Failing crops

1 October 2020 By Aimee Donnellan Follow @aimeedonnellan

The German drugs-to-seeds company’s shares collapsed after it said earnings will fall next year. On top of legal woes from the Monsanto acquisition, the crop science business has been hit by the virus, and tough competition. The case for separating its sickly units is growing.

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German drugs-to-seeds company Bayer said on Sept. 30 that it did not expect any growth in sales next year, and that earnings would be “slightly below” this year’s levels, largely due to weaker than expected performance in its crop science division.

Bayer said that the impact of the coronavirus on the crop science business will be deeper than originally expected due to low commodity prices, intense competition in soy, and reduced biofuel consumption, compounded by negative currency effects.

As a result, Bayer expects to take non-cash impairment charges in the “mid to high single-digit billion euro” range on its crop science business, and announced 1.5 billion euros of cost cuts.

Bayer said the new cuts come on top of annual savings of 2.6 billion euros as of 2022, which were announced in November 2018, adding that the company was also considering exiting non-strategic businesses or brands.

It said the restructuring, which may also lead to extra job cuts, is in the early stages of planning.

It will leave its dividend policy unchanged, but expects payouts in coming years to be at the lower end of 30%-40% of core earnings per share, rather than at the upper end as in previous years.

Bayer shares were down nearly 13% at 46.56 euros by 0726 GMT on Oct. 1.

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As a result, Bayer expects to take non-cash impairment charges in the “mid to high single-digit billion euro” range on its crop science business, and announced 1.5 billion euros of cost cuts.

It said the restructuring, which may also lead to extra job cuts, is in the early stages of planning.

It will leave its dividend policy unchanged, but expects payouts in coming years to be at the lower end of 30%-40% of core earnings per share, rather than at the upper end as in previous years.

Bayer shares were down nearly 13% at 46.56 euros by 0726 GMT on Oct. 1.

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