Bayer Trades Sharply Lower on Guidance Cut
October 01 2020 - 5:18AM
Dow Jones News
--Bayer shares slipped after the company cut its views amid
lower demand in the agricultural sector
--The chemicals and pharma major announced billions of euros in
cost cuts, but said even that may not offset declining sales
--Bayer has had bad news every year since its mega-deal to buy
agricultural-products company Monsanto, Bryan Garnier analysts
said
By Joshua Kirby
Shares in Bayer AG plunged on Thursday morning after it set new
guidance and announced billions in cost cuts amid falling demand
for agricultural products, an area that has been hit harder than
expected by the coronavirus pandemic.
The German chemicals-and-pharmaceuticals company said late on
Wednesday that it now expects sales to be flat in 2021, having
previously guided for sales growth of around 4%. The company also
said it expects its core earnings-per-share for 2021 to be below
this year's level at constant exchange rates.
Bayer said it targets operational savings of more than 1.5
billion euros ($1.76 billion) a year as of 2024, which come on top
of existing plans to cut EUR2.6 billion a year in costs from
2022.
The cost cuts aren't expected to entirely offset declining
sales, meaning Bayer now also expects to miss its cash-flow targets
for 2021.
At 0847 GMT, Bayer shares were down 10% at EUR47.95.
Analysts at Bryan Garnier said that since Bayer acquired
crop-science business Monsanto, it "has delivered its basket of bad
news every year and it is clear now that the group will not deliver
the revenue growth expected at the time of this acquisition."
Bryan Garnier downgraded the stock to sell from neutral on
Thursday, and said the lack of visibility in Bayer's crop-science
and pharma division should weigh on the share price.
"Like most companies, the COVID-19 pandemic has led to headwinds
in the 2020 fiscal year for Bayer, with significant currency
effects presenting an additional burden on sales and earnings
growth," Bayer said.
In the crop-science division, the company said biofuel
consumption is falling amid low commodity prices for major crops,
while competition in the soy market is increasing.
Bayer said it didn't expect market conditions to improve much
near-term, and that this means it will likely reduce the value of
its crop-science business by booking impairment charges in the
"mid-to-high single-digit billion-euro" range.
Write to Joshua Kirby at joshua.kirby@dowjones.com
(END) Dow Jones Newswires
October 01, 2020 05:03 ET (09:03 GMT)
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