Third quarter of 2022 - Bayer with continued strong performance

The Bayer Group maintained its strong business performance across all three divisions in the third quarter. ″Despite rising inflation and global supply chain problems, we were again able to boost sales and earnings,″ said Werner Baumann, Chairman of the Board of Management, when presenting the company’s quarterly statement on Tuesday. Crop Science in particular continued its growth trajectory, and Pharmaceuticals and Consumer Health also saw sales rise against the prior-year quarter. Baumann confirmed the Group outlook for 2022. ″We are right on track to achieve the full-year financial targets that we raised in August.″

Bayer expects the cost increases triggered by high inflation to continue next year. In Germany, the company aims to be independent of Russian gas by the end of the year. As global supply chains remain very much under strain, procurement management and supply chain stability are top priorities for Bayer. In order to shore up supply chain stability and mitigate the impact of any supply bottlenecks, the company is working closely with suppliers and contract manufacturers and is continuing to build up inventories.

Third-quarter Group sales rose by 5.7 percent to 11.281 billion euros on a currency- and portfolio-adjusted basis (Fx & portfolio adj.). Sales benefited from positive currency effects of 940 million euros (Q3 2021: 67 million euros). EBITDA before special items increased by 17.3 percent to 2.451 billion euros. This figure included a negative currency effect of 78 million euros (Q3 2021: 44 million euros). EBIT came in at 1.199 billion euros (Q3 2021: 530 million euros) after net special charges of 153 million euros (Q3 2021: 694 million euros). Net income amounted to 546 million euros (Q3 2021: 85 million euros), and core earnings per share advanced by 7.6 percent to 1.13 euros.

Free cash flow declined by 11.1 percent to 1.738 billion euros. The company was able to reduce its net financial debt to 35.884 billion euros as of September 30, down 1.9 percent from June 30, 2022. Cash inflows from operating activities were partly offset by negative currency effects.

Sustained growth momentum at Crop Science

Sales

Crop Science registered strong growth in the third quarter of 2022, with sales rising by 8.4% (Fx & portfolio adj.) to €4,692 million. Bayer achieved double-digit percentage gains in Latin America and Europe/Middle East/Africa, but saw sales fall significantly in North America, mainly due to higher seed returns.

In the Corn Seed & Traits business, sales in North America were heavily impacted by lower licensing revenues and higher returns. This was only partly offset by higher prices in Latin America.

Herbicides posted considerable gains due to price increases, especially in Latin and North America and in Europe/Middle East/Africa, as Bayer continued to benefit from a positive market environment for Bayer’s glyphosate-based products.

Sales at Fungicides were level with the prior-year quarter. Weather-related shifts in demand between the second and third quarters resulted in higher sales in North America, but declines in Europe/Middle East/Africa.

Sales at Soybean Seed & Traits were down year on year, largely due to higher returns in North America. However, Bayer’s business expanded in Latin America thanks to higher volumes and prices.

Sales at Insecticides advanced year on year, mainly driven by the performance of Bayer’s Curbix™ product in Latin America.

Environmental Science posted an increase in sales due to higher prices across all regions.

Sales at Vegetable Seeds were down, mainly due to a decline in volumes in Europe/Middle East/Africa as a result of lower surface areas.

In the reporting unit ″Other″, we saw volumes decrease at SeedGrowth, but increase in the North American cotton seed business.

Earnings

EBITDA before special items at Crop Science increased to €629 million in the third quarter of 2022 (Q3 2021: €471 million), primarily driven by Bayer’s good business performance. Bayer also benefited from contributions from ongoing efficiency programs. By contrast, earnings were diminished by an increase in costs, particularly in the cost of goods sold, which was mainly due to high inflation. There was a negative currency effect of €93 million (Q3 2021: €28 million). The EBITDA margin before special items increased by 1.2 percentage points to 13.4%.

EBIT came in at €53 million (Q3 2021: minus €200 million) after special charges of €10 million (Q3 2021: €181 million) that primarily related to expenses in connection with the sale of Bayer’s Environmental Science Professional business to the international private equity firm Cinven.

Major strides in sustainability

Bayer is making good progress in the field of sustainability. MSCI has upgraded its environmental, social and governance (ESG) rating for Bayer from BB to A, marking an important milestone in the company’s efforts to strengthen its ESG profile. The improved rating was partly thanks to a reevaluation of the alleged environmental risks presented by genetically modified organisms as well as the additional disclosure of relevant data to investors and rating agencies.