09 August 2023, Leverkusen: Bayer published detailed results for the second quarter of 2023 on Tuesday, after having already communicated key figures for the three-month period and lowering its outlook for full-year 2023 in a July 24 news release. The revised guidance was mainly due to a significant further decline in sales of glyphosate-based products at the Crop Science Division.
Group sales declined by 8.2 percent to 11.044 billion euros in the second quarter. There was a negative currency effect of 553 million euros (Q2 2022: positive currency effect of 915 million euros). EBITDA before special items declined by 24.5 percent to 2.527 billion euros. This figure included a negative currency effect of 120 million euros (Q2 2022: positive currency effect of 300 million euros). By contrast, the company registered income across all divisions totaling around 481 million euros due to a decrease in provisions for the Group-wide Short-Term Incentive program. EBIT came in at minus 956 million euros (Q2 2022: plus 169 million euros) after net special charges of 2.490 billion euros (Q2 2022: 2.111 billion euros) that primarily related to unscheduled impairment testing in the Crop Science Division. As a result, net income came in at minus 1.887 billion euros (Q2 2022: minus 298 million euros). Core earnings per share decreased by 36.8 percent to 1.22 euros.
Free cash flow amounted to minus 473 million euros (Q2 2022: plus 1.140 billion euros), primarily due to the decline in business at the Crop Science Division. At 39.620 billion euros, net financial debt as of June 30, 2023, was 9.8 percent higher than at the end of March 2023.
Crop Science sales without glyphosate at prior-year level (Fx & portfolio adj.)
Sales in the agricultural business (Crop Science) fell by 18.5 percent (Fx & portfolio adj.) to 4.924 billion euros, mainly driven by lower volumes and prices for glyphosate-based products. This effect particularly impacted business in North and Latin America as well as in Europe/Middle East/Africa and resulted in a 45.6 percent decrease in sales (Fx & portfolio adj.) at Herbicides. Excluding the glyphosate business, Crop Science sales were level with the previous year (Fx & portfolio adj.), as higher prices were offset by lower volumes. Sales at Corn Seed & Traits rose by 10.6 percent (Fx & portfolio adj.), largely thanks to higher prices in all regions as well as increased acreages in North America. Business at Fungicides was level with the prior-year quarter (Fx & portfolio adj.). Sales at Soybean Seed & Traits were down 9.3 percent (Fx & portfolio adj.), mainly due to decreased acreages and a decline in license revenues in North America.
EBITDA before special items at Crop Science fell by 58.5 percent to 725 million euros, primarily due to the decline in sales of glyphosate-based products. Higher prices in the rest of the business and cost savings only partially compensated for this effect. Earnings were also diminished by a mainly inflation-related increase in the cost of goods sold and a negative currency effect of 96 million euros (Q2 2022: positive currency effect of 215 million euros).
Group outlook lowered on July 24
The Bayer Group lowered its outlook for full-year 2023 on July 24, mainly due to a significant further decline in sales of glyphosate-based products. When communicating its first quarter results, Bayer had already guided towards the lower end of the forecast it had previously issued. On a currency-adjusted basis (i.e. based on the average monthly exchange rates from 2022), Bayer now expects to generate sales of between 48.5 and 49.5 billion euros (initial forecast: 51 to 52 billion euros). This now corresponds to a decline of 2 to 3 percent on a currency- and portfolio-adjusted basis (initial forecast: increase of 2 to 3 percent). EBITDA before special items is now expected to come in at 11.3 billion to 11.8 billion euros on a currency-adjusted basis (initial forecast: 12.5 to 13.0 billion euros). The company now anticipates core earnings per share of 6.20 to 6.40 euros on a currency-adjusted basis (initial forecast: 7.20 to 7.40 euros). In addition, it now projects free cash flow of approximately zero euros (initial forecast: approximately 3.0 billion euros) and net financial debt of approximately 36 billion euros (initial forecast: 32 to 33 billion euros) on a currency-adjusted basis. Bayer now expects to take special items of around minus 3.5 billion euros (initial forecast: around minus 1.0 billion euros) in EBIT after adjusting for currency effects.
With respect to the divisions, the company now expects Crop Science sales to fall by around 5 percent year on year (initial forecast: increase by around 3 percent) and Pharmaceuticals sales to show a roughly 0 percent change against the prior-year level (initial forecast: increase by approximately 1 percent) after adjusting for currency and portfolio effects. The currency-adjusted EBITDA margin before special items is now projected to come in at around 21 percent at Crop Science (initial forecast: 25 to 26 percent) and approximately 28 percent at Pharmaceuticals (initial forecast: slightly above 29 percent). The forecast for Consumer Health remains unchanged, with sales growth of roughly 5 percent on a currency- and portfolio-adjusted basis, and a currency-adjusted EBITDA margin before special items of around 23 percent.
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