Bayer Trims Profit, Sales Forecast on Crop Chemicals Stumble

Bayer AG trimmed its profit and sales estimates for the year, blaming a stumble in agriculture, even as the German conglomerate doubles down on crop chemicals with the $66 billion acquisition of Monsanto Co.

Earnings before interest, taxes, depreciation and amortization and other special costs will probably rise by a percentage in the high single-digits this year while sales grow more slowly, the Leverkusen, Germany-based company said Thursday in a statement. Ebitda was previously expected to rise by a percentage in the low teens.

Bayer is forging ahead with the Monsanto takeover and paring its holding in Covestro AG, its former plastics unit, as Chief Executive Officer Werner Baumann reshapes the company around health and agriculture. The company’s prescription drugs business has helped offset stutters at its other units, even as the Monsanto deal has raised questions about whether the conglomerate has reserved enough resources to compete for plum pharmaceutical assets.

The stock fell as much as 4.1 percent to 107.20 euros in Frankfurt trading, the lowest level in more than three months. Bayer pointed to an inventory adjustment in Brazil and a challenging environment for consumer health business in the U.S. for the weakened outlook.

“We will have a good -- though not as good as we thought -- year 2017,” Baumann said in a televised interview with Bloomberg’s Manus Cranny.

Bayer aims to close the Monsanto transaction by the end of the year, a timeline that could be challenged if the European Commission requires a so-called phase II review, which would add about four months to the antitrust approval process. Baumann said he believes the deal remains on track.

“We continue to work very very well with about 30 regulatory agencies,” he said on Bloomberg television.

Earnings before interest, taxes, depreciation and amortization and other special costs rose to 3.06 billion euros ($3.59 billion) in the second quarter, Bayer said. That beat the 3 billion-euro average estimate of seven analysts surveyed by Bloomberg. 

Profit rose at the pharmaceutical unit, which makes the blood thinner Xarelto, and at Covestro, where Ebitda spiked 57 percent to 848 million euros. Although Bayer reduced its holding to 44.8 percent last month and has said it aims to separate fully in the medium term, the former plastics unit remains fully consolidated in Bayer’s financial statements.