Bayer Warns on Crop Weakness as Roundup Plaintiffs Rise -- Update

By Sara Germano and Ruth Bender

BERLIN -- Bayer AG warned that severe weather impacting its crop-science division could strain its ability to hit full-year sales targets, adding to fresh concerns about the company's troubled acquisition of Monsanto last year.

The German chemical and pharmaceutical giant is grappling with the effects of what analysts say has been one of the worst crop planting seasons in the U.S. on record.

On Tuesday, the company reported a 49% drop in net income for the quarter ended in June, as extreme weather across the U.S., Canada and Europe hurt the crop-science division, Bayer's largest unit by sales.

Chief Financial Officer Wolfgang Nickl said Tuesday that the challenges in the crop business makes achieving Bayer's full-year performance outlook seem "increasingly ambitious."

Bayer said the number of plaintiffs suing over its Roundup herbicide rose by another 5,000 over the last three months, highlighting the difficulty in putting to rest a damaging legal battle over the world's most widely used weedkiller.

Overall sales grew 21% to EUR11.5 billion ($12.8 billion), boosted by its acquisition of Monsanto last June. Profit fell by nearly half to EUR404 million, crimped by charges and impairments related to ongoing restructuring as well as challenges in the crop division.

A wet planting season delayed farmers from getting their corn crop into the ground, while dry weather across Europe and Canada hit demand for herbicides and fungicides.

Shares of Bayer fell nearly 5% to EUR56.68 in afternoon trading Tuesday.

The Leverkusen, Germany-based inventor of Aspirin has lost almost 40% of its market value since acquiring Monsanto, due to fears that the lawsuits will cost the company several billions of dollars and are clouding plans to boost profits by expanding in the agriculture sector.

Analysts are beginning to doubt the company's ability to maintain its guidance, because of the crop sector trouble, according to research from Bernstein.

Bayer has been entangled in a protracted legal battle, pitching it against thousands of cancer patients claiming Monsanto-invented Roundup weedkillers cause cancer. The number of plaintiffs rose to 18,400 in the latest quarter, from 13,400 in April, Bayer said.

On Tuesday, Bayer Chief Executive Werner Baumann told analysts that "while this is an increase since our last reporting, it is by no means a reflection of the merits of the litigation," adding that the company will "only consider a settlement if financially reasonable."

Bayer lost the three first jury verdicts in the U.S., with awards reaching as high as $2 billion, though last week a California judge reduced that penalty to $86.7 million. Bayer is appealing the verdicts and argues that Roundup and its active ingredient glyphosate are safe.

In recent weeks, Bayer has stepped up efforts to reassure investors that it is doing what it can to get the legal woes under control, after shareholders staged a dramatic revolt at the group's last annual meeting.

In June, Bayer bowed to shareholder pressure by announcing it would review its approach to defending itself against the claims and hiring a high-profile lawyer to advise on legal strategy.

On Tuesday, management said that despite the bad weather weighing on crop yields in the Northern Hemisphere during the first half of the year, they remained optimistic that the segment can rebound as Latin America and the Asia-Pacific regions begin their planting seasons.

Write to Sara Germano at sara.germano@wsj.com and Ruth Bender at Ruth.Bender@wsj.com

(END) Dow Jones Newswires

July 30, 2019 10:43 ET (14:43 GMT)

Bayer Aktiengesellschaft (PK) (USOTC:BAYRY)
Historical Stock Chart
From Mar 2024 to Apr 2024