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Bayer Lowers Expectations Due To Weak Glyphosate Demand

Bayer Lowers Expectations Due To Weak Glyphosate Demand
Bayer announced a 2.5 billion euro ($2.8 billion) write-down on glyphosate-related assets as a result of weak glyphosate-based weed killer demand, which also caused Bayer to lower its full-year earnings guidance for the second time.
The German manufacturer of pharmaceuticals and pesticides said in an unscheduled statement on Monday that it expected 2023 earnings before interest, taxes, depreciation, and amortisation (EBITDA), adjusted for one-time items, to be between 11.3 billion euros ($12.5 billion) and 11.8 billion euros on a currency-adjusted basis, down from the 13.5 billion euros reported for 2022.
That was less or somewhat more than the prior forecast for 2023, which called for 12.5 billion euros.
The company forecast that free cash flow would be zero, down from its previous estimate of 3 billion euros.
"Based on the anticipated market development, in particular with respect to the glyphosate business, Bayer also expects to record a goodwill impairment of approximately 2.5 billion euros," it said.
As a result, there would be a 2 billion euro net loss for the second quarter.
Competitors have also been impacted by weak farm markets, which has led analysts to forecast a profit warning at Bayer. Following wholesale distributors' reduction in orders to lower inventory levels, crop protection provider FMC this month lowered its full-year outlook. The industrial chemicals company BASF, which Bayer competes with in the seed and pesticide markets, lowered its earnings guidance this month but omitted information about its agricultural business.
Bayer had already forewarned in May that cost inflation and a drop in the price of glyphosate-based weedkillers from their peak levels last year would likely cause its 2023 results to fall short of its intended range.
After Hurricane Ida destroyed competing producers and constricted Chinese suppliers failed to fill the gap, Bayer saw a 44% increase in herbicide sales in 2022. As competitors have entered the market again this year, prices have been falling drastically.
The new CEO Bill Anderson, a former Roche executive who took over the top position in June, faces additional hurdles as a result of the more challenging environment.
The German industrial giant Bayer, which has spent billions on legal fees related to its glyphosate weedkillers, replaced its outgoing CEO Werner Baumann early in response to demands from certain investors that it break into distinct companies and streamline its complex organisational structure.

Christopher J. Mitchell

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