Bayer Q2 results: Sales up 12.9% at all divisions, Crop Science posts strong sales growth

• Group sales increase by 12.9 percent (Fx & portfolio adj.) to 10.854 billion euros – double-digit percentage growth (Fx & portfolio adj.) at all divisions

• EBITDA before special items declines by 10.6 percent to 2.577 billion euros, burdened by currency effects of 153 million euros

• Crop Science posts strong sales growth, earnings impacted by higher costs and currency effects

• Pharmaceuticals reports significant recovery after COVID-19 effects in prior year

• Consumer Health continues growth momentum

• Core earnings per share rise by 1.3 percent to 1.61 euros

• Net income at minus 2.335 billion euros, additional provisions of around 3.5 billion euros established for glyphosate litigations
  Strong free cash flow of 1.152 billion euros

• Full-year guidance upgraded

• Good pipeline news: Kerendia™ gains U.S. approval; acquisition of Vividion Therapeutics agreed; start of first clinical study for Parkinson’s cell therapy treatment

The Bayer Group registered strong growth in the second quarter of 2021. “Sales at all divisions increased by a double-digit percentage after adjusting for currency and portfolio effects, and we expect this positive sales momentum to continue in all our businesses. We are therefore upgrading our full-year guidance, and now anticipate higher sales and core earnings per share than in our previous forecast,” said Werner Baumann, Chairman of the Board of Management, on Thursday. Presenting the company’s half-year financial report, he highlighted how “we have achieved major successes in developing and launching drugs, some of which have blockbuster potential. We have successfully expanded the launch of our cancer drug Nubeqa™ and are continuously surpassing our own expectations. We have continued to advance the launch of Verquvo™ for the treatment of symptomatic chronic heart failure, with approvals gained in the European Union and Japan, and we’re now in the process of launching Kerendia™ in the United States.” The latter product was approved in July by the U.S. Food and Drug Administration for the treatment of adult patients with chronic kidney disease and type 2 diabetes. Bayer has also announced the acquisition of Vividion Therapeutics, as the company continues to make strides in implementing its strategy for the Pharmaceuticals Division. “Vividion’s unique technologies and special expertise will significantly strengthen our drug discovery capabilities,” Baumann emphasized. Bayer recently formed its own cell and gene therapy platform as part of its transformation strategy for Pharmaceuticals. The platform already has potentially ground-breaking medical innovations in clinical development, such as a therapy for the treatment of Parkinson’s.

Group sales in the second quarter increased by 12.9 percent on a currency- and portfolio-adjusted basis (Fx & portfolio adj.) to 10.854 billion euros, after the prior-year period had been significantly impacted by the restrictions introduced in response to COVID-19. EBITDA before special items fell by 10.6 percent to 2.577 billion euros. Negative currency effects impacted sales by 524 million euros and EBITDA before special items by 153 million euros, with the latter also being diminished by allocations to provisions for variable compensation. EBIT came in at minus 2.281 billion euros (Q2 2020: minus 10.784 billion euros) after net special charges of 3.901 billion euros (Q2 2020: 12.511 billion euros). The special charges related primarily to the previously announced allocation to provisions – in the discounted amount of around 3.5 billion euros – in connection with the glyphosate litigations. Other special charges related to impairments and restructuring. Net income amounted to minus 2.335 billion euros (Q2 2020: minus 9.548 billion euros), while core earnings per share from continuing operations increased by 1.3 percent to 1.61 euros.

Free cash flow declined by 17.8 percent to 1.152 billion euros. Net financial debt as of June 30, 2021, increased to 34.361 billion euros, up 1.3 percent from March 31, 2021. Cash inflows from operating activities and positive currency effects almost offset the outflow for the dividend payment and settlement payments for litigations in the United States.

Crop Science grows sales in all regions

In the agricultural business (Crop Science), Bayer increased sales by 10.6 percent (Fx & portfolio adj.) to 5.021 billion euros, with growth in all regions. The division registered double-digit percentage gains in Latin America and Asia/Pacific as well as significant growth in North America after adjusting for currency and portfolio effects. Fungicides (Fx & portfolio adj. plus 22.9 percent) and Herbicides (Fx & portfolio adj. plus 16.2 percent) achieved particularly strong gains. Fungicides registered a significant increase in volumes, primarily in Latin America thanks to the Fox Xpro™ product, and also in North America due to the launch of new products such as Delaro Complete™. The increase in sales at Herbicides was driven by increased volumes and prices, especially in North America, which saw higher volumes for XtendiMax™ and increased prices for Roundup™. Business was also up at Soybean Seeds & Traits, which recorded growth of 9.1 percent (Fx & portfolio adj.) thanks to higher volumes in North America. Sales at Corn Seed & Traits advanced by 8.6 percent (Fx & portfolio adj.), with business benefiting in particular from increased volumes in Latin America and higher prices in North America.

EBITDA before special items at Crop Science decreased by 25.4 percent to 1.018 billion euros, giving a margin of 20.3 percent. Higher prices and volumes along with contributions from ongoing efficiency programs only partly offset an increase in costs, and particularly in the cost of goods sold. Earnings were also diminished by a negative product mix, currency effects of 111 million euros, and the later receipt of license revenues.

Pharmaceuticals raises sales and earnings

Sales of prescription medicines (Pharmaceuticals) rose by 16.2 percent (Fx & portfolio adj.) to 4.494 billion euros. The division’s business showed a robust recovery from the COVID-19 restrictions, particularly in the areas of ophthalmology, women’s healthcare and radiology, while other products such as the oral anticoagulant Xarelto™ and the newly launched cancer drug Nubeqa™ also generated tangible growth. Xarelto™ sales increased by 12.6 percent (Fx & portfolio adj.), largely as a result of significantly expanded volumes in China and Russia. Sales of the ophthalmology drug Eylea™ were up by 27.4 percent (Fx & portfolio adj.), mainly due to very strong growth as a result of high demand in Europe

EBITDA before special items at Pharmaceuticals increased by 3.0 percent to 1.409 billion euros, driven by the strong growth in sales. This resulted in a margin of 31.4 percent. Research and development expenses increased against the low prior-year figure and were partly attributable to the cell and gene therapy unit. Earnings were also diminished by an increase in the cost of goods sold, expenses for product launches, and a negative currency effect of 26 million euros.

Consumer Health delivers growth and increases profitability

Sales of self-care products (Consumer Health) increased by 12.8 percent (Fx & portfolio adj.) to 1.290 billion euros, with growth in all regions and categories following a soft prior-year quarter. Business benefited from continued high demand in Nutritionals, which saw sales rise by 15.7 percent (Fx & portfolio adj.), and from a strong allergy season in North America, which resulted in a 15.8 percent increase (Fx & portfolio adj.) in sales in the Allergy & Cold category.

EBITDA before special items at Consumer Health advanced by 9.4 percent to 278 million euros. As a result, the EBITDA margin before special items improved by 0.5 percentage points to 21.6 percent. The growth in earnings was primarily driven by the division’s strong business performance and continuous cost management efforts while allowing for additional investments in marketing as part of new product launches and accounting for negative currency effects of 20 million euros.

Outlook: Bayer optimistic for remainder of the year

Following the good business performance in the first half of 2021, Bayer is also optimistic for the remainder of the year and is raising its guidance accordingly. After adjusting for currency effects (i.e. based on the average monthly exchange rates in 2020), the company now expects to post sales of approximately 44 billion euros (previously: approximately 42 billion to 43 billion euros). This now corresponds to an increase of around 6 percent (previously: about 3 percent) on a currency- and portfolio-adjusted basis. Bayer now expects to generate an EBITDA margin before special items of around 26 percent (previously: around 27 percent) on a currency-adjusted basis. This would continue to correspond to EBITDA before special items of 11.2 billion to 11.5 billion euros on a currency-adjusted basis. Core earnings per share are now expected to come in at approximately 6.40 to 6.60 euros on a currency-adjusted basis (previously: approximately 6.10 to 6.30 euros). Free cash flow is now projected to amount to around minus 2 billion to minus 3 billion euros on a currency-adjusted basis (previously: around minus 3 billion to minus 4 billion euros). In addition, the company now expects net financial debt at the end of the year to come in at approximately 36 billion euros (previously: approximately 36 billion to 37 billion euros) on a currency-adjusted basis.

Based on the closing rates on June 30, 2021, the company now expects to generate sales of approximately 43 billion euros (previously: approximately 41 billion euros) for fiscal 2021. This now corresponds to an increase of approximately 6 percent (previously: approximately 3 percent) on a currency- and portfolio-adjusted basis. Bayer is now targeting an EBITDA margin before special items of approximately 25 percent (previously: approximately 26 percent). This would now correspond to EBITDA before special items of 10.6 billion to 10.9 billion euros (previously: 10.5 billion to 10.8 billion euros). Core earnings per share are now projected to come in at approximately 6.00 to 6.20 euros (previously: approximately 5.60 to 5.80 euros). Free cash flow is now expected to amount to around minus 2 billion to minus 3 billion euros (previously: around minus 3 billion to minus 4 billion euros), while net financial debt is now forecast to come in at around 35 billion euros (previously: around 35 billion to 36 billion euros).

Bayer links core financial instrument to ambitious sustainability targets

The company also made good progress in the area of sustainability. For example, Bayer recently amended its existing 4.5-billion-euro revolving credit facility by linking it to climate protection, creating a link between one of its financial instruments and its sustainability targets for the first time. The amendment incorporated the company’s greenhouse gas emission reduction targets into the revolving credit facility: if Bayer misses its reduction targets, it will make a compensation payment to a charitable organization. Through this amendment, Bayer has emphasized its commitment to achieving climate neutrality by 2030 and its holistic sustainability strategy.

After launching an initiative to help farmers sequester carbon in the soil in 2020, Bayer recently extended this decarbonization program to Europe. In addition, the long-term contraceptive Mirena™ has been added to the product catalogs of the United Nations Population Fund (UNFPA) and the United States Agency for International Development (USAID) for distribution in low- and mid-income countries. This represents a milestone in providing women in these countries with access to family planning. Bayer is investing 250 million euros in Turku, Finland, to expand and modernize the production of contraceptives.

Notes:

The following tables contain the key data for the Bayer Group and its divisions for the second quarter and the first six months of 2021.

The full half-year financial report is available online at: www.bayer.com/halfyearreport

Additional information for investors and access – from around 2 p.m. CEST – to the live broadcast of the investor conference call at: www.bayer.com/live-ic

Print-quality photos can be found online at: www.bayer.com/photo-footage