Bayer CropScience plans to further expand business with high-margin products and new crops

 
Bayer CropScience intends to maintain its growth strategy with innovative crop protection agents, high-quality seed and enhanced plant traits. To this end, the company plans to further strengthen its portfolio in conventional crop protection and increase the proportion of new, high-margin products. In the area of seeds and traits, the regional business will be expanded and long-term growth will be generated with new crops. Bayer CropScience intends to pursue research cooperations, licensing agreements and further acquisitions to further strengthen its strategic position.

The acquisition and subsequent integration of Aventis CropScience in 2002 made Bayer CropScience one of the world’s most successful crop science companies in the years thereafter. Bayer CropScience’s sales reached an all-time high of EUR 6.5 billion in 2009, and the margin has almost continuously improved since the company’s founding, said Professor Dr. Dr. h.c. Friedrich Berschauer. Professor Berschauer, who has been Chairman of the Board of Management of Bayer CropScience since 2004, will enter his retirement on October 1.

Friedrich Berschauer hands over reins to Sandra E. Peterson

Effective October 1, Professor Berschauer will be succeeded by Sandra E. Peterson, who joined the Bayer CropScience Board of Management on July 1. The U.S. citizen was appointed to the Executive Committee of Bayer HealthCare in May 2005 and most recently headed up the Diabetes Care Division, which is now part of Medical Care. “We have a golden opportunity to position ourselves to thrive in the dynamic agricultural market by building on our core competencies; by continuing to deliver new technologies and optimized customer solutions; and by further establishing ourselves in strategically emerging regions,” said Peterson in her presentation. Friedrich Berschauer’s business acumen and strategic foresight have put the company into a strong position, she added, and it is now well equipped for future challenges.

Since 2002, sales have risen by nearly 5 percent annually on average, while the EBITDA margin increased to 23.2 percent in 2009, explained Berschauer. “Contributing to this has been not just the market success of our products, but also our strict cost management.” He also drew attention to the uncertainties of the market, however, adding, “the agriculture sector is also subject to its own economic cycles.”

Crop protection business weaker in first half of 2010

The industry got off to a difficult start in 2010. Following the long winter with heavy snowfall in the northern hemisphere, however, the market has since recovered somewhat overall. As a result of the global economic recovery, furthermore, financing conditions for farmers have also improved in many regions, said Berschauer. Nonetheless, the herbicides market continues to suffer from surplus capacities and falling prices for glyphosate, a pesticide marketed by one of our competitors. First-half sales were also down in the area of seed treatment, where Bayer CropScience is the world’s leading supplier, and in fungicides.

Positive business development in Environmental Science/BioScience

By contrast, the BioScience unit saw considerable growth as in fiscal 2009, and Environmental Science also expanded significantly. This robust growth was however not sufficient to offset the decline in our conventional crop protection business. Sales of Bayer CropScience fell by around three percent overall in the first half of 2010. Said Berschauer: “The first half of the year was disappointing for Bayer CropScience. As we announced when we published our first-half figures, we therefore anticipate, provided market conditions return to normal, that sales will decline slightly overall in 2010 on a currency- and portfolio-adjusted basis, and that we will see a significant drop in our EBITDA before special items.”

This will not however impact the medium- and long-term business perspectives, which remain very positive. Demand for high-quality food and animal feed, renewable energies and plant fibers continues to rise. The agriculture industry is facing increasingly difficult conditions as a result of climate change. Berschauer drew attention to the growing fluctuations between supply and demand and the increasingly unpredictable weather.

Enabling a second green revolution with technology and innovation

Berschauer reaffirmed his calls for a second green revolution: “Not just agricultural research and technology innovations, but also infrastructural, market and economic aspects, as well as social and political factors must be interlinked and coordinated. Only then can the global supply of affordable food and other agricultural products in a sufficiently high quality be safeguarded.”

Bayer CropScience believes that it is well positioned in this environment, with its integrated solutions for agriculture from sowing to the harvest. In addition to the new active substances that have had to be introduced to the market solely due to the development of resistances by pests, weeds and to combat new diseases, climate protection and sustainability issues are also playing an increasingly important role.

New active ingredients with a sales potential of more than EUR 1 billon

Bayer CropScience plans to make a contribution towards safeguarding harvests and increasing yields with its new generation of environmentally friendly active ingredients. The company anticipates global annual peak sales potential of more than EUR 1 billion from products based on the six new substances it plans to launch between 2010 and 2012.

Among the new active ingredients are three fungicides from a new generation of fungal respiratory chain inhibitors: Aviator(R) Xpro(TM) (bixafen), Luna(R) (fluopyram) and Emesto(TM)respectively Emerion(TM) (penflufen), which will be launched on the market in 2012 as a seed dressing, a particularly environmentally friendly crop protection method. Another exemplary, innovative new active ingredient from Bayer CropScience’s research is the new fungicide Routine(R) (active ingredient: isotianil) to combat rice blast, the world’s most economically important rice disease.

Around 18 new products from BioScience by 2016

Bayer CropScience also sees great potential for growth in its business with Seeds & Traits. As the world market leader in several crops, including cotton seeds, the company is able to call up a wealth of expertise and build on it in other segments. Around 18 new products are scheduled to be launched until 2016. For example, cotton seed from Bayer CropScience’s own research that is resistant to the herbicide glyphosate will be marketed in the United States next year.

Sugar cane has also been added to the portfolio. Bayer CropScience is working together with the CTC (Centro de Tecnologia Canavieira) in Brazil, the world’s leading institute for that crop, to develop new varieties for ethanol production that will have higher sugar content. Bayer CropScience today added to the numerous research and licensing agreements the company has closed an agreement with the Chinese Oil Crops Research Institute (OCRI) to develop new rapeseed varieties. Bayer CropScience has now entered into around 80 such cooperation projects.

In Environmental Science too, the business with products for non-agricultural applications, Bayer CropScience aims to offer its customers innovative and sustainable solutions and further strengthen its leading position as the world’s number one in professional markets. One strategic project is malaria control. Almost half of the world’s population lives in regions where there is high risk of contracting malaria. Bayer CropScience and Bayer Technology Services have together developed a new generation of mosquito nets which will be launched on the market next year under the name LifeNet(R).