BAYN Bayer AG

   By Joshua Stein 
 

Shares in Bayer AG fell Thursday after it reported a steep decline in fourth-quarter profit, dragged by litigation related to its Roundup weedkiller that was also reflected in the company's 2021 outlook.

At 1416 GMT, Bayer shares were down 4.4% at EUR52.69.

The German pharmaceutical and chemical conglomerate said net profit for the period fell by 78% to 308 million euros ($374.9 million) from EUR1.41 billion a year earlier.

For the full year, Bayer swung to a net loss of EUR10.50 billion compared with a profit of EUR4.09 billion for 2019.

Earnings before interest and taxes for the quarter rose to EUR1.52 billion from EUR389 million a year earlier. For 2020, the company recorded a loss before interest and taxes of EUR16.17 billion compared with an EBIT of EUR4.16 billion in 2019.

Bayer said its earnings for the year were severely hurt by litigation costs relating to its weedkiller, Roundup, which along with other less prominent litigation action made up the majority of the net special charges. The company recorded net special charges of EUR23.26 billion for the year compared with EUR2.81 billion for 2019.

Bayer has faced lawsuits over Roundup since it purchased Monsanto in June 2018, amid allegations that the weedkiller causes cancer. Bayer has consistently denied the charges.

The company said its $2 billion proposal to pay farmers and gardeners who attempt to blame it for illnesses in the future, announced earlier in February, is subject to court approval.

Quarterly sales fell to EUR10.00 billion from EUR10.75 billion a year earlier, slightly missing analysts' expectations of EUR10.01 billion, according to a consensus provided by Vara Research.

Net debt came in at EUR30.04 billion at the end of 2020, down from EUR34.07 billion at the end of 2019, the company said.

Bayer proposed a dividend of EUR2.00 a share for 2020 compared with EUR2.80 the previous year.

Warburg Research analyst Ulrich Huwald said Bayer's sales and adjusted Ebitda for the fourth quarter and 2020 came in below expectations and were disappointing, mainly due to a miss at the company's crop-science segment.

"The Roundup litigation remains a burden for Bayer with an unforeseeable outcome," Mr. Huwald said.

Citi analysts said the company's growing research-and-development as well as pharma-related investments may preoccupy the market, which could require a reset of margin expectations for the pharma business.

Meanwhile, the company faces questions on its ability to attract investors from an environmental, social and governance perspective, while its pharma outlook may become uncertain when patents for its Xarelto and Eylea drugs run out in the coming years, Citi said.

Looking ahead, Bayer expects sales between around EUR42 billion and EUR43 billion for 2021, with Ebitda before special items of EUR11.2 billion to EUR11.5 billion, both on a currency-adjusted basis.

The company expects negative free cash flow of between EUR3 billion and EUR4 billion, which includes EUR8 billion that has been set aside for Roundup-related litigation.

Write to Joshua Stein at joshua.stein@wsj.com

(END) Dow Jones Newswires

February 25, 2021 09:42 ET (14:42 GMT)

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