Bayer delays in Monsanto buy hurt earnings forecast
BERLIN: Delays to Bayer AG’s US$63bil purchase of agricultural giant Monsanto pushed the acquisition past the new unit&’s;s busiest season, and the company said earnings for the year will be lower than forecast. Core earnings per share will probably € € reach about 5.7 to 5.9 euros, the Leverkusen, Germany-based company said in a statement. € That falls short of 6.22 euros, the average estimate of analysts surveyed by Bloomberg. The acquired business generates the majority of its sales and, above all, earnings in the first half of the year, chief executive officer Werner Baumann said in the statement. The company had earlier said that earn€ ings would equal those for 2017, 6.74 a share. Bayer had also projected its earnings without Monsanto would decline for the year. The shares fell as much as 3% in Frankfurt, and have lost about 24% this year. While acquiring Monsanto made Bayer the biggest seed and agricultural chemicals maker in the world, the purchase has been dogged by a series of regulatory challenges and legal pitfalls. After officials around the world scrutinised the deal’s effect on competition in the consolidating agriculture industry, a legal battle over the weed killer Roundup, one of Monsanto’s most important products, came to the fore. Closing the deal required nearly two years of wrangling with regulators. Bayer filed some 40 million pages of paperwork, eventu€ ally agreeing to sell 7.6bil in agriculture assets – including its vegetable seeds business – to German competitor BASF SE in order to placate antitrust authorities. The delays pushed the deal to June. Monsanto’s sales in the second quarter of 2017 were US$5.07bil, compared with US$2.69bil in the fourth quarter.
Bayer’s weaker-than-expected 2018 earnings forecast was a result of Monsanto’s extreme phasing of seasonal earnings, said David Evans, an analyst at Kepler Cheuvreux, in a phone interview.
“It certainly doesn&’s;t really help sentiment on the stock.
“This year’s earnings were always going to be hard to predict because of the Monsanto deal and next year’s results will be more telling,” Evans said.
The deal continued to generate challenges when a California court last month awarded US$289mil to a school groundskeeper who claimed that the herbicide had helped cause his cancer. As of late August, some 8,700 people were seeking damages over glyphosate, the main ingredient in Roundup – a number that has risen steadily in recent months. More cases are expected, Bayer said.