By Helena Smolak
Bayer cut its full-year earnings target after a tough agricultural market hit its crop-science division, and said it heads into next year with a muted outlook and likely declining earnings.
The German conglomerate said it is cautious on the agricultural market environment in 2025, warning that its crop-protection business will remain under pressure due to regulatory challenges and generic competition.
Lower grain prices, tightened farmer spending and unfavorable weather conditions have squeezed earnings at agriculture companies this year. U.S. seed and pesticide maker Corteva and grain trader ADM the week prior both cut their forecasts for the year.
Bayer followed suit on Tuesday, lowering its full-year forecast for earnings before interest, taxes, depreciation and amortization before special items, a key company metric.
The pharmaceutical-and-agricultural group now expects the metric at between 10.4 billion to 10.7 billion euros ($11.08 billion-$11.40 billion) this year, against a previous projection of between 10.7 billion and 11.3 billion euros. The revision was due to a weaker-than-anticipated agricultural market, it said.
Shares in Bayer fell more than 12% in early trade and have shed more than a third of their value since the start of the year.
Bayer also cut its outlook for its crop-science unit, the group's largest by sales. It now expects this year's crop-science sales to fall by between 1% and 3%, excluding currency movements and portfolio changes, and an Ebitda before special items margin of between 18% and 20%.
The company previously forecast the division's sales to range from a 1% fall to a 3% increase and an Ebitda before special items margin of 20% to 22%, but had cautioned that both metrics were likely to be at the lower end of the guidance ranges.
At group level, the company reiterated its full-year guidance for sales--when adjusted for changes in foreign-exchange rates and the group's portfolio--core earnings per share, another key profit metric, and free cash flow.
Bayer lowered its annual sales growth target for its consumer-health division due to slowed demand in the U.S. and China, but said the results of its pharmaceutical division would be at the upper end of its previous outlook.
The company has been trying to bolster its pharma pipeline, reduce debt, address U.S. legal cases over weedkiller Roundup, and overhaul its organization in a bid to turn its finances around.
Bayer Chief Executive Bill Anderson said the company is tackling its challenges head on, citing cancer medicine Nubeqa's newly-achieved status as a blockbuster drug after surpassing the $1 billion sales mark in September as an example of progress.
The company expects continued sales momentum of Nubeqa and kidney-disease treatment Kerendia next year, whereas it factored in fading earnings of bestseller blood-thinning drug Xarelto, which faces competition from other drugs. The company was also more downbeat on the prospects for its crop-science unit due to a weak agriculture market.
"Overall, we expect a muted outlook on top and bottom line next year with likely declining earnings," Bayer Chief Financial Officer Wolfgang Nickl said. The company aims to speed up cost measures to mitigate the hit, Nickl added.
For the third quarter, the company posted a net loss of 4.18 billion euros compared with a loss of 4.57 billion euros in the same quarter the previous year. Both this year's loss and the loss for the year-earlier period were mainly due to impairment charges related to its crop-science business.
Ebitda before special items fell to 1.25 billion euros from 1.685 billion euros. This compared with analysts' expectations of 1.30 billion euros, according to consensus estimates compiled by Vara Research.
Sales dropped 3.6% to 9.97 billion euros on foreign-currency headwinds and as demand for its glyphosate-based herbicides and corn seeds declined significantly, offsetting higher sales at its pharma business. Sales came in below analysts' expectations of 10.16 billion euros.
Write to Helena Smolak at helena.smolak@wsj.com
(END) Dow Jones Newswires
November 12, 2024 04:17 ET (09:17 GMT)
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