Weather Buffets Bayer Crops Unit -- WSJ

By Sara Germano and Ruth Bender

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 31, 2019).

BERLIN -- Bayer AG warned that severe weather affecting its crop-science division could put its 2019 sales target out of reach, adding to concerns about the fallout from last year's acquisition of Monsanto.

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, it reported a 49% drop in profit 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 that impact makes the company's full-year goals seem "increasingly ambitious."

Bayer has targeted a 4% rise in group sales to EUR46 billion ($51.3 billion) for 2019.

The company said the number of plaintiffs suing over the herbicide Roundup acquired in the Monsanto deal rose by another 5,000 over the past 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% from last year's second quarter to EUR11.5 billion ($12.8 billion), boosted by its acquisition of Monsanto. Profit fell by nearly half to EUR404 million, crimped by restructuring costs and write-downs, as well as the challenges in the crop division.

A wet planting season in the U.S. Midwest delayed farmers from getting their corn crop into the ground, while dry weather across Europe and Canada hit demand for herbicides and fungicides. Despite that challenge, Bayer said it is optimistic that its agricultural business can rebound as planting begins in the Southern Hemisphere.

Shares of Bayer fell nearly 4% to EUR57.16 on 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 jeopardize plans to boost profits by expanding in the agriculture sector.

Bayer has been entangled in a protracted legal battle that pits it against thousands of cancer patients claiming Monsanto-invented Roundup weedkillers cause cancer. The number of plaintiffs rose to 18,400 as of July 11, from 13,400 in April, Bayer said.

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

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

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.

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

(END) Dow Jones Newswires

July 31, 2019 02:47 ET (06:47 GMT)

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