Bayer Q2 2024 results: Modest performance in challenging agricultural market environment – Group outlook confirmed

The Bayer Group generated increased sales and lower earnings in the second quarter of 2024. Each business delivered a competitive performance in their respective industries, positioning the Group to confirm its 2024 outlook. ″Our Crop Science business nearly offset headwinds in a challenging agricultural market environment,″ CEO Bill Anderson said on Tuesday when presenting the company’s half-year financial report. In addition, the Pharmaceuticals Division’s new products Nubeqa™ and Kerendia™ continued their impressive momentum, and Consumer Health returned to growth, he noted. Beyond its operational progress, the company advanced on its strategic priorities. ″One of the central commitments we made at Capital Markets Day is that this organization will consistently perform while simultaneously addressing the longer-term roadblocks holding us back. The 154 days since March 5th have been pretty good evidence that we can do both.″

Anderson outlined where the company stands in addressing four strategic focus areas, with good progress in growth and innovation, the US litigation, cash and deleveraging, and the introduction of the new Dynamic Shared Ownership (DSO) operating model. 

Group sales rose by 3.1 percent on a currency- and portfolio-adjusted basis (Fx & portfolio adj.) to 11.144 billion euros in the second quarter of 2024. There was a negative currency effect of 240 million euros (Q2 2023: 553 million euros). EBITDA before special items decreased by 16.5 percent to 2.111 billion euros. This figure included a negative currency effect of 129 million euros (Q2 2023: 120 million euros). The decline in earnings was mainly due to an unfavorable product mix. In addition, the provisions for the Group-wide short-term incentive program were lower in the prior-year period. EBIT improved to 525 million euros (Q2 2023: minus 956 million euros) after net special charges of 490 million euros (Q2 2023: 2.490 billion euros). The special charges primarily related to expenses for ongoing restructuring measures and affected all divisions and functional areas. Net income amounted to minus 34 million euros (Q2 2023: minus 1.887 billion euros).

Free cash flow came in at 1.273 billion euros (Q2 2023: minus 473 million euros), primarily due to the increase in operating cash flow. Net financial debt as of June 30 stood at 36.760 billion euros, down 1.9 percent from the end of March, mainly as a result of cash inflows from operating activities.

Business up slightly at Crop Science

Second quarter of 2024

Sales

Sales at Crop Science rose by 1.1% (Fx & portfolio adj.) to €4,981 million in the second quarter of 2024. Growth was mainly driven by higher sales of glyphosate-based herbicides, with a particularly strong performance in North America. Sales of soybean seeds also increased. However, Crop Science recorded substantial sales declines for its non-glyphosate-based herbicides and its Fungicides business in a soft market environment.

• At Corn Seed & Traits, Crop Science recorded a slight drop in sales, mainly due to lower volumes in Latin and North America amid a decline in planted acreages.

• In the Herbicides business, Crop Science recorded substantial volume increases for its glyphosate-based products across all regions. By contrast, sales of its non-glyphosate-based products declined in all regions, especially in Latin America due to adverse weather conditions and Asia/Pacific as a result of falling market prices.

• Business at Fungicides was down sharply, mainly as a result of lower volumes and prices in North and Latin America.

• Sales at Soybean Seed & Traits climbed by a double-digit percentage, mainly driven by substantially higher volumes in North America.

• Sales at Insecticides increased, largely driven by higher Movento™ volumes in the Europe/Middle East/Africa region. 

• The Cotton Seed business was impacted by a negative regional price-mix effect in North America that was only partially offset by higher volumes in the Asia/Pacific and North America regions.

• Business at Vegetable Seeds was up, primarily due to price increases in the Europe/Middle East/Africa region.

• Sales in the reporting unit ″Other″ came in at the prior-year level. In the Industrial Turf & Ornamental (IT&O) business, volume increases more than offset price declines.

Earnings

EBITDA before special items at Crop Science decreased by 27.7% to €524 million in the second quarter of 2024 (Q2 2023: €725 million), mainly due to an unfavorable product mix and a reduction in allocations to provisions for the Group-wide short-term incentive (STI) program in the prior-year quarter. By contrast, there was a positive currency effect of €49 million (Q2 2023: negative currency effect of €96 million). The EBITDA margin before special items declined by 4.2 percentage points to 10.5%.

EBIT amounted to minus €229 million in the second quarter of 2024 (Q2 2023: minus €2,207 million) after net special charges of €79 million (Q2 2023: €2,353 million) that primarily related to ongoing restructuring measures. 

First half of 2024

Sales

In the first half of 2024, sales at Crop Science declined by 1.4% (Fx & portfolio adj.) to €12,888 million in a soft market environment, mainly due to significantly lower volumes for non-glyphosate-based herbicides and the Fungicides business. By contrast, Crop Science recorded a substantial increase in sales of its glyphosate-based products. Sales at Corn Seed & Traits rose, especially in Europe/Middle East/Africa. However, growth was slowed by lower volumes in North and Latin America. In the Herbicides business, Crop Science recorded declines for its non-glyphosate-based products in all regions, largely due to increased competitive pressure in the Europe/Middle East/Africa region. The glyphosate-based products saw a substantial increase in volumes and a market-driven decline in prices, especially in North America, with demand returning to normal levels. Business at Fungicides was down in all regions, with sales primarily impacted by significantly lower volumes in the Europe/Middle East/Africa region due to adverse weather and market conditions. Sales at Soybean Seed & Traits were up, primarily driven by higher volumes in North and Latin America. The Insecticides business reported an increase in sales that was largely due to higher volumes and prices in the Europe/Middle East/Africa region. However, price declines in Latin America had a negative impact. Sales at Cotton Seed decreased, mainly due to negative regional pricemix effects in North America. Sales at Vegetable Seeds increased, with business growing particularly in Europe/Middle East/Africa due to higher prices. In the reporting unit ″Other″, Crop Science registered a slight increase in sales that was predominantly due to higher volumes.

Earnings

EBITDA before special items at Crop Science declined by 15.5% to €3,373 million in the first half of 2024, mainly due to price declines for glyphosate-based products, an unfavorable product mix and a reduction in allocations to provisions for the Group-wide short-term incentive (STI) program in the prior-year period. There was a negative currency effect of €43 million (H1 2023: €42 million). The EBITDA margin before special items decreased by 3.9 percentage points to 26.2%.

EBIT came in at €1,834 million (H1 2023: €112 million) after net special charges of €138 million (H1 2023: €2,649 million) that primarily related to ongoing restructuring measures. 

Group outlook confirmed

Bayer confirmed its Group outlook for full-year 2024. ″We remain on track to deliver,″ Anderson said. For the Crop Science Division, the company expects currency- and portfolio-adjusted sales growth and the EBITDA margin before special items to come in at the lower end of the projected ranges (between minus 1 and plus 3 percent, and between 20 and 22 percent, respectively). 

Sustainability: major progress in renewable energy efforts

In a bid to bolster its sustainability endeavors, Bayer has published the Climate Transition and Transformation Plan, which underpins its aspiration to achieve net zero. The plan covers Bayer’s commitment as a company to reduce its greenhouse gas emissions by at least 90 percent by 2050 (″Transition″) and, going beyond the company’s boundaries, to generate positive impact in the businesses in which it operates (″Transformation″). The company’s transition toward net zero carbon emissions involves switching to renewable energies, among other measures. In the second quarter, Bayer concluded two supply contracts for electricity from renewable energy sources, marking major steps forward on its path to becoming climate-neutral by 2030. Together, the agreements secure the supply of 300 gigawatt hours of electricity from 100 percent renewable energy sources. The power to be provided under these agreements is equivalent to the annual electricity consumption of around 75,000 households.