Unsatisfactory!

We had hoped that the never-ending Monsanto provision-and-extra-expenses-story would end without additional costs. Nothing doing! Another Monsanto-related provision and some additional impairments took a chunk out of the real-world P&L. Bayer moderately beat consensus (sales: +4.4%; adjusted EBITDA: +2.2%), but the party ended at the one-offs (reported: €-698m; consensus: -€247m).

Strong start to the year

Bayer started the agro season strongly as well as the flu season, whereas Pharma’s dynamics stalled slightly due to the Chinese tender business. Nevertheless, the beat to consensus was too meaningful (revenues: +6.0%; adjusted EBITDA: +13.1%; net profit: +38.7%) to be ignored by management. We wonder why it did not release preliminary figures like other companies would have done with such a deviation.

Flexing muscles in 2021

Bayer had a better ending than expected at the beginning of 2021. Crop Science especially was better off, benefiting from the greater glyphosate shortage and the strong position in corn and soybeans. Pharma was once again driven by its drag horses, but management warned of some tougher times in 2022. Consumer Health continued to perform well. Bayer reported a strong beat to the consensus FY net income line (+75.4%); we had been too cautious at many levels.

An unexpected surprise …

… after all the disappointment Bayer has caused in recent quarters. Consensus was beaten by +7.3% at the top line and by +7.5% on an adjusted EBITDA level. This came after Crop Science’s strong pick-up in the Americas allowing the division to make a positive contribution. Pharmaceuticals and Consumer Health reported a mixed set of figures, but were acceptable. The lifted guidance supported our positive view, despite a small miss to our estimates.

Bayer’s next rung?

Bayer looks a bit shy about announcing the first success in the glyphosate-related battles. Or realistic? We do not know why the company has not made more out of it. From our point of view, the recent case is too different to be seen as a trend reversal. Only a positive outcome of the Supreme Court’s final decision could wipe all unsettled as well as future cases from the table.

Always good for a surprise

Bayer’s timing was perfect to make more than one announcement to deflect one’s full attention. Using a busy day is another option. Basically, Bayer’s adjusted operating figures were not that bad. Crop Science reported some volatility in its margin, whereas the other divisions did quite well despite some miss of our estimates, especially on the profitability level. Consensus was beaten at the top-line (+6.9%), whereas the adjusted EBITDA was missed by -7.1%. Likewise, ours was also beaten.

Could be valued as a coup de liberation…

… but we see the count-down on Mr Baumann remaining tenure at closer to ‘… three’ rather to ‘ten … nine …’. Bayer’s management has tried to ‘sell’ the rejection of the settlement mechanism for future glyphosate-related cases by Judge Chhabria as opening up new opportunities but basically the issues and risks are unchanged. While the Supreme Court ruling might be of some help on future liability risks, it is unlikely to prevent a pickup in the stream of new plaintiffs.

Nice beat, but this is not relevant

The planned hearing for the preliminary approval on 19 May 2021 (rescheduled from 12 May 2021) could mark the turn of the tide as the mechanism for the settlement of future glyphosate-related plaintiffs is not yet agreed. The judge has an additional 30 days to render his option. Bayer reported a good start into the year, beating the street by +4% (top line) and +9% at the profitability level. However, the group’s operating performance made us not too enthusiastic.

Still another moderate year ahead

Bayer really needs a kind of breakthrough or a brilliant idea to change the sentiment on the name. We understand glyphosate-related issues and the related payments continue to weigh on CF, but the 2021 guidance seems to be quite reachable, especially in Crop Science. Nevertheless, our 2020 estimates were missed as we had factored in some additional provisions in Crop Science and did not envisage any potential reversals of impairments in other divisions. Consensus was met.

Bayer's never-ending story: settling Monsanto's claims

As argued in earlier reports, the Monsanto acquisition was not a good idea and, in our view, there will be additional provisions for the settlement of the claims. We had been already quite cautious regarding the Q3 numbers, but Crop Science’s unexpectedly weak contribution led to a miss. The figures were also below consensus as there were more negative one-offs than expected, which may have been attributable to the unclear guidance.

A great move!

The acquisition of Asklepios BioPharmaceutical (AskBio), while not a bargain, is a great move into the really hot topic of gene therapy. Based on the leading vector platform currently and pushed by numerous venture capital (VC) financing rounds, AskBio had built a broad and diversified R&D pipeline with three candidates in phase 1/2 trials. We see this as a major step towards better backward integration.

SP Angel Healthcare Conditions- 26-10-2020

Good managerial skills look different

Bayer’s announcement that it is to take an impairment on its agro business looks to us like a reality check: highly-hyped Monsanto was far too expensive. Fortunately, the CEO’s term was prolonged for three years just some days ago. A correlation between the two events might be a contingency, but the announced additional cost-cutting measures should deliver by 2024.

Another tick on the list

It looks to us as if Bayer’s management has come to a conclusion for settling the line-up of different plaintiffs across the product portfolio. Compared to the partly settled glyphosate-related claims, those on Essure look a bit less expensive and will not burden the Q3 figures too much. Management is trying to ‘pack’ all the nasty issues into the ‘coronavirus year’.

Nasty marks of reality

In the light of the settlement of the majority of glyphosate-related plaintiffs, Bayer took €12,050m legal costs into account (also for dicamba and PCB). Regarding future litigation, there is currently no agreement in place. Bayer’s operational performance was less pronounced in Q2, despite Crop Science’s stronger one. Pharmaceuticals and Consumer Health reported weaker than expected figures. Management now expects a stronger negative impact from the pandemic and has adjusted the guidance acco

Strong growth in core underpins FY expectations

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Growth on an accelerating path

Smith & Nephew’s growth acceleration and margin expansion in Q2 should continue in H215, more reflecting internal changes than improvements in market fundamentals. Its c 13% premium on 2015 P/E to its global ortho peers is supported by its brisker growth and strategic value.

LIBERUM: Medica Group PLC* - Strong update with all divisions growing

Hybridan Small Cap Feast 11/07/22

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