Mar. 1, 2023
The Bayer Group achieved strong growth last year, posting significantly higher sales and earnings. ″2022 was a very successful year for Bayer despite the challenging environment. We were able to deliver, even during these difficult times, and met the upgraded financial targets we set in August,″ said Werner Baumann, Chairman of the Board of Management, at the company’s Financial News Conference on Tuesday. The company is active in the right fields, he said. ″Health and nutrition are fundamental human needs. Our vision of Health for all, hunger for none is and will remain vitally important, especially in times like these.″
Group sales came in at 50.739 billion euros in 2022, up 8.7 percent on a currency- and portfolio-adjusted basis (Fx & portfolio adj.). EBITDA before special items rose by 20.9 percent to 13.513 billion euros, and included a positive currency effect of 429 million euros (2021: negative currency effect of 507 million euros). The EBITDA margin before special items increased to 26.6 percent (2021: 25.4 percent). EBIT amounted to 7.012 billion euros, and was therefore more than twice as high as in the previous year. Net income came in at 4.150 billion euros (2021: 1.000 billion euros), while core earnings per share rose by 22.0 percent to 7.94 euros.
Free cash flow more than doubled against the prior year, rising to 3.111 billion euros. Net financial debt amounted to 31.809 billion euros as of December 31, 2022, down 4.0 percent from year-end 2021. Cash inflows from operating activities and the sale of the Environmental Science Professional business were partially offset by cash outflows for dividends and negative currency effects.
Crop Science achieves record sales and industry-leading margin
Positive market environment
The global seed and crop protection market grew strongly in 2022 (Fx adj. +12%; 2021: +7%) due to continued strong global demand for corn and soybeans and the overall effect of the RussiaUkraine war across commodities. Growth was also driven by higher prices for agrochemical products, primarily due to high inflation and supply bottlenecks. Increased prices and the resulting improvement in farm incomes encouraged the application of premium crop protection products, especially herbicides, across all regions and indications. This had a positive impact on the overall Crop Science business.
Sales at Crop Science advanced by a significant 15.6% (Fx & portfolio adj.) in 2022 to €25,169 million, with business up in all regions. Crop Science registered double-digit percentage gains in Latin America and Europe/Middle East/Africa, and posted significant growth in North America and Asia/Pacific.
Sales at Corn Seed & Traits rose year on year as Bayer's business increased its market share. Price increases in all regions more than offset a decrease in acreages in North America and lower license revenues.
Herbicides posted considerable gains due to higher prices, especially in Latin and North America and in Europe/Middle East/Africa, as supply for glyphosate-based products remained tight.
Sales at Fungicides were also up, driven by higher prices in the Latin America and Europe/Middle East/Africa regions in particular, which more than offset a decline in volumes in North America.
Sales at Soybean Seed & Traits were level with the prior year. Bayer benefited from higher license revenues in Latin America, but saw business decline in North America due to lower volumes.
Sales at Insecticides increased, primarily due to higher volumes and prices for Bayer's Curbix™ product in Latin America. Sales in North America were down due to lower volumes.
Environmental Science registered an increase in sales in North and Latin America as well as in Asia/Pacific due to higher prices.
Sales at Vegetable Seeds rose due to price increases in all regions. These higher prices more than offset a decline in volumes, especially in Europe/Middle East/Africa.
Sales in the reporting unit ″Other″ expanded, largely as a result of volume and price increases in Bayer's North American cotton seed business.
EBITDA before special items at Crop Science advanced by 46.2% to €6,867 million in 2022 (2021: €4,698 million), mainly due to the significant increase in sales. Bayer also benefited from contributions from ongoing efficiency programs. In addition, there was a positive currency effect of €284 million. By contrast, earnings were diminished by an increase in costs, particularly in the cost of goods sold, which was mainly due to high inflation. The EBITDA margin before special items increased by 4.1 percentage points to 27.3%.
EBIT came in at €2,950 million in 2022 (2021: minus €495 million) after special charges of €1,460 million (2021: €2,915 million). These special charges primarily related to the aforementioned impairment losses, which mainly concerned the cash-generating unit Soybean Seed & Traits. These effects were partially offset by impairment loss reversals in the Corn Seed & Traits cash-generating unit and special gains from the divestment of the Environmental Science Professional business.
Fourth quarter of 2022
Sales advanced by 11.4% (Fx & portfolio adj.) to €5,569 million in the fourth quarter, with growth in all regions. Bayer's business in North America, Europe/Middle East/Africa and Latin America saw sales rise by double-digit percentages. Sales at Corn Seed & Traits were up significantly in North and Latin America, driven by an increase in prices and volumes. At Herbicides, sales rose year on year due to higher volumes and prices, especially for Bayer's glyphosate-based products. Fungicides recorded a decline in sales, with business down in Latin America in particular due to volume downsides in Brazil and drought in Argentina. Sales grew significantly at Soybean Seed & Traits, mainly thanks to higher license revenues in Latin America. Sales at Insecticides decreased in all regions, with business down in Latin America in particular due to drought in Argentina. Environmental Science registered an increase in sales thanks to higher prices. Sales at Vegetable Seeds increased year on year, with business growing in Europe/Middle East/Africa in particular thanks to higher prices and volumes. Sales in the reporting unit ″Other″ declined, primarily as a result of lower volumes in the canola business.
EBITDA before special items increased by 7.8% to €820 million in the fourth quarter (Q4 2021: €761 million). The growth in earnings was mainly driven by the substantial improvement in business performance, as well as contributions from ongoing efficiency programs. There was also a positive currency effect of €64 million. By contrast, earnings were diminished by an increase in costs, particularly in the cost of goods sold, which was mainly due to high inflation. The EBITDA margin before special items declined by 1.5 percentage points to 14.7%.
EBIT decreased to €127 million in the fourth quarter (Q4 2021: €1,435 million) after special charges of €126 million (Q4 2021: special gains of €1,263 million) that largely related to the aforementioned effects of the impairment losses. The divestment of the Environmental Science Professional business had a positive impact.
Outlook: Further growth in sales – Earnings below prior year due to inflation and price factors
″Following two consecutive years of high single-digit percentage growth rates, we expect our business to remain at a high level and grow by two to three percent in 2023 on a currency- and portfolio-adjusted basis,″ said Baumann. The company anticipates lower prices for agricultural herbicides. Projected sales growth in the other parts of the portfolio and from new products are expected to have a positive impact. As regards earnings in 2023, growth-driven margin contributions and positive effects from ongoing efficiency programs will not be sufficient to offset the anticipated decline in prices as well as high inflation-driven cost increases, which are expected to continue.
On a currency-adjusted basis (i.e. based on the average monthly exchange rates in 2022), Bayer expects to generate sales of 51 billion to 52 billion euros in 2023. The company anticipates EBITDA before special items of 12.5 billion to 13.0 billion on a currency-adjusted basis (Fx adj.). It forecasts core earnings per share of 7.20 to 7.40 euros (Fx adj.) and free cash flow of approximately 3.0 billion euros (Fx adj.). Net financial debt as of year-end 2023 is expected to amount to 32 billion to 33 billion euros (Fx adj.).
With respect to the divisions, Bayer anticipates sales growth (Fx & portfolio adj.) of around 3 percent at Crop Science. The company also expects the EBITDA margin before special items (Fx adj.) to come in at 25 to 26 percent at Crop Science.
Major strides in innovation and sustainability
Bayer has also made significant progress in launching and developing innovations. The Crop Science Division advanced the launch of new products that are designed to protect harvests even more effectively and reduce environmental impact. In the field of biologicals, it shifted its research approach to an open innovation model, with the division engaging in strategic collaborations with the Boston-based biotech company Ginkgo Bioworks and the Spanish biologicals company Kimitec, for example.
Turning to the company’s sustainability targets, Baumann explained: ″In 2022, we once again managed to reduce our greenhouse gas emissions overall – while at the same time achieving dynamic growth in our businesses.″ The company’s efforts are gaining ever greater recognition, he remarked, with MSCI having upgraded its environmental, social and governance (ESG) rating for Bayer from ″BB″ to ″A″. In addition, the company has for the first time made it into the top ten in the renowned Access to Medicine index, Baumann added. The index ranks companies in terms of their related endeavors in low- and middle-income countries. Bayer is also making good progress in attaining its ambitious social responsibility goals, he said. By 2030, the company aims to help 100 million smallholder farmers in low- and middle-income countries (LMICs), satisfy the need of 100 million women in LMICs for modern contraception, and support 100 million people in underserved communities with self-care.
Learn more at Bayer's website.
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