Bayer Posts Third-Quarter Loss on Agriculture Woes--2nd Update
By Ruth Bender
BERLIN -- Bayer AG on Tuesday posted a loss in the third quarter
as the coronavirus pandemic compounded problems the German chemical
and drug giant has been facing since its acquisition of agriculture
giant Monsanto just over two years ago.
Bayer also said it would need an extra $750 million on top of a
settlement worth up to $10.9 billion it announced over the summer
to resolve a legal battle with U.S. plaintiffs alleging the Roundup
weedkillers inherited from Monsanto cause cancer. Bayer has
consistently denied that Roundup or its ingredients cause
Bayer, the inventor of aspirin, bet big on agriculture with its
$63 billion acquisition of Monsanto in 2018. The move was supposed
to help the German company tap into rising demand driven by rapid
population growth. Instead, it exposed Bayer to open-ended legal
liabilities and a market that has been severely disrupted by the
The legal battle with plaintiffs claiming that Roundup and its
active ingredient glyphosate cause cancer sent its share price
falling to record lows. The planned settlement hasn't so far been
completed. And now the pandemic is hurting a crops-science business
that since the Monsanto integration has grown to just under half
the group's total sales.
Last month, Bayer issued a profit warning for 2021, blaming low
prices for major crops, falling demand for biofuel and tougher
competition in the soy market. Bayer then said it expected to write
down the value of assets in the agricultural business in the "mid
to high-single-digit billion euros" range.
Bayer swung to a net loss of 2.74 billion euros, equivalent to
about $3.2 billion, in the three months ended Sept. 30 from a net
profit of EUR1.04 billion. The company said it had to make noncash
impairment charges of EUR9.3 billion on various assets in its
agriculture unit, including goodwill. Sales fell 14% to EUR8.51
billion, dragged down mostly by the crops-science unit.
Crop-science sales hurt notably in North America, due to a high
level of product returns from farmers, such as on corn, due to
lower than anticipated plantage acreages this year.
"The impact of the pandemic is placing additional strain on our
Crop Science Division," said finance chief Wolfgang Nickl in a
Sales in the pharmaceuticals division, which suffered at the
beginning of the pandemic as hospitals around the world postponed
regular treatments to deal with the surge in Covid-19 patients,
continued to recover in the quarter but still declined 6.1%
compared with the same period last year.
In the second quarter, problems related to the Monsanto purchase
had already pushed Bayer to a net loss of nearly $11 billion as the
company set aside money to cover its proposed Roundup settlement
Chief Executive Werner Baumann defended the Monsanto purchase on
a call with reporters, arguing that long-term growth prospects for
the farming branch remained intact, despite the current crisis.
Besides troubles on the global agriculture market, Bayer's
Roundup settlement plan also hit snags. In July, Bayer scrapped a
crucial part of the deal -- a $1.25 billion proposal for resolving
possible future lawsuits since the weedkillers continue to be sold
-- after a federal judge voiced concerns about its structure.
Bayer on Tuesday said completing a new proposal protecting it
from future lawsuits would require more time but that a new
solution would probably cost in the range of $2 billion, instead of
$1.25 billion. Investors have been eager to see Bayer complete the
deal. Mr. Baumann declined to provide details of what such a
solution would look like, but he said Bayer had reached an
agreement in principle for a deal that addressed the concerns
raised by the judge.
Bayer has yet to ink final deals for all pending claims. The
company said it had reached final settlement deals for some 88,500
of roughly 125,000 total filed and unfiled Roundup claims. Some
analysts said they were hopeful this meant a final deal was coming
In further bad news for Bayer, the California Supreme Court
declined last month to hear an appeal by Bayer seeking to reverse
the first jury Roundup jury verdict that ruled in favor of a former
groundskeeper who said it gave him cancer. Mr. Baumann said Bayer
is hopeful that an appeal of the second jury verdict, the case of
Edwin Hardeman, will be heard.
In early morning trade, Bayer shares were trading down 0.5% in a
broadly higher market going into U.S. election day. Concerns over
the outcome of the settlement, the recent profit warning and
pandemic woes have pushed Bayer shares down over 40% this year so
far, the worst performer in Germany's blue chip DAX index.
Write to Ruth Bender at Ruth.Bender@wsj.com
(END) Dow Jones Newswires
November 03, 2020 05:56 ET (10:56 GMT)
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