Significantly lower prices for the herbicide glyphosate and weak business in China have spoiled the beginning of the year for the pharmaceutical and agrochemical group Bayer. Even though the other businesses are expected to stabilize in the course of the year, the Dax group expects continued burdens in the agricultural business due to falling glycsat prices. "Overall, we expect target to be achieved in the lower corridor of our guidance," said Werner Baumann on his last presentation of the quarterly figures as Chairman of Bayer's Board of Management.

Jonas Jansen

Business correspondent in Dusseldorf.

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For 2023, the Leverkusen-based group has forecast adjusted earnings (Ebitda before special items) of between €12.5 billion and €13 billion. In the previous year, Bayer had achieved a record profit of 13.5 billion euros, so the new Chairman of the Board of Management, Bill Anderson, who will take over Baumann's office in June, will most likely have to report a significant decline in profits.

Investors disappointed

Investors punished the quarterly figures by selling: The share price was down around 6 percent during the day on Thursday, making it one of the weakest stocks in the Dax. Although Bayer had already pointed out a normalization of glyphosate prices at the annual balance sheet and also at the Annual Stockholders' Meeting, many analysts had higher expectations for sales and earnings. The pessimistic forecast also weighed on the share price. At the same time, the stock has recently been on the upswing due to the announcement of the change in the management board, since the beginning of the year, the share price has gained more than 10 percent.

Last year, the agricultural business had been the profit driver of the group due to the sharp rise in the prices of glyphosate, but now prices are pointing in the other direction. In the first quarter, Bayer recorded a decline in sales of herbicides of almost a quarter, and sales volumes also declined. Corn seed, on the other hand, was in strong demand, with business growing by 15.8 percent on a currency- and portfolio-adjusted basis. Excluding glyphosate, sales grew by 8 percent, but the product is so important for Bayer that sales in the agricultural division fell by 1.1 percent to around EUR 8.4 billion. Operating profit before special items fell by 11 percent to 3.3 billion euros, which was also due to higher cost of sales.

Legal costs remain high

In the first quarter, Bayer once again spent a lot of money on getting rid of legal disputes: Bayer paid EUR 1.5 billion for proceedings on the herbicides glyphosate and dicamba and, above all, old lawsuits on PCBs, the products the company had brought into its portfolio through the billion-dollar takeover of the American seed company Monsanto. However, Bayer had already set aside provisions for this.

The pharmaceutical business in the first three months suffered from so-called tender procedures in China, where manufacturers have to participate in tenders, while on the other hand municipalities and cities join forces to negotiate discounts. This depressed sales of the anticoagulant Xarelto and the heart drug Adalat. Pandemic restrictions in the country, which is important for Bayer, also weighed on business. Although the new launches developed well, they were unable to compensate for the losses of the established medicines: Sales of prescription drugs fell by 3.1 percent to 4.4 billion euros, while Ebitda before special flows fell by as much as a fifth to 1.1 billion euros.

At Group level, Bayer generated sales of EUR 14.4 billion, while operating profit fell by 14.9 percent to EUR 4.5 billion. Net income fell by a third to 2.2 billion euros.