BAYN Bayer AG

--Bayer shares slipped after the company cut its views amid lower demand in the agricultural sector

--The chemicals and pharma major announced billions of euros in cost cuts, but said even that may not offset declining sales

--Bayer has had bad news every year since its mega-deal to buy agricultural-products company Monsanto, Bryan Garnier analysts said

By Joshua Kirby

Shares in Bayer AG plunged on Thursday morning after it set new guidance and announced billions in cost cuts amid falling demand for agricultural products, an area that has been hit harder than expected by the coronavirus pandemic.

The German chemicals-and-pharmaceuticals company said late on Wednesday that it now expects sales to be flat in 2021, having previously guided for sales growth of around 4%. The company also said it expects its core earnings-per-share for 2021 to be below this year's level at constant exchange rates.

Bayer said it targets operational savings of more than 1.5 billion euros ($1.76 billion) a year as of 2024, which come on top of existing plans to cut EUR2.6 billion a year in costs from 2022.

The cost cuts aren't expected to entirely offset declining sales, meaning Bayer now also expects to miss its cash-flow targets for 2021.

At 0847 GMT, Bayer shares were down 10% at EUR47.95.

Analysts at Bryan Garnier said that since Bayer acquired crop-science business Monsanto, it "has delivered its basket of bad news every year and it is clear now that the group will not deliver the revenue growth expected at the time of this acquisition."

Bryan Garnier downgraded the stock to sell from neutral on Thursday, and said the lack of visibility in Bayer's crop-science and pharma division should weigh on the share price.

"Like most companies, the COVID-19 pandemic has led to headwinds in the 2020 fiscal year for Bayer, with significant currency effects presenting an additional burden on sales and earnings growth," Bayer said.

In the crop-science division, the company said biofuel consumption is falling amid low commodity prices for major crops, while competition in the soy market is increasing.

Bayer said it didn't expect market conditions to improve much near-term, and that this means it will likely reduce the value of its crop-science business by booking impairment charges in the "mid-to-high single-digit billion-euro" range.

Write to Joshua Kirby at joshua.kirby@dowjones.com

(END) Dow Jones Newswires

October 01, 2020 05:03 ET (09:03 GMT)

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