The Bayer Group’s performance in the opening months of the year aligned with expectations. “First-quarter sales declined slightly compared to the previous year. The Pharmaceuticals Division experienced growth and increased profitability, while the Crop Science Division outperformed in a challenging market. Consumer Health had a slower start but is expected to return to growth throughout the year,” CEO Bill Anderson said on Tuesday, presenting the company’s quarterly statement for the first quarter. He reaffirmed Bayer’s outlook for 2024 at constant currencies. Anderson also discussed the company’s strategic priorities. “In March, I outlined four focus areas to get Bayer back on track. Two months later, we’ve made progress in each one,” he stated, referring to growth and innovation, US litigation, cash and deleveraging, and the new Dynamic Shared Ownership (DSO) operating model. Regarding DSO implementation, Anderson explained, “We’re consolidating roles, designing teams for more impact, and reducing layers. The most important measure of our impact will be our ability to innovate, grow our businesses, and improve life for our customers.”
Group sales reached 13.765 billion euros in the first quarter of 2024, slightly below the previous year’s figure on a currency- and portfolio-adjusted basis (Fx & portfolio adj. -0.6 percent). A negative currency effect of 525 million euros was recorded (Q1 2023: positive currency effect of 102 million euros). EBITDA before special items decreased by 1.3 percent to 4.412 billion euros. EBIT increased by 4.0 percent to 3.092 billion euros after net special charges of 207 million euros (Q1 2023: 431 million euros). These charges were primarily related to expenses for ongoing restructuring measures affecting all divisions and functional areas. Net income fell by 8.2 percent to 2.0 billion euros, while core earnings per share decreased by 4.4 percent to 2.82 euros.
Free cash flow was at minus 2.626 billion euros (Q1 2023: minus 4.102 billion euros), mainly due to improved operating cash flow. Net financial debt as of March 31, 2024, stood at 37.488 billion euros, up 8.7 percent from the end of 2023, mainly due to seasonal cash outflows from operating activities.
Crop Science Outperforms in Challenging Market
In the agricultural business (Crop Science), Bayer outperformed its peers in a difficult market. Sales declined by 3.0 percent (Fx & portfolio adj.) to 7.907 billion euros, mainly due to lower volumes for non-glyphosate-based herbicides and fungicides in Europe, the Middle East, and Africa. For glyphosate-based products, significant market-driven price declines in all regions were not fully offset by strong volume recovery. Herbicides and fungicides sales fell by 13.3 percent and 8.5 percent (Fx & portfolio adj.), respectively. Sales at Soybean Seed & Traits remained level with the prior-year period (Fx & portfolio adj.). Business at Corn Seed & Traits grew by 2.0 percent (Fx & portfolio adj.) due to higher prices in all regions, while sales at Insecticides increased by 2.3 percent (Fx & portfolio adj.), driven by higher volumes in Europe, the Middle East, Africa, and North America.
EBITDA before special items at Crop Science declined by 12.8 percent to 2.849 billion euros, mainly due to price declines for glyphosate-based products. There was also a negative currency effect of 92 million euros (Q1 2023: positive currency effect of 54 million euros).
Pharmaceuticals Boosted by New Products
Sales of prescription medicines (Pharmaceuticals) increased by 3.9 percent (Fx & portfolio adj.) to 4.358 billion euros. The division’s new products, Nubeqa™, a cancer drug, and Kerendia™, for chronic kidney disease associated with type 2 diabetes, both saw sales rise by around two-thirds (Fx & portfolio adj.). Additionally, sales of the ophthalmology drug Eylea™ rose by 3.4 percent (Fx & portfolio adj.) due to higher volumes and prices. The Radiology business also posted gains, with the CT Fluid Delivery and Ultravist™ product families growing by around 10 percent (Fx & portfolio adj.). Despite competitive pressure from generic products, sales of the oral anticoagulant Xarelto™ rose by 1.7 percent (Fx & portfolio adj.). Conversely, sales of the cardiovascular drug Adalat™ fell by 23.0 percent (Fx & portfolio adj.) due to tender procedures in China.
EBITDA before special items at Pharmaceuticals rose by 8.0 percent to 1.194 billion euros. Higher R&D investments for cell and gene therapy and chemoproteomics technologies were offset by lower expenses for advanced clinical development projects. The division also reduced costs related to its sales activities. There was a negative currency effect of 127 million euros (Q1 2023: negative currency effect of 6 million euros).
Consumer Health Balances Shifting Demand with Pricing
Sales of self-care products (Consumer Health) decreased by 1.8 percent (Fx & portfolio adj.) to 1.432 billion euros. The division saw reduced customer demand following a strong previous quarter when inventories were replenished due to improved supply. Additionally, US retailers optimized inventory levels across the industry. However, strategic pricing largely offset the decline in volumes. Business in the Allergy & Cold category fell by 16.8 percent (Fx & portfolio adj.) due to a weaker cold season and mild winter, while sales at Nutritionals remained level year-on-year (Fx & portfolio adj.). Conversely, Digestive Health saw a 9.0 percent (Fx & portfolio adj.) increase amid improved supply. Growth in Europe, driven by Iberogast™ and Rennie™, contributed to overall higher sales, with Dermatology sales rising by 7.3 percent (Fx & portfolio adj.) due to strong demand for Bepanthen™ Derma and regional brands in China.
EBITDA before special items at Consumer Health decreased by 12.7 percent to 331 million euros, mainly due to negative currency effects of 46 million euros (Q1 2023: negative currency effects of 4 million euros). The division managed to offset the decline in sales, rising inflation-driven costs, and higher marketing investments through continuous cost and price management efforts and higher income from selling minor, non-strategic brands.
Currency-Adjusted Outlook Confirmed
Bayer has confirmed its currency-adjusted forecast for full-year 2024 (based on the average monthly exchange rates in 2023). However, the anticipated negative impact from currency effects has increased based on closing rates as of March 31, 2024. Applying these rates instead of December 31, 2023, reduces the forecast for EBITDA before special items from between 10.4 billion and 11.0 billion euros to between 10.2 billion and 10.8 billion euros.
