Bayer Chief Executive, Bill Anderson, has announced plans to overhaul the company’s structure and streamline its management. This move will result in significant job cuts, however, Anderson has ruled out the possibility of splitting the group into three separate businesses.
Throughout the years, Bayer has been among the few companies that have combined pharmaceutical and consumer-health assets under one roof. However, in recent times, several pharmaceutical giants such as Sanofi, Johnson & Johnson, Pfizer, and GSK have made the decision to spin off their consumer-health divisions to focus on more profitable prescription drugs.
Despite urging from shareholders, including Bluebell Capital Partners, to split Bayer into three businesses (crop science, consumer health, and pharmaceuticals), Anderson has made it clear that this option is not on the table. He believes that a three-way split would require a complex and time-consuming process.
Instead, Bayer plans to streamline operations by cutting several layers of management by the end of the next year. Anderson stated, “We are redesigning Bayer to focus only on what’s essential for our mission – and getting rid of everything else.”
In order to explore various structural options, including potentially separating its crop science or consumer health divisions, Anderson has assembled a team of advisors.
This strategic restructuring at Bayer aims to create a more efficient and focused organization that can better align with its mission and goals moving forward.
Bayer Reports Lower Sales and Earnings in Q3
Bayer, a multinational pharmaceutical and life sciences company, experienced a decline in sales and earnings for the third quarter across its three divisions. The agricultural division was particularly affected due to impairment losses caused by high interest rates. Additionally, lower prices for glyphosate, the active ingredient in herbicides and weed-control products, have contributed to the company’s challenges. As a result, Bayer had to revise its sales and earnings guidance for the year.
Financial Performance
In the three months ending September, Bayer reported a net loss of 4.57 billion euros ($4.89 billion), compared to a profit of EUR546 million in the same period last year. Earnings before interest, taxes, depreciation, amortization, and special items (EBITDA) decreased by 31% to EUR1.69 billion. Core earnings per share also saw a significant decline, dropping from EUR1.13 to EUR0.38.
Sales Results
Total sales for the quarter fell by 8.3% to EUR10.34 billion. The agricultural business division, crop science, experienced a 7% reduction in sales, amounting to EUR4.37 billion. Sales in the pharmaceuticals division declined by 8.4% to EUR4.54 billion, while the consumer health business contributed EUR1.41 billion in sales, representing an 8.9% decrease compared to the previous year.
Analyst Expectations
Analysts had anticipated a net profit of EUR33 million for the quarter. The forecast also predicted EBITDA before special items of EUR1.73 billion, core earnings per share of EUR0.73, and sales of EUR10.44 billion, according to a Vara Research consensus.
Future Outlook
Despite the challenges faced in Q3, Bayer maintains its expectations for the full year. The company anticipates EBITDA before special items to range between EUR11.3 billion and EUR11.8 billion. They also project core earnings per share of EUR6.20 to EUR6.40, and sales between EUR48.5 billion and EUR49.5 billion, based on average monthly exchange rates in 2022. However, they acknowledge that the year ahead will likely bring about continued challenges and slow growth.
In light of the disappointing performance, an executive at Bayer expressed dissatisfaction with the situation and emphasized the need to address the lack of cash flow.