Jul. 31, 2019
The Bayer Group continued to grow in the second quarter of 2019. “Bayer is on track in its operational business,” said Werner Baumann, Chairman of the Board of Management, when presenting the half-year financial report on Tuesday. “Sales at Crop Science were primarily held back by the extreme weather conditions in North America,” he said.
Crop Science impacted by extreme weather conditions
Second quarter of 2019
Crop Science posted sales of €4,788 million in the second quarter of 2019. Sales rose by 59.0% on a reported basis, thanks mainly to a positive portfolio effect of 61.0% due to the acquisition of Monsanto (€2,320 million) less the prorated contribution from the divested businesses in the prior-year period (€484 million). Overall, business at Crop Science in the second quarter was significantly impacted by extreme weather conditions. In particular, flooding and heavy rains in the Midwestern United States and drought in large parts of Europe and in Canada had a negative effect. The ongoing trade disputes involving the United States also weighed on business. Sales were down by 3.1% after adjusting for currency and portfolio effects, with the acquired business only taken into account for the period June 7 to June 30. This decline was mainly the result of a considerable drop in sales in North America. Significant gains in Latin America did not offset this effect.
Sales in Europe / Middle East / Africa rose by 11.0% (Fx adj.) to €1,092 million. The portfolio effect amounted to €126 million. Adjusted for currency and portfolio effects, business declined by 1.8%.
SeedGrowth (Other) saw lower sales following a loss of registrations in Europe, and business at Fungicides also receded due to the exceptionally dry weather conditions in parts of Europe. Insecticides, however, posted encouraging gains.
Sales in North America advanced by 120.2% (Fx adj.) to €2,397 million. There was a portfolio effect of €1,438 million. The 13.5% decline after adjusting for currency and portfolio effects was primarily due to the extreme weather conditions.
Sales in the Asia / Pacific region increased by 4.2% (Fx adj.) to €533 million. The portfolio effect here was €30 million. Adjusted for currency and portfolio effects, business declined by 1.7%. Sales of Herbicides and Insecticides in India moved back as a result of anticipated shifts in demand into the third quarter.
Sales in Latin America advanced by 72.4% (Fx adj.) to €766 million. The portfolio effect was €241 million. Adjusted for currency and portfolio effects, sales moved ahead by 17.7%. Growth in this region came from volume increases for Herbicides, Fungicides and Insecticides in Brazil.
As of July 11, 2019, lawsuits from approximately 18,400 plaintiffs had been served in the United States in connection with the crop protection product glyphosate
. Bayer continues to believe that it has meritorious defenses and intends to defend itself vigorously in all of these lawsuits. In parallel to the continued litigation, Bayer will constructively engage in the mediation process ordered by a district judge in California.
First half of 2019
Crop Science posted sales of €11,232 million in the first half of 2019. Sales climbed by 91.3% on a reported basis, thanks mainly to a positive portfolio effect of 89.5% from the acquisition of Monsanto (€6,649 million) less the prorated contribution from the divested businesses in the prior-year period (€1,393 million). Adjusted for currency and portfolio effects, business expanded by 1.1%. Sales rose markedly in Latin America due to demand shifts from the fourth quarter of 2018 and lower sales in the prior-year period in connection with the normalization of inventories for crop protection products in Brazil.
By contrast, business in North America was down due to the weather conditions.
EBITDA before special items of Crop Science doubled to €3,397 million in the first half of 2019 (H1 2018: €1,686 million). The increase was largely attributable to the earnings contribution from the newly acquired business. Earnings were diminished by the decline in sales, the absence of the earnings contribution from the businesses divested to BASF, inventory write-downs and a negative currency effect of €93 million.
EBIT increased by 24.9% to €1,300 million (H1 2018: €1,041 million) after net special charges of €719 million (H1 2018: €340 million), mainly including a total of €648 million in connection with the acquisition and integration of Monsanto and the divestments to BASF – of which €483 million comprised prorated reversals of inventory step-ups – as well as legal fees in connection with the glyphosate litigations.
Pro-forma sales by strategic business entity
Due to the scope of the acquired activities and the seasonality of the business, we are presenting sales by strategic business entity on a pro-forma basis in order to more transparently reflect the underlying operational business development for the combined business of Crop Science and Monsanto, among other reasons. In this context, sales are presented as if both the acquisition of Monsanto and the associated divestments had already taken place as of January 1, 2018. Sales from the aforementioned service agreements with BASF after the divestments closed are not included.
Second quarter of 2019
Sales in the second quarter of 2019 on a pro-forma basis fell by a currency-adjusted 9.9%.
The decline for Herbicides was largely the result of high inventories at distributors as well as extreme weather conditions in the United States, where flooding and heavy rains in the Midwest delayed sowing and led to lower volumes from an overall reduction in acreages planted and fewer pre-plant applications, especially for Roundup™.
Corn Seed & Traits sales were down, mainly because of the drop in acreages planted caused by the weather conditions mentioned and as a result of an unfavorable product mix compared with the prior year period. In addition, business in Latin America in the prior-year quarter benefited from higher than normal license revenues in Brazil.
The drop in sales of Soybean Seed & Traits was due to lower volumes resulting from the effects of the weather conditions described and to trade disputes involving the United States. Increased competitive pressure also had a negative effect.
Business at Fungicides was adversely impacted by the above-mentioned effects in Canada, in particular, while in Latin America we benefited from volume gains and the registration of Xpro™ in Brazil.
Sales of Insecticides rose sharply in the Europe / Middle East / Africa and Latin America regions as a result of higher prices and volumes. They also increased in North America due to phasing from the third quarter.
The decline for Other primarily resulted from the loss of registrations for SeedGrowth in Europe. In the United States, however, we achieved significant sales growth for Cotton Seed as the result of higher volumes due to higher market share and an anticipated increase in acreages.
First half of 2019
Sales in the first half of 2019 on a pro-forma basis decreased by 4.6% (Fx adj.). This was mainly due to the extreme weather conditions in the United States, which led to lower sales of Soybean Seed & Traits, Corn Seed & Traits and Herbicides.