Bayer slumps on bleaker outlook and possible writedown
Shares in the pesticides and seeds maker dropped more than 12% to a six-month low, stripping more than €5bn off the company’s market value
Frankfurt — Bayer shares plunged after it flagged lower profit for 2021 and warned it may have to write down the value of agriculture assets by close to €10bn, rekindling a debate over the merits of the takeover of Monsanto.
Bayer, which acquired the US seedmaker for $63bn in 2018, said late on Wednesday that the coronavirus pandemic has been a bigger drag on the agriculture business than feared, causing lower biofuel demand and negative currency effects, and that competition in soy seeds is also intensifying.
The stock dropped as much as 12.7% on Thursday to a six-month low and was down 10% at 10.54am GMT. That strips more than €5bn off the company’s market value.
The drugs, pesticides and seeds maker said it now expects 2021 sales to come in at about 2020 levels, with 2021 core earnings per share slightly below 2020 levels, based on constant exchange rates.
“Since Monsanto was acquired, Bayer has delivered its basket of bad news every year and it is clear now that the group will not deliver the revenue growth expected at the time of this acquisition,” said Jean-Jacques Le Fur, an analyst at brokerage Bryan Garnier.
That is an added headache as Bayer is already struggling to wrap up an $11bn settlement over claims that Monsanto’s Roundup weedkiller causes cancer after a judge took issue with a side arrangement on future cases that may yet be lodged.
Analysts at Barclays said the significant revision of the crop science unit’s growth forecasts is a particularly unwelcome addition to the litigation uncertainty.
“The profit warning for 2021 is a significant setback for Bayer and its management,” said Markus Manns, a portfolio manager at German mutual fund firm Union Investment. “Things like a break-up of the company or management change could likely come on the agenda again sooner or later.”
The contract of Bayer CEO Werner Baumann, the driving force behind the takeover, has been extended until 2024 in a show of support from the drugmaker’s new chair, and comes even as the Roundup settlement deal, agreed in June, has yet to be finalised.
Shareholders denied Bayer’s top management a largely symbolic vote of confidence at the 2019 AGM, after courtroom defeats over Roundup, but Baumann and his team won the investor vote at this year’s AGM.
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.