Is Bayer CEO Bill Anderson Running Out of Time?
Bayer, the German agriculture and healthcare giant, has released lacklustre third-quarter earnings, with a warning current challenges may also impact next year’s results too.
Its net third-quarter sales were €10bn (£8.3bn), down from €10.3bn (£8.6bn) year on year.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) for the third quarter came up to €1.3bn, down from €1.7bn in Q3 2023.
Crop protection under pressure
Crop science sales fell 2% in the first nine months of the year, as its crop protection operations face pricing pressures.
Announcing the third-quarter results, Bayer CEO Bill Anderson said in a press release: “Even as we see great progress in some areas, others require more attention. Regulatory challenges and generic pricing pressures in our crop protection business are two examples.”
Bayer's crop protection business is experiencing pricing pressures primarily due to increased competition from Chinese competitors, particularly in glyphosate-based herbicides, which has seen Bayer cutting prices for its own products.
This is on to increased competition from generic products in the crop protection market, which again is lowering prices across every manufacturer.
Plus additional regulatory requirements are impacting Bayer’s crop protection business, potentially limiting its market reach or increasing compliance costs.
Weak Latin America demand
Bayer is also grappling with a weaker-than-expected agricultural market in Latin America. Growers in Argentina, for example, are planting less corn after the proliferation of a certain insect hit harvests last year, as well farmers braced for drought.
Wider problems at Bayer
Increased Chinese competition and a weak demand in Latin America are part of a larger set of issues affecting Bayer.
Bayer faces the loss of exclusivity of some of its best-selling drugs, is weighed down by an enormous debt burden, and is hounded by costly litigation following its US$63bn acquisition of seed producer Monsanto in 2018, which Anderson’s predecessor pushed through despite major shareholder competition.
Bayer is experiencing declining sales of its blockbuster blood thinner Xarelto due to patent expiries and increased generic competition.
Rising costs are also impacting profitability across Bayer's divisions.
And Bayer continues to face legal challenges related to glyphosate products, with potential financial implications, and delays in regulatory approval for its soya bean herbicide, Dicamba.
How Anderson is going to boost Bayer
“We’ve made a lot of gains in terms of the future, but I understand that the current numbers aren’t that pretty because of the Xarelto loss,” Anderson told analysts during a third-quarter earnings call.
He acknowledged the frustration investors are feeling but asked for patience as the 160-year-old German corporate juggernaut moves forward with a strategy outlined in March to adopt what it calls “a dynamic shared ownership model” – this consists of cutting out middle managers to empower the scientists and sales experts, and is expected to save €2bn per year by 2026.
Anderson has already slashed 5,500 jobs since the start of the year.
Other elements of Anderson’s strategy to turn Bayer around include a supervisory board refresh, guidance adjustment and a change to management compensation, among other ideas.
“We’re basically seven to eight months into a two-to-three-year plan,” Anderson said. “So we’re not done.”
However, there is scepticism that Anderson can turn this juggernaut around.
“Bill Anderson is running out of time,” Thomas Schweppe, a former Goldman Sachs banker and founder of Frankfurt-based advisory firm 7 Square, told the Financial Times in March.
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