Bayer’s turbulent path sees pharma sales slump drive earnings cut

GERMANY — Bayer, the prominent German pharmaceutical and pesticides manufacturer has revealed that its downward revision of this year’s earnings forecast was primarily influenced by a less optimistic outlook in its Crop Science division and the anticipation of stagnant pharmaceutical sales.

This unexpected shift raises concerns for CEO Bill Anderson, who has been navigating a challenging landscape since assuming his role in June.

Bayer’s abrupt alteration to its full-year earnings forecast was driven by internal dynamics within its diverse business domains.

The company announced a revised projection for its 2023 group earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted for exceptional circumstances.

The new range, between 11.3 billion euros (US$ 12.5 billion) and 11.8 billion euros (US$ 13.02 billion) on a currency-adjusted basis, marks a decline from the 13.5 billion euros (US$ 14.9 billion) reported in 2022.

A deeper dive into Bayer’s revised forecast reveals that the heart of the matter lies in its Crop Science division.

The adjusted EBITDA margin for 2023 sales in this agriculture business segment is now expected to be around 21%, a significant drop from the 25% projected just a few months earlier.

Furthermore, currency-adjusted sales figures for this division have shifted drastically, changing from an anticipated increase of about 1.5% to a decrease of about 5%.

Pharma sales dip a cause for concern

Pharmaceutical sales, historically a stronghold for Bayer, have encountered a setback. The figures reveal a decline of over 5%, bringing the total to 4.56 billion euros (US$5.03 billion).

Equally noteworthy is the nearly 7% drop in EBITDA before special items, which now stands at 1.38 billion euros (US$1.5 billion).

This dip highlights the uphill battle faced by CEO Bill Anderson and his team in their quest to rejuvenate growth across the entire organization.

Bill Anderson, previously an executive at Roche, took the reins as CEO in June, plunging into a complex terrain.

The mainstay of Bayer’s agricultural operations has grappled with inflation-driven cost challenges, weather-related impacts on farmer demand, and a decline in glyphosate-based weedkiller prices following a year of inflated revenues due to competitors’ production disruptions.

Revised outlook: a clearer picture of the road ahead

The revised forecasts lay bare Bayer’s altered course. For the full year of 2023, the projected sales range has shifted from 48.5 billion euros (US$ 53.5 billion)  to 49.5 billion euros (US$ 54.6 billion) on a currency-adjusted basis, a departure from the earlier estimate of 51 billion to 52 billion euros (US$ 56.3 billion to US$57.4 billion).

The once-optimistic projection of a 1% increase in prescription drug sales has been revised to a flat line.

The profit margin outlook for these drugs has also contracted, now expected to hover around 28% for the year, down from the previous target of over 29%.

Bayer’s financial report for the second quarter disclosed a net loss of 1.89 billion euros (US$ 2.1 billion), impacted by substantial impairment charges totaling 2.3 billion euros (US$ 2.5 billion).

The previous preliminary figures had hinted at potential goodwill impairments of around 2.5 billion euros (US$2.8 billion), culminating in a second-quarter net loss of 2 billion euros (US$ 2.2 billion).

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