjusted for currency and portfolio effects) to €9.83 billion. According to the report, sales increased by 6.1%. EBITDA before special items grew 7.5% to €2.291 billion. The application of IFRS 16, effective from January 1, 2019, had a positive impact of approximately €110 million. Under this new standard, lease expenses are no longer recognized in EBITDA. Currency fluctuations also contributed a positive effect of €77 million.

After deducting net special charges of €13 million, earnings before interest and taxes (EBIT) decreased by 71.9% to €1.215 billion. The EBIT figure for the previous year included net special income of €3.128 billion, derived from a pre-tax gain of approximately €3.9 billion generated by the divestiture of businesses to BASF. In the third quarter of 2019, special income from the sale of the prescription dermatology business outside the United States amounted to €350 million, offset primarily by special charges related to ongoing restructuring programs (€213 million) and litigation (€104 million). Due to the high level of special income in the same period of the prior year, net income declined by 63.9% to €1.036 billion. Core earnings per share from continuing operations increased by 6.4% to €1.16.

Free cash flow increased by 13.2% to €1.263 billion. As of September 30, 2019, net financial debt totaled €37.86 billion, a decrease of 2.4% compared to June 30, 2019.

Crop Science Division Achieves Growth in Sales and Profitability

Bayer’s Agriculture Division (Crop Science) saw sales grow by 4.8% (adjusted for exchange rates and portfolio changes), reaching €3.948 billion, primarily driven by business development in Latin America and North America. Baumann stated, “Despite the still challenging environment, the Crop Science division is performing well,” with droughts in Europe and Australia being one of the factors putting pressure on operations.

Based on total sales calculated by including Monsanto’s sales from January 1, 2018, and excluding sales from related divested businesses, the Crop Science Division reported a currency-adjusted (exchange-rate adjusted) sales growth of 5.7%. The combined estimated sales growth for fungicides, corn seeds and traits, and soybean seeds and traits was particularly strong, while vegetable seeds and other crops experienced the largest decline in sales.

EBITDA excluding special items of the Crop Science division increased by 24.9% to €527 million. This growth was primarily driven by higher prices and sales volumes in Latin America, as well as cost synergies realized as the company progressed with integrating acquired businesses. Foreign exchange rate fluctuations also had a positive impact of €51 million. In contrast, profitability was adversely affected mainly by rising costs of goods sold.

As of October 11, 2019, approximately 42,700 plaintiffs had filed lawsuits in the United States over crop protection products containing glyphosate. Television advertising expenditures by the plaintiffs’ side drove the increase in the number of lawsuits.3.Quarterly television advertising expenditures were approximately double those of the first half of the year. However, the number of lawsuits is not correlated with the claims asserted. Bayer firmly believes that it has substantial defenses and will vigorously defend its interests in the appeals proceedings against the three initial trial verdicts, as well as in all future proceedings. Meanwhile, the company is participating constructively in mediation proceedings ordered by a U.S. federal judge in California.

Driven by robust growth in the Chinese market and Xarelto^®and Eylea^®, the Prescription Drugs Division achieved further sales growth 

Prescription Drugs Division sales grew by 5.9% (adjusted for currency and portfolio effects) to €4.04 billion. Baumann stated, “The overall business delivered strong performance, driven by continued robust growth in China and increased sales of the anticoagulant Xarelto® and the ophthalmic drug Eylea®.” Xarelto® sales rose by 9.1% (adjusted for currency and portfolio effects), primarily due to volume growth in the Chinese and Russian markets. Eylea® sales increased by 15.9% (adjusted for currency and portfolio effects), mainly attributable to business expansion in the Europe/Middle East/Africa region, particularly in the UK and Germany. Sales of this drug also grew in Japan.

Sales of the antibiotic Avalox™/Avelox® (up 32.8%, adjusted for currency and portfolio effects) and the oncology drug Stivarga® (up 30.6%, adjusted for currency and portfolio effects) were particularly strong, primarily driven by increased sales volume in China. Demand for Stivarga® also grew in the US and Russian markets. Sales of Adempas®, a treatment for pulmonary hypertension, rose by 19.3% (adjusted for currency and portfolio effects), mainly due to its positive performance in the US market. In contrast, sales of Betaseron®/Betaferon®, a treatment for multiple sclerosis, continued to decline, falling by 18.2% (adjusted for currency and portfolio effects), primarily due to intense competition in the US market.

EBITDA of the prescription drug business, excluding special items, decreased by 1.7% year-on-year to €1.527 billion. This decline was primarily due to the inclusion of approximately €190 million in one-time gains related to collaborative development projects in the same period last year. Sales expenses incurred for product launches and the expansion of new indications also offset part of the profits in the third quarter of this year. However, increased sales volume and a €20 million positive impact from exchange rate fluctuations had a favorable effect on profitability.

Profitability of the Consumer Health segment grew, with sales increasing across nearly all categories.

Sales of Bayer’s Self-Care Products (Consumer Health Division) increased by 3.7% (adjusted for exchange rates and portfolio effects) to €1.288 billion. “We can see that the measures implemented by the Consumer Health Division have yielded significant results, with both sales and profitability beginning to resume growth,” said Baumann. Business in the Europe/Middle East/Africa and Latin America regions both achieved growth. The analgesics and cardiovascular categories performed most strongly (up 9.0%, adjusted for exchange rates and portfolio effects), followed by the allergy and cold remedies category (up 6.4%, adjusted for exchange rates and portfolio effects). The gastrointestinal health category was the only one to experience a decline in sales (down 7.5%, adjusted for exchange rates and portfolio effects).

EBITDA growth of the Health Consumer Goods Division, excluding special items, increased by 3.2%, reaching €256 million. The profitability was mainly driven by efficiency improvement projects initiated at the end of 2018, which significantly reduced sales expenses. Additionally, exchange rate fluctuations contributed an increase of €9 million. However, profits declined due to the loss of earnings from the divested prescription drug business in the skin care category.

Bayer Confirms Its Outlook

Bayer has confirmed its Group outlook for fiscal 2019, released in February of this year, which was based on the assumption that all businesses would continue as going concerns. In light of the progress made in the divestment plans for the Animal Health business and the Currenta shares, the original forecast has been adjusted to exclude the sales and earnings contributions from these discontinued operations. Exchange rate effects have also been taken into account.

Based on the adjusted forecast, Bayer expects Group sales to reach approximately EUR 43.5 billion, maintaining a growth rate of around 4% (adjusted for exchange rates and portfolio changes) (the original forecast was approximately EUR 46.0 billion; minus approximately EUR 3.0 billion after portfolio adjustments, plus approximately EUR 0.5 billion considering exchange rate impacts). Based on the same forecast, EBITDA before special items for fiscal year 2019 is expected to reach approximately EUR 11.5 billion (the original forecast was approximately EUR 12.2 billion; minus approximately EUR 0.6 billion after portfolio adjustments, then minus another approximately EUR 0.1 billion considering exchange rate impacts), with core earnings per share expected to reach approximately EUR 6.35 (the original forecast was EUR 6.80; minus approximately EUR 0.35 after portfolio adjustments, then minus another approximately EUR 0.10 considering exchange rate impacts).

For more information, please visitwww.bayer.com。

Forward-Looking Statements 

This press release includes 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/the various reports of Bayer publicly disclosed. The Company has no obligation to update these forward-looking statements or to align them with events or developments that occur in the future.