German group is examining spinning off its crop sciences or consumer health businesses in effort to restore fortunes
Olaf Storbeck in Frankfurt8 hours ago
Bayer’s new chief executive Bill Anderson has blasted the German conglomerate’s performance as “not acceptable”, underlining the group’s struggle to revive its fortunes after the ill-fated acquisition of Monsanto.
The company, which is best known for creating aspirin more than a century ago, is exploring whether to split off its crop sciences business or its consumer health division in an effort to appease disgruntled investors.
Anderson, who has led Bayer since June after joining from Swiss drugmaker Roche, has previously said that all options were on the table but on Wednesday narrowed those down, ruling out breaking the group into three.
The $63bn acquisition of Monsanto in 2016 was designed to turn Bayer into a powerhouse in the global food industry, supplying farmers with everything from seeds to crop sprays. But the deal, masterminded by Bayer’s former chief Werner Baumann, has instead saddled the German company with debt and a vast legal fight in the US over Monsanto’s allegedly carcinogenic weedkiller Roundup. Bayer has denied the product causes cancer.
“We’re not happy with this year’s performance,” Anderson told reporters on Wednesday after Bayer reported third-quarter results. The American added that “nearly €50bn in revenue but zero cash flow is simply not acceptable”.
The CEO said he was unhappy with Bayer’s share price, which has fallen almost 20 per cent this year, underperforming the German stock market. The stock was down 1.6 per cent in early afternoon trading.
Ingo Speich, head of sustainability and corporate governance at asset manager Deka, a Bayer shareholder, urged Anderson to make a quick decision on how to overhaul the company.
“It took Werner Baumann less than two weeks in office to decide on the Monsanto acquisition,” said Speich. “I hope that Bill Anderson won’t need more than 12 months to work out his strategy.”
Bayer’s weak cash flow, US litigation issue and lacklustre operational performance meant Anderson was running out of time to decide, Speich added.
Headquartered in Leverkusen, Bayer had lowered its full-year forecast over the summer. Anderson said on Wednesday that meeting the revised outlook could be a stretch because it “requires a strong fourth quarter”.
Chief financial officer Wolfgang Nickl cautioned that next year would also be challenging, with growth “likely to remain soft” and profitability under pressure. Bayer will give a detailed outlook for next year in March.
In the third quarter, operating profit, excluding one-off items, plunged 48 per cent from a year ago to €709mn while revenues dropped 8 per cent to €10.3bn. Excluding currency swings, revenues were largely stable. Net debt climbed 8 per cent to €38.7bn.
The crop science division was a significant drag in the quarter as costs rose and prices for glyphosate, a type of weedkiller, fell. Bayer also took a €4bn impairment charge on the value of its crop science assets, adding to a €2.3bn writedown in the second quarter.
The company said it would cut “multiple layers of management and co-ordination” by the end of this year as Anderson aimed to shift the bulk of the decision-making “from managers to the people doing the work”. This would result in “a significant reduction in the workforce”, Bayer said.
Fonte: FT