Bayer lifts outlook on pesticides unit
GERMANY’s largest drug maker, Bayer, raised its full-year earnings outlook more than expected yesterday as high grain prices fuelled demand at its farming pesticides unit and a lower euro lifted the value of its overseas revenue.
The diversified company, which invented aspirin and synthetic rubber, said it expected a high single-digit percentage gain in adjusted earnings before interest, tax, depreciation and amortisation (Ebitda), where it had previously seen a slight increase.
The new guidance went beyond the higher outlook that analysts had factored in and the shares were 3.6% ahead against a 0.4% rise in Germany’s blue chip index yesterday morning.
“We expect (analysts’) fullyear earnings estimates to be raised, which should further support positive confidence in the stock,” Claudia Lakatos of Silvia Quandt Research said in a note.
Bayer now expects revenue of €39bn-€40bn this year, compared with a prior outlook of about €37bn, which was based on a euro value of $1.40. The currency has fallen below $1.23.
Second-quarter adjusted Ebitda rose 6.7% to €2.17bn, above the average estimate of €2.08bn in a Reuters poll, in part driven by a strong crop chemicals division, the world’s secondlargest maker of pesticides after Syngenta. Prices of crops such as soya, wheat and corn have risen between 30% and 50% in global markets since early June, just before the end of the quarter, mainly driven by supply shortages due to a drought in the US. Higher prices for crops encourage farmers to spend more on pesticides.
Syngenta posted forecast-beating results last week for the first half and was optimistic for the remainder of the year.
Bayer’s reported net income, however, dropped by a third to €494m as the company unexpectedly set aside €500m for litigations in connection with its birth control pills.
In April, US health regulators added warnings to the labels on the popular class of birth control pills that includes Bayer’s Yaz and Yasmin, to show they may raise the risk of blood clots.
Bayer said yesterday it has agreed to pay a combined $402.6m to settle almost one third of about 6,000 legal claims that Yasmin caused blood clots.
Bayer’s drugs division, where quarterly underlying core earnings rose 8% on growth in emerging markets, is pinning its hopes on drug launches to lift earnings in the coming years.
It has said its four most promising drugs, led by stroke prevention pill Xarelto, have the potential to rack up combined annual sales of more than €5bn, although little of that will be seen this year. Reuters