Bayer Decides Against Splitting Into Separate Units for Now — 2nd Update

By Dominic Chopping

Bayer doesn't plan to pursue a split into separate units for now, Chief Executive Bill Anderson said.

"On the question of the company's structure and a possible breakup of the group, our answer is 'not now'--and this shouldn't be misunderstood as 'never'," Anderson said Tuesday.

The German pharmaceutical and agricultural conglomerate has been looking into various options for the group as it seeks to cut debt and boost its beleaguered share price.

Bayer has been under pressure from investors to split itself up as its three units--crop science, consumer health and pharmaceuticals--are diverse. The company is one of few remaining groups to house both pharmaceutical and consumer-health assets under the same roof.

Rather than split itself up through a spinoff, Bayer has decided to spend the next 24 to 36 months focusing on building a strong pharmaceuticals pipeline, addressing litigation, reducing debt, and continuing to implement its new operating model to improve performance, it said.

"We will keep an open mind," Anderson said. "Given the company's very limited room to maneuver, our priority is on tackling our challenges, boosting performance and creating strategic flexibility."

The rebuilding of its pharmaceuticals pipeline follows the recent discontinuation of key experimental drug asundexian. Bayer had backed the blood-thinning drug for stroke prevention to become the biggest growth driver among its pharmaceuticals, but trials were halted late last year after disappointing results.

The company also remains embroiled in legal battles stemming from its Monsanto business, as plaintiffs blame Monsanto's Roundup weedkiller for causing cancers. The $63 billion acquisition of Monsanto in 2018 was designed to turn the inventor of aspirin into the world's biggest crop-science business, but instead saddled it with debt and litigation.

To save cash, Bayer slashed its dividend to the legally required minimum last month and said it plans to pay out the minimum required for both 2024 and 2025 as well.

Building on recently announced plans to cut into several layers of management to streamline operations, the company said the move will take out 2 billion euros ($2.17 billion) of costs and accelerate decision-making to make its businesses leaner and more effective.

Around 4,000 employees are already involved in the shift to smaller self-managed teams and the system--dubbed dynamic shared ownership--will be rolled out to every part of the company by the end of the year. The change will also lead to a "considerable" number of job reductions, it said.

Ultimately, the new structure will fuel growth through improved customer proximity and accelerated innovation, enabling a strengthening of the pharma pipeline, allowing innovation in crop science with 10 blockbusters reaching the market over the next decade, and putting consumer health in a position to outperform, Bayer added.

Earnings improved in the final quarter of 2023. Net profit rose to EUR1.34 billion from EUR611 million in the same quarter a year earlier, though sales fell 1.2% to EUR11.86 billion. Both metrics beat forecasts from a Vara Research consensus.

However, it expects sales to be relatively flat this year while earnings will fall.

Bayer forecasts earnings before interest, taxes, depreciation and amortization this year between EUR10.7 billion and EUR11.3 billion before special items, compared with EUR11.71 billion in 2023, on sales of EUR47 billion to EUR49 billion. Sales in 2023 were EUR47.64 billion.

Core earnings per share is seen at EUR5.10 to EUR5.50, free cash flow at EUR2 billion to EUR3 billion and net financial debt at year-end of EUR32.5 billion to EUR33.5 billion.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

March 05, 2024 04:09 ET (09:09 GMT)

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