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Bayer Posts Third-Quarter Loss on Agriculture Woes—Update

By Ruth Bender 

BERLIN -- Bayer AG on Tuesday posted a loss in the third-quarter as the coronavirus pandemic compounded problems the German chemical and drug giant has been facing since its acquisition of agriculture giant Monsanto just over two years ago.

Bayer also said it would need an extra $750 million on top of a settlement worth up to $10.9 billion it announced over the summer to resolve a legal battle with U.S. plaintiffs alleging the Roundup weedkillers inherited from Monsanto cause cancer. Bayer has consistently denied that Roundup or its ingredients cause cancer.

Bayer, the inventor of aspirin, bet big on agriculture with its $63 billion acquisition of Monsanto in 2018. The move was supposed to help the German company tap into rising demand driven by rapid population growth. Instead, it exposed Bayer to open-ended legal liabilities and a market that has been severely disrupted by the coronavirus pandemic.

The legal battle with plaintiffs claiming that Roundup and its active ingredient glyphosate cause cancer sent its share price falling to record lows. The planned settlement hasn't so far been finalized. And now the pandemic is hurting a crops-science business that since the Monsanto integration has grown to just under half the group's total sales.

Last month, Bayer issued a profit warning for 2021, blaming low prices for major crops, falling demand for biofuel and tougher competition in the soy market. Bayer then said it expected to write down the value of assets in the agricultural business in the "mid to high-single-digit billion euros" range.

Bayer swung to a net loss of EUR2.74 billion (equivalent to about $3.2 billion) in the three months ended Sept. 30 from a net profit of EUR1.04 billion. The company said it had to make non-cash impairment charges of EUR9.3 billion on various assets in its agriculture unit, including goodwill. Sales fell 14% to EUR8.51 billion, dragged down mostly by the crops-science unit.

"The impact of the pandemic is placing additional strain on our Crop Science Division," said finance chief Wolfgang Nickl in a statement.

In the second quarter, problems related to the Monsanto purchase had already pushed Bayer to a net loss of nearly $11 billion as the company set aside money to cover its proposed Roundup settlement deal.

But the settlement has hit snags. In July, Bayer scrapped a crucial part of the deal -- a $1.25 billion proposal for resolving possible future lawsuits since the weedkillers continue to be sold -- after a federal judge voiced concerns about its structure.

Bayer on Tuesday said finalizing a new proposal protecting it from future lawsuits would require more time but that a new solution would probably cost in the range of $2 billion, instead of $1.25 billion. Investors have been keen to see Bayer finalize the deal.

In further bad news for Bayer, the California Supreme Court declined last month to hear an appeal by Bayer seeking to reverse the first jury Roundup jury verdict that ruled in favor of a former groundskeeper who said it gave him cancer.

In early morning trade, Bayer shares were trading down 2% in a broadly higher market going into U.S. election day. Concerns over the outcome of the settlement, the recent profit warning and pandemic woes have pushed Bayer shares down over 40% this year so far, the worst performer in Germany's bluechip DAX index.

Write to Ruth Bender at Ruth.Bender@wsj.com

Corrections & Amplifications

This story was corrected at 0852 GMT. The original in the second paragraph incorrectly reported that Bayer said it would need an extra $750,000. It should say $750 million.

(END) Dow Jones Newswires

November 03, 2020 04:01 ET (09:01 GMT)

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