Bayer says it’s looking to restructure its business and trim management after reporting poor financial results for the latest quarter, largely driven by the performance of its Crop Science Division.
“We are redesigning Bayer to focus only on what’s essential for our mission – and getting rid of everything else,” CEO Bill Anderson said on an investors call Wednesday in which he said, “We’re not happy with this year’s performance.”
“Nearly 50 billion euros in revenue, but zero cash flow is simply not acceptable,” Anderson said of the past year’s performance. “The status quo is simply not an option for Bayer.”
Structurally, Anderson said that “beyond maintaining three divisions, the main option would be a separation of either the Consumer Health or Crop Science [divisions], and both of those remain under evaluation.” The other division is Pharmaceuticals.
Anderson said the company was “ruling out” splitting into three businesses. “it's just not feasible to do that all at once,” he said. “A three-way split would require a two-step process. And we certainly will not pursue any structural moves that would come with a downgrade of our operational performance.”
By the end of 2024, Bayer “will remove multiple layers of management and coordination. … Ninety-five percent of the decision making in the whole organization is going to go to the people doing the work,” Anderson said.
Company officials on the investor call declined to discuss litigation strategy in any detail following three recent court losses in an ongoing series of cases brought by consumers who claim exposure to Roundup caused their cancer.
“We did not expect [to] win every case,” Chief Financial Officer Wolfgang Nickl said, adding that one of the three losses resulted in a jury verdict of $1.25 million, which he said was “not even covering remotely the cost of the other side, so that's not going to be a strong incentive to keep going.”
The other two cases resulted in verdicts of $175 million and $332 million, but Nickl indicated those cases are set up well for Bayer to appeal. He also emphasized that before the string of losses, Bayer had won nine trials in a row.
He also pointed to the 9th Circuit Court of Appeals decision on Tuesday finding a California cancer warning for Roundup to be unconstitutional. The company already said the decision could help with litigation.
“That's a very, very strong signal,” Nickl said.
As for litigation strategy, which some prominent investors have called on the company to revisit, Nickl said, “I think you'll appreciate that we constantly adjust our strategy, but this is probably not the right forum to discuss it.”
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About 113,000 of approximately 160,000 claims against the company “have been settled or deemed ineligible for various reasons,” a spokesperson said last week.
In the third quarter, Bayer said earnings before interest, taxes and depreciation fell 31.3% from the prior year’s quarter, to about $1.8 billion, “mainly due to the decline in earnings at the Crop Science Division.” Overall, sales for the company in the quarter were about the same as the prior-year quarter, at about $11 billion.
For the quarter, Crop Science saw earnings decline to minus $25.6 million, down from 2022’s third quarter figure of $672 million.
“Higher volumes in all regions were mostly offset by lower prices for glyphosate-based products following an exceptionally strong prior year,” the company said, with sales of corn seeds and traits up 21.2% due to higher prices, fungicide sales up 16.2%, and soybean seeds and traits up 15.6%.
But herbicide sales declined 17.3%, “with substantial price declines outweighing higher volumes in all regions,” Bayer said.
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