Bayer expects stagnant earnings at agriculture unit

[LEVERKUSEN, GERMANY] German drugmaker Bayer issued muted full-year guidance for its agricultural products division on Wednesday, as it prepares to wrap up the US$66 billion takeover of US seed maker Monsanto later this year.

Bayer's Crop Science division expects earnings before interest, taxes, depreciation and amortisation (EBITDA), adjusted for one-offs, to stagnate this year, the group said as it issued fourth-quarter group earnings that slightly beat market expectations. "We predict that the environment for the world seed and crop protection market will remain volatile in 2017 after a weak prior year," Bayer said in its annual report, reiterating it was on track to gain all regulatory approvals for the takeover by year-end.

It said it anticipated a slight recovery in global agricultural products markets, with expected industry growth of 1 percent this year compared with a 1 percent decline in 2016.

Prices of agricultural commodities such as corn, soy and wheat have recovered somewhat from multi-year lows hit in September last year.

Bayer has said the Monsanto deal, which would bring its agricultural division on par with its health care unit in terms of revenues, would help it develop new combinations of seeds and pesticides to compete with large rivals such as the planned combination of Dow and Dupont.

For the group overall, Bayer said it expected a medium single-digit percentage increase in adjusted EBITDA for 2017, helped by fast-growing revenues from stroke prevention pill Xarelto.

In the fourth quarter, adjusted group EBITDA rose 13.7 percent to 2.18 billion euros (US$2.30 billion), above the average estimate of 2.09 billion euros in a Reuters poll of analysts.

Growth in prescription drugs sales were partly offset by weaker-than-expected earnings at its consumer care products division, with sales of allergy treatment Claritin falling 9 percent, coming under pressure from rival products.

REUTERS