Bayer sees lower profit, slower sales growth in 2023

By Geoffrey Smith

Investing.com -- Bayer (ETR:BAYGN) said it expects revenue and profit to fall this year, as cost inflation, a rebound in the euro, and weaker demand combine to put a squeeze on the German conglomerate's suite of products.

Bayer said it expects sales growth adjusted for foreign exchange and portfolio effects to grow by only 2%-3% to between €51 billion and €52 billion (€1 = $1.0585), as falling prices at its crop science division offset continued growth in pharma and consumer health.

"As regards earnings in 2023, growth-driven margin contributions and positive effects from ongoing efficiency programs will not be sufficient to offset the anticipated decline in prices as well as high inflation-driven cost increases, which are expected to continue," chief executive Werner Baumann said.

Basic underlying earnings rose 21% last year to €13.5B, but are expected to fall to around €13B this year. Core earnings per share are expected to fall to €7.20-€7.40 from €7.94.

As always with Bayer, those underlying numbers are likely to be subject to big swings from one-off items as the company navigates its way through a forest of lawsuits related to the side effects of its Roundup weedkiller and the ongoing reshuffle of its product portfolio. Baumann has come under intense pressure from shareholders in recent years as Roundup litigation stopped the acquisition of Monsanto from delivering its promised benefits.

Litigation aside, crop sciences was the standout performer among Bayer's three divisions last year, with earnings before interest, taxes, depreciation and amortization rising by 47% to €6.87 billion. However, momentum was already weakening in the fourth quarter, with EBITDA of €820 million a sharp slowdown from previous quarters.

At pharma, EBITDA before special items fell 4.8% from a year earlier in the fourth quarter to €4.86B, while consumer health EBITDA was essentially flat on the year at €313M.

Last week, the board offered activist shareholder Jeff Ubben, who is pressing for radical improvements in returns, a seat on its sustainability council, but has so far resisted offering him a seat on its supervisory board, which would give him greater influence.

Bayer stock reacted negatively to the weak outlook. By 03:25 ET (08:25 GMT), it was down 4% in Frankfurt at a four-week low.