Bayer Crop Science posted Q3 sales result

Bayer Crop Science posted the third quarter and first nine months sales result of 2018.

 

 

In the third quarter of 2018, Bayer Crop Science posted sales of €3,733 million. The businesses divested to BASF contributed approximately €100 million to third-quarter sales prior to the closing of the respective transactions in August. Sales increased by 83.8% on a reported basis, thanks mainly to a positive portfolio effect of 96.3% due to the acquisition of Monsanto (€2,199 million) less the prorated contribution from the divested businesses in the prior year (€243 million). Sales were also impacted by a negative currency effect of 3.0%. The 9.5% decline on a currency- and portfolio-adjusted basis resulted especially from the accounting measures taken in Brazil in the prior year and lower volumes in the Europe / Middle East / Africa region.

 

Earnings 
 

EBITDA before special items of Crop Science climbed by 25.7% to €386 million in the third quarter of 2018 (Q3 2017: €307 million). This increase was primarily attributable to earnings contributions from the newly acquired business in the amount of €255 million. Negative factors included the aforementioned accounting measures taken in Brazil in the prior year, lower volumes in Europe, higher other operating income in the prior-year quarter, the prorated Q3 2017 earnings contributions from the businesses divested to BASF, and a negative currency effect of €59 million (excluding the acquired business).

 

EBIT increased to €3,054 million (Q3 2017: €84 million), after special gains of €3,163 million (Q3 2017: special charges of €121 million) primarily resulting from divestiture proceeds of approximately €3.9 billion before taxes in connection with the businesses divested to BASF. Special charges of €763 million were incurred in connection with the acquisition of Monsanto, including €518 million relating to the remeasurement of inventories. EBIT also included additional depreciation and amortization in the amount of €252 million resulting from remeasurements or the first-time recognition of assets in the course of the purchase price allocation. 


 

 

Sales in the Europe/Middle East/Africa region increased by 59.3% (Fx adj.) to €817 million, with a portfolio effect of €353 million. Sales fell by 7.9% on a currency- and portfolio-adjusted basis. The SeedGrowth business (Other) saw a decline due to a loss of registration in France. The company also saw a decline in sales at Herbicides and Fungicides as a result of the dry weather.  

 

Sales in North America increased by 145.5% (Fx adj.) to €948 million, with a portfolio effect of €541 million. The 5.4% increase on a currency- and portfolio-adjusted basis was mainly attributable to the Fungicides business, which posted gains due partly to a product launch in Canada, and the SeedGrowth business (Other). The company also registered double-digit-percentage sales growth at Environmental Science. By contrast, there was a decline in sales at Soybean Seed & Traits, and sales of selective herbicides were down in the United States. 

 

In the Asia / Pacific region, sales increased by 23.1% (Fx adj.) to €452 million, with a portfolio effect of €107 million. Sales fell by 5.3% on a currency- and portfolio-adjusted basis. Insecticides in particular saw a decline in sales in India against a strong prior-year quarter due to the introduction of a new sales tax system in the previous year. 

 

In Latin America, sales advanced by 108.7% (Fx adj.) to €1,516 million, with a portfolio effect of €955 million. Sales fell by 20.4% after adjusting for currency and portfolio effects, due primarily to the accounting measures taken in Brazil in the prior year. The company posted a slight increase in sales overall in the other Latin American countries on a currency- and portfolio-adjusted basis.

 

 

 

In the first nine months of 2018, Crop Science posted sales of €9,605 million. The divested businesses accounted for approximately €1,500 million of this figure. Sales increased by 31.3% on a reported basis, thanks mainly to a positive portfolio effect of 34.2% due to the acquisition of Monsanto (€2,742 million), which took place on June 7, less the prorated contribution from the divested businesses in the prior year (€243 million). Sales were also impacted by a negative currency effect of 6.3%. The 3.2% increase on a currency- and portfolio-adjusted basis was mainly attributable to the Latin America region due to the significantly higher provisions for crop protection product returns recognized in the second quarter of 2017 due to high inventories in Brazil. The Asia / Pacific and North America regions also developed positively. By contrast, the company registered a decline in the Europe/Middle East/Africa region that was mainly the result of exceptionally dry conditions in Western Europe and regulatory changes in France. 

 

 

EBITDA before special items of Crop Science increased by 18.4% to €2,059 million in the first nine months of 2018 (9M 2017: €1,739 million). This significant increase was primarily attributable to positive earnings contributions of €325 million from the newly acquired business and to the significantly higher provisions for product returns in Brazil recognized in the second quarter of 2017. Earnings were held back by a negative currency effect of €155 million (excluding the acquired business) and by lower volumes in Europe. 

 

EBIT increased to €4,100 million (9M 2017: €1,171 million), after special gains of €2,822 million (9M 2017: special charges of €253 million) primarily resulting from the divestiture proceeds outlined above. Special charges of €1,096 million were incurred in connection with the acquired business, including €644 million associated with the sale of acquired inventories remeasured at fair value in connection with the purchase price allocation for Monsanto. EBIT also included additional depreciation and amortization in the amount of €307 million resulting from remeasurements or the first-time recognition of assets in the course of the purchase price allocation. 

 

 

Due to the scope of the acquired activities and the seasonality of the business, Bayer is presenting sales by strategic business entity on an unaudited, pro-forma basis, 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 divestitures had taken place already as of January 1, 2017.