The German global agro and chemical group Bayer expects sales to stagnate next year as a result of the coronavirus pandemic. Adjusted earnings per share will also likely be worse than in the current year.
The expectations for the CropScience division are lower; therefore, the company is tightening its cost-cutting policy. Possibly more than 1.5 billion euros will need to be saved.
Bayer’s cultivation activities, which generate just under half of sales, will face “deeper than expected” impacts from the corona crisis that likely will not improve in the short term, Bayer said in a statement. The company expects to incur impairments on assets in the agricultural sector worth billions of euros.
The effects of COVID-19 are stronger than anticipated for the Crop Science division, it said. The agricultural sector is growing less than expected due to low prices for key crops and intense competition in the soybean market. The limited production of biofuels also has an impact. Moreover, Bayer is facing negative currency effects, mainly from the Brazilian real.
Further job losses cannot be ruled out, the company announced when presenting the disappointing outlook. Business premises not considered strategically important may be sold. In addition, CEO Werner Baumann announced cuts in operational activities. From 2024 onwards, more than 1.5 billion euros in annual costs will be eliminated.
On the financial markets, investors reacted to the bad news from Leverkusen with a price drop of more than 12 percent. Bayer AG shares collapsed after the agricultural and pharmaceutical giant stated that the pandemic’s effects on agricultural commodities will continue into next year.
The worse outlook for Bayer for 2021 comes on top of the financial setback earlier this year, when the company had to set aside 5 billion dollars to settle tens of thousands of damage claims in the United States. Those damage claims related to the acquired Monsanto / RoundUp business have still not been resolved.