Bayer AG fell after slashing its outlook for the year amid persistently low prices for agriculture products, including the controversial weed killer Roundup.
The stock dropped as much as 3.2% in Frankfurt trading after the German company lowered its range for expected earnings by more than €1 billion ($1.1 billion).
While Bayer joins other chemicals companies including BASF SE and Lanxess AG in warning of a worsening outlook, the magnitude of the downgrade may come as a surprise, according to Morgan Stanley’s James Quigley. And there is still a risk that the picture could further deteriorate later this year if prices and demand for Roundup remain weak, the analyst said.
The gloomier outlook comes as new Chief Executive Officer Bill Anderson tries to resurrect the fortunes of the sprawling company, which has three divisions devoted to agriculture, pharmaceuticals and consumer health. Anderson’s predecessor, Werner Baumann, spent $63 billion last decade on crops giant Monsanto, which saddled Bayer with massive legal headaches related to Roundup.
Bayer’s second-quarter results were lower than expected, with sales of €11 billion and earnings per share of €1.20, according to a preliminary release.
Earnings before interest, taxes, depreciation and amortization will probably be as high as €11.8 billion this year, down from an expected peak of €13 billion, the company said late Monday. Bayer also adjusted its forecast for core earnings per share and said it expects to record a goodwill impairment of about €2.5 billion, mostly based on the Roundup business, it said.
CEO Anderson, a Texas-born former head of pharma at Swiss health-care giant Roche Holding AG, has pledged to reshape the work culture at Bayer and said he doesn’t believe most shareholders want a break up of the company.
--With assistance from James Cone.
(Updates with shares in first, second paragraphs and analyst commentary in third)
