1ST HALF: BAYER'S CROP SCIENCE UNIT'S SALES UP 20%, EARNINGS UP 58%: $5.4 BILLION
Aug. 4, 2022
Source: Bayer news release
Leverkusen - The Bayer Group achieved substantial growth in the second quarter of 2022. "We delivered strong operational performance. In terms of sales, we posted significant gains at Crop Science and strong growth at Consumer Health, as well as a slight increase at Pharmaceuticals, too.
And with EBITDA before special items, we even achieved growth of 30 percent," said Werner Baumann, Chairman of the Board of Management, on Thursday while presenting the company's half-year financial report. "In view of our good business performance and higher growth expectations, we have raised our full-year guidance," he explained.
Bayer does not currently see any material financial impact in 2022 from any potential gas supply bottlenecks as a result of the war in Ukraine, Baumann said. The company has taken steps to ensure that the direct impact of any potential gas shortages on its own production capabilities this year is contained to the greatest degree possible, he explained.
"From a technical perspective, we are well prepared to significantly reduce our reliance on natural gas by switching to alternative and renewable sources of energy. We have also launched programs to save energy and have built up our stocks of products where possible." A higher degree of uncertainty stems from the company's indirect exposure via its global supplier network, Baumann said. "That's why we are expanding our network of suppliers and building up additional inventory of key raw materials and packaging materials."
In the second quarter of 2022, Group sales increased by 9.6 percent to 12.819 billion euros on a currency- and portfolio-adjusted basis (Fx & portfolio adj.). EBITDA before special items advanced by 30.0 percent to 3.349 billion euros.
Positive currency effects benefited sales by 915 million euros (Q2 2021: minus 524 million euros) and EBITDA before special items by 300 million euros (Q2 2021: minus 153 million euros). EBIT came in at 169 million euros (Q2 2021: minus 2.281 billion euros) after net special charges of 2.111 billion euros (Q2 2021: 3.901 billion euros) that mainly comprised 1.322 billion euros in impairment losses on intangible assets at the Crop Science Division.
These impairment losses were recognized as part of impairment testing that was performed due to a strong rise in capital market interest rates. Other special charges related to ongoing litigations and restructuring measures.
Significantly improved market environment at Crop Science
In the agricultural business (Crop Science), Bayer increased sales by 17.2 percent (Fx & portfolio adj.) to 6.461 billion euros, driven by a substantial improvement in the market environment. The division recorded double-digit percentage growth in Latin America and Europe/Middle East/Africa, and also registered an expansion of business in North America and Asia/Pacific.
Herbicides posted the strongest growth, at 51.3 percent (Fx & portfolio adj.), with sales rising particularly in Latin and North America, as well as in Europe/Middle East/Africa as a result of prices for glyphosate-based products remaining high.
Sales at Corn Seed & Traits advanced by 9.5 percent (Fx & portfolio adj.), mainly due to price increases in North America, Europe/Middle East/Africa and Latin America. In addition, volumes expanded in all regions except North America.
Sales at Fungicides rose by 4.3 percent (Fx & portfolio adj.), with growth in all regions except North America, where volumes declined as a result of unfavorable weather conditions.
Soybean Seed & Traits saw sales decline by 16.1 percent (Fx & portfolio adj.), largely due to the significant reduction in sales from overproduction in North America and the unit's withdrawal from the Argentinian market.
EBITDA before special items at Crop Science climbed by 71.8 percent to 1.749 billion euros. The growth in earnings was mainly driven by the substantial improvement in business performance, as well as contributions from ongoing efficiency programs. There was also a positive currency effect of 215 million euros (Q2 2021: minus 111 million euros).
By contrast, earnings were diminished by an increase in costs, particularly in the cost of goods sold, which was mainly due to high inflation. The EBITDA margin before special items rose by 6.8 percentage points to 27.1 percent.
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