Bayer Q4 Profit Surges, Warns On FY24; Says Break-up Not Now

(RTTNews) - German pharmaceutical and biotechnology major Bayer AG reported Tuesday a surge in its fourth-quarter net profit benefited by weak expenses. Meanwhile, sales were hurt by lower Pharmaceuticals sales, despite growth in Crop Science and consumer Health segments. Further, the company trimmed its dividend, and said it sees lower adjusted earnings and nearly flat sales in fiscal 2024 on a currency-adjusted basis.

Further, CEO Bill Anderson announced various steps to take out 2 billion euros in annual organizational costs from 2026, with cost reduction representing just one outcome.

Regarding the company's structure and a possible break-up, Anderson said, "our answer is 'not now' - and this shouldn't be misunderstood as 'never'. Of course, we will keep an open mind."

The Chief Executive stated that the company has four challenges that must be addressed urgently, including the loss of exclusivities and the pipeline at Pharmaceuticals, the US litigation, high debt levels and a hierarchical bureaucracy that blocks progress.

Net financial debt as of December 31 increased 8.5 percent against year-end 2022 to 34.498 billion euros.

For the next 24 to 36 months, the company said it will focus into building a strong Pharmaceuticals pipeline, addressing litigation, reducing debt, and continuing to implement its radical new operating model Dynamic Shared Ownership or DSO with a view to improve performance.

The company announced a dividend of 0.11 euro per share, lesser than previous year's 2.40 euros per share.

For fiscal 2024, the firm expects core earnings per share of 4.95 to 5.35 euros and sales of 46 billion to 48 billion euros.

On a currency-adjusted basis, it is expected that core earnings per share would be 5.10 euros to 5.50 euros, with EBITDA before special items of 10.7 billion euros to 11.3 billion euros, on sales of 47 billion to 49 billion euros.

In fiscal 2023, Bayer recorded core earnings per share of 6.39 euros, and EBITDA before special items of 11.706 billion euros, on sales of 47.637 billion euros.

For the fourth-quarter, Bayer reported a net income of 1.34 billion euros or 1.36 euros per share, 119 percent higher than 611 million euros or 0.62 euro per share last year.

Core earnings per share were 1.85 euros, compared to last year's 1.35 euros per share.

EBIT was at 2.19 billion euros, 53 percent higher than previous year's 1.43 billion euros. Excluding special items, EBIT was 1.94 billion euros, a growth of 33.7 percent from 1.45 billion euros a year ago.

EBITDA before special items was at 3.023 billion euros, up 22.8 percent from 2.462 billion euros in 2022. EBITDA margin before special items was 25.5 percent, higher than 20.5 percent last year.

In the quarter, research and development expenses dropped 33.7 percent from last year to 1.07 billion euros, and selling expenses moved down 23.4 percent to 2.84 billion euros.

Sales fell 1.2 percent to 11.86 billion euros from 12 billion euros last year. At constant exchange rates, sales grew 5.5 percent.

Bayer's agricultural business, Crop Science, recorded sales growth of 1.1 percent in the quarter to 5.63 billion euros, and consumer Health sales grew 3.5 percent, while Pharmaceuticals sales fell 5.7 percent to 4.58 billion euros.

In Germany, Bayer shares were trading at 27.83 euros, down 0.91 percent.

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