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Bayer ‘surprised’ with another impairment on Monsanto’s intangible assets – mainly goodwill – increasing the total purchase price to €73bn, +62% above the initial level. Meanwhile the management has shared some insights on the officially unthinkable (i.e. separation of a single division, breakup of all three divisions). In an immediate intermediate move, the management has started to implement a change in the operational system. The Q3 figures were below consensus (sales: -0.9%; adjusted EBI
Companies: Bayer AG
AlphaValue
After Bayer’s pre-released Q2 figures, there was a chance that the report would only provide more transparency. The greater details allowed a more granular view of two Seed & Traits businesses in Crop Science while the blockbuster anticoagulant Xarelto is facing the hot breath of generic competition to a much higher extent. Furthermore the company ‘optimized’ the presentation of its legal risks having dropped the glyphosate-related section without any explanation. The latest-available consen
The tone of Bayer Pharmaceuticals’ management was very optimistic when it talked about its late-stage pipeline at the R&D event. A peak sales potential of c.€12bn was not new, however, the company reported very good first results of a clinical trial in Parkinson’s disease (cell therapy – BlueRock), which also give some hope for the early-stage pipeline.
Bayer was abruptly evicted from the agro Shangri La and the pharma business was a mixed and more costly bag. This led to some differences with the consensus (sales: -1.4%; adjusted EBITDA: -3.5%). These things happen, but they never help change muted sentiment into a positive. Managing expectations might have been a good idea.
Bayer reported a strong set of FY 2022 figures beating AV forecasts but missing consensus on net profit (-8.2%); the outlook given indicated weaker profitability in 2023. This does not come out of the blue in our view. Glyphosate prices and therefore the related products are expected to make a lower contribution to profitability. The pharmaceuticals’ performance was held back by the expected weak performance from Xarelto.
Bayer’s Q3 figures were not a huge miss to consensus. They were mixed, but in an expectable pattern and should not be a big issue. On the contrary, there were some smaller positive aspects although investors were clearly disappointed as the share price is down -9% since last Friday’s close, bringing the twelve-month-performance down to a poor 2%. In our view the management is yet to reassure investors on the outlook for the coming months; perhaps the Q&A session will do the trick.
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).
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.
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.
… 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 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.
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.
… 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.
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.
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.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Bayer AG. We currently have 3 research reports from 7 professional analysts.
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Shore Capital
Feature article: Steady as she goes, but could be better: A review of investment company liquidity since 2016 Liquidity is the lifeblood of equity markets. The measurement of liquid asset availability to a market or company is a way of gauging a market’s health. This article builds on our previous work, which analysed the liquidity data for non-financial trading companies, by applying the same analytical techniques to the investment companies (IC) space. We analyse liquidity for ICs as a whol
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Hardman & Co
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Hybridan
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Cavendish
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Avon Protection’s capital markets day highlighted its continued focus on medium-term margin expansion (targeting operating margin of 14–16%), concentrating on its core business of respirators and head protection. The unwinding of the armour business, alongside the consolidation of Team Wendy (acquired in H220) should enable Avon to benefit from rising global defence spending. Its strong relationship with the US DoD, and organic growth opportunities with recurring revenue from necessary product r
Companies: Avon Protection PLC
Edison
Cambridge Nutritional Sciences (CNS) has published its H1 2024 results to end September 2023. Group revenues grew 44% to £4.9m and gross profits increased by 63% to £3.1m, with the company benefitting from newfound operational efficiencies. With its now streamlined strategy focussing on the core Health & Nutrition business and the initial signs of an encouraging uptick in sales momentum, we believe the company is well positioned for growth that will help create future value for shareholders. We
Companies: Cambridge Nutritional Sciences PLC
Venture Life has reported FY23 results to December 2023, following the February trading update. Revenues grew 17% in the year to £51.4m (our est. £50.7m) and adjusted EBITDA was £11.6m (our est. £11.6m). Cash conversion was 85%, generating £9.8m of cash from operations. Cash generation and no M&A in 2023 allowed the company to de-lever, closing FY23 with net debt to adjusted EBITDA at 1.3x. Management have focused on growth with three therapy areas generating double-digit revenue growth and onli
Companies: Venture Life Group Plc
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Liberum
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Diaceutics has released a trading statement for the year to December 2023 guiding to revenue growth of 22% YoY to £23.7m, up 19% on a constant currency basis. The order book jumped 57% to £26.6m, of which c£12.3m is expected to be realised in FY24, and which currently stands at £30.8m. The proportion of recurring revenue continues to increase and is now over 50% (FY22 35%). Cash at YE23 stood at £16.7m, indicating a near halving of the rate of cash burn in 2H23 compared to 1H23. We adjust our FY
Companies: Diaceutics Plc
Capital Access Group
Belluscura has released a Trading Update stating that due to the delay in securing funding and Chinese NMPA approval, sales and manufacturing have been delayed by at least four months and it now expects EBITDA breakeven in Q3 and to turn cashflow positive in Q1 2025.
Companies: Belluscura PLC
Dowgate Capital
Zoetis delivered a decent set of results for the last quarter of 2022 meeting analyst expectations as well as the high end of its management guidance. Despite the economic challenges, ongoing pandemic recovery, and the political unpredictability brought on by the war in Ukraine, they delivered operational growth for the year in each of their top 13 markets. The company's unique companion animal portfolio drove its 8% operational revenue increase for the year, growing 14% operationally. In compar
Companies: Zoetis (ZTS:NYSE)Zoetis, Inc. Class A (ZTS:NYS)
Baptista Research
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