Bayer sees sales and earnings increase

The third quarter of 2017 marked a period of further strategic and operational progress for the Bayer Group. “Last quarter we took some important strategic steps,” said Werner Baumann, Chairman of the Board of Management, when he presented the interim report for the third quarter on Thursday. Bayer has made very good progress toward its goal of achieving full separation from Covestro in the medium term, he noted. As regards the planned acquisition of Monsanto, Baumann explained how the agreement to sell selected Crop Science businesses to BASF marked another important step. Bayer recorded an increase in sales (currency- and portfolio adjusted – Fx & portfolio adj.) and earnings at Pharmaceuticals in the third quarter. Business at Consumer Health declined, as expected. At Crop Science and Animal Health, sales moved ahead (Fx & portfolio adj.), while EBITDA before special items decreased year on year.

The agreed sale of selected Crop Science businesses to BASF for EUR 5.9 billion is subject to the approval of the antitrust authorities. The transaction is also dependent on the successful closing of Bayer’s acquisition of Monsanto. “With this agreement, we are actively addressing the authorities’ possible concerns regarding the planned acquisition of Monsanto. However, it is not an attempt to preempt any decisions by the regulatory authorities,” Baumann stressed. Bayer continues to work closely with the authorities with the aim of facilitating a successful closing of the transaction by early 2018.

Bayer has reduced its direct interest in Covestro to 24.6 percent, and is declining to exercise certain voting rights at the Covestro Annual General Meeting. “We have thus ceded de facto control over Covestro and deconsolidated it,” Baumann explained. The remaining shares of Covestro are now recognized in the statement of financial position using the equity method. The continuing operations of the Bayer Group are now comprised exclusively of the Life Science businesses. The financial information for the preceding quarters and the prior-year figures have been restated accordingly.

Crop Science posts significant gains in North America and Asia/Pacific
Third-quarter sales of the agricultural business (Crop Science) moved ahead by 2.7 percent (Fx & portfolio adj.) to EUR 2,031 million. Crop Science achieved gratifying business development in North America and Asia/Pacific, where sales rose by 9.8 percent (Fx adj.) and 7.4 percent (Fx adj.), respectively. Sales in Europe/Middle East/Africa and Latin America matched the prior-year level. “On the positive side, we were able to reduce provisions for product returns in Brazil, which shows that the measures we have implemented to normalize the situation in Brazil are taking hold,” Baumann said. In that country, Bayer had to establish provisions in the second quarter due to unexpectedly high inventories of crop protection products.

At Crop Protection, the Insecticides business delivered very positive performance, with sales rising by 13.2 percent (Fx & portfolio adj.). Sales declined at Fungicides (Fx & portfolio adj. minus 6.3 percent), Herbicides (Fx & portfolio adj. minus 1.9 percent) and SeedGrowth (Fx & portfolio adj. minus 1.1 percent). In contrast, Seeds (which also includes the traits business) reported strong gains, with sales rising by 29.6 percent (Fx & portfolio adj.). Environmental Science posted increased sales due to product deliveries to the acquirer of the consumer business divested in the fourth quarter of 2016 (Fx & portfolio adj. plus 6.8 percent).

EBITDA before special items of Crop Science decreased by 3.5 percent to EUR 307 million in the third quarter of 2017. Lower selling prices and a negative currency effect of around EUR 20 million stood against an increase in other operating income, a decline in the cost of goods sold and a decrease in selling expenses. Positive effects in the mid-double-digit millions were recorded in conjunction with the accounting measures taken in the previous quarter in Brazil.

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