Bayer Reports Strong Start to Business Operations in Q1 2019

GermanyLeverkusen, April 26, 2019 /PRNewswire/ -- Bayer Group has made a strong start in its business operations. “A major contributing factor to this success was our agriculture business, while the performance of the Prescription Drugs division was also encouraging,” said Werner Baumann, Chairman of the Board of Management, in his statement on the first-quarter report for 2019 released on Thursday. Benefiting from newly acquired agricultural businesses, the Crop Science division saw its sales and profits more than double. The Prescription Drugs division achieved significant growth in both sales and earnings. In contrast, the Consumer Health division’s performance was as expected, below the level of the same period last year. Baumann reaffirmed Bayer Group’s business outlook for 2019.

The company’s plan to exit the animal health business is also proceeding in an orderly manner. Following a strategic review of the exit options over the past few months, the current focus is primarily on the sale. Bayer continues to consider all options that would maximize value. DivestitureandFurther preparations are underway.

Bayer Group’s Q1 sales rose 4.1% (adjusted for currency and portfolio effects) to €13.015 billion (reported: up 42.4%). Despite adverse currency impacts reducing pre-acquisition Bayer business earnings by €110 million, EBITDA excluding special items increased 44.6% to €4.188 billion. After deducting net special charges of €1.05 billion (Q1 2018: €78 million), EBIT declined 15.6% to €1.95 billion. Major expenses related to the acquisition and integration of Monsanto totaled €492 million, while costs associated with the announced restructuring amounted to €393 million.

Due to high special charges, net income fell 36.5% to €1.241 billion. In contrast, core earnings per share rose 13.8% to €2.55, despite an increase in the number of shares outstanding. Bayer’s free cash flow nearly doubled, reaching €508 million. As of March 31, 2019, net financial debt increased by 3.0% compared with December 31, 2018, to €36.74 billion, driven by adverse foreign exchange effects and the initial application of IFRS 16, the new leasing standard.

Crop Science Division’s Revenue Doubles Due to Acquisition

Bayer’s Agriculture Division (Crop Science) reported sales of €6.444 billion, representing a 125.2% growth rate. Of this, a 5.5% increase (adjusted for currency and portfolio effects) was driven by business development in Latin America and North America, with the service agreement signed with BASF providing a significant boost in these regions. Sales in Europe/Middle East/Africa also saw a slight increase (adjusted for currency and portfolio effects). In contrast, sales in the Asia-Pacific region declined slightly (adjusted for currency and portfolio effects).

When viewing total sales calculated by including Monsanto’s sales from January 1, 2017, and excluding the sales of relevant divested businesses, the Crop Science Division’s sales remained flat year-on-year (a decrease of 0.2%) on a currency-adjusted basis. Sales of herbicides and insecticides increased (on a currency-adjusted basis), while the business entities categorized under “Other” showed particularly strong growth, driven by an increased market share for cotton seeds in the United States and Brazil. The corn seeds and traits business remained flat compared to the same period last year. The soybean seeds and traits business experienced the largest decline, primarily due to the pull-forward of market demand in Latin America in previous quarters, as well as reduced planting areas and heightened competitive pressure in North America.

EBITDA of the Crop Science Division, excluding special items, grew by 122.8% to €2.322 billion. This growth was primarily attributable to earnings contributions from newly acquired businesses. The further growth in profit was constrained by the absence of earnings from the businesses divested to BASF. Foreign exchange fluctuations also hindered earnings growth, exerting a negative impact of €67 million on Bayer’s pre-acquisition businesses.

As of April 11, 2019, approximately 13,400 plaintiffs had filed lawsuits in the United States over the crop protection product glyphosate. Bayer remains confident that it has strong defenses and will vigorously defend its interests in all such litigation.

# Prescription Drug Division Achieves Growth in Sales and Revenue

Prescription Drugs Business (Prescription Drugs Division) sales grew by 5.3% (adjusted for exchange rates and portfolio changes) to €4.354 billion, primarily driven by the anticoagulant Xarelto.^®and the ophthalmic drug Eylea^®sustained robust growth and the overall significant expansion of its business in the Chinese market. Xarelto^®Sales increased by 14.8% (adjusted for currency and portfolio effects), primarily driven by higher sales volumes in China, Japan, and Europe. Eylea^®Sales increased by 14.5% (adjusted for currency and portfolio effects), driven by higher volumes, particularly due to strong business performance in the UK, France, and Germany markets.

Nexavar, an Anti-Cancer Drug^®Bavencio^®as well as the pulmonary arterial hypertension treatment drug Angio^®sales also achieved double-digit percentage growth. Among them, Bayvango^®recorded the highest sales growth rate, reaching 34.5% (adjusted for exchange rates and portfolio effects), primarily driven by increased sales volume in China and significant improvement in its U.S. operations. Angio^®Sales increased by 12.9% (adjusted for exchange rates and portfolio effects), primarily driven by higher volumes in the United States and Europe. Nexavar^®Sales increased by 11.4% (adjusted for exchange rates and portfolio effects), driven by performance in the Chinese market and, in particular, sales growth in Germany and Brazil. The multiple sclerosis treatment Betaseron^®/Betaseron™ sales declined by 24.4% (adjusted for exchange rates and portfolio effects), primarily due to the highly competitive market environment in the United States.

EBITDA growth of the prescription drug business, excluding special items, increased by 6.9% (10.0% after exchange rate adjustment), reaching €1.512 billion, primarily due to the strong performance of the business and reduced costs of products sold.

Health Consumer Care Division Achieves Sales Growth in Two Major Regions

Sales of self-care products (consumer health) declined by 1.4% (adjusted for currency and portfolio effects) to €1.395 billion. After adjusting for currency and portfolio effects, business in the Latin America and Asia-Pacific regions grew, while operations in the Europe/Middle East/Africa and North America markets declined. Globally, Bayer’s Dermatology category saw an 8.6% increase in sales (adjusted for currency and portfolio effects), whereas other categories experienced a decline (adjusted for currency and portfolio effects), particularly the Gastrointestinal Health category (down 6%) and the Allergy & Cold category (down 4.8%).

EBITDA excluding special items of the Consumer Health business decreased by 10.9% to €279 million. The decline in profitability was driven by lower sales volumes, higher costs of goods sold, and the absence of profit contributions from the divested U.S. prescription dermatology business. Ongoing efficiency enhancement initiatives within the Consumer Health division have begun to yield results, reducing selling and administrative expenses; however, these savings only partially offset the aforementioned adverse factors.

Animal Health Business Remains Flat Year-over-Year

Animal Health sales amounted to €421 million, remaining flat year-on-year (a 0.9% decline after adjusting for currency and portfolio effects). After adjusting for currency and portfolio effects, the business unit achieved growth in the Europe/Middle East/Africa and Asia-Pacific markets, while performance in Latin America remained flat year-on-year. The North American business experienced a significant decline. EBITDA excluding special items remained flat year-on-year at €140 million (a 0.7% increase).

Bayer Confirms Its Outlook 

Bayer has confirmed its Group guidance for 2019 (based on 2018 exchange rates). The company expects sales to reach approximately €46 billion in 2019, representing a growth rate of around 4% (adjusted for currency and portfolio effects). Bayer is working to increase its EBITDA before special items to approximately €12.2 billion, with core earnings per share rising to about €6.80. The expectations for each business division remain unchanged from those published in the 2018 Annual Report. These targets do not take into account the planned exit from the Animal Health division, the divestiture of the Coppertone™ and Dr. Scholl’s™ brands from the Consumer Health division, or the sale of the 60% stake held in Currenta, the German production site service provider.

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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 may 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 described on Bayer’s official websitewww.bayer.comBayer's various reports disclosed above. The Company has no obligation to update these forward-looking statements or to align them with future events or developments.