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Bayer swings to USD11.3-billion net loss on litigation charges

August 06/2020

MOSCOW (MRC) -- Bayer swung to a second-quarter net loss of EUR9.55 billion (USD11.27 billion) from a net profit of EUR404 million in the year-earlier quarter on special charges of EUR12.51 billion comprising mainly provisions for agreements reached in legacy Monsanto litigation in the US related to glyphosate and dicamba herbicides, and polychlorinated biphenyls. Other special charges resulted from litigation in pharmaceuticals and the companys ongoing restructuring program, reported Chemweek.

Bayers EBITDA before special items rose by 5.6% year on year (YOY) in the second quarter to EUR2.88 billion, net of EUR12 million in negative currency effects, beating analysts consensus estimate by 5%. Sales declined by 2.5% on a currency- and portfolio-adjusted basis to EUR10.05 billion and the special charges drove EBIT down to a negative EUR10.78 billion from a positive EUR785 million in the year-earlier period. Bayer, meanwhile, has downgraded its full-year outlook due to the impacts of the COVID-19 pandemic.

Free cash flow amounted to EUR1.40 billion in the second quarter, up from EUR751 million a year earlier. Net debt increased by 1.7% compared with 31 March 2020, to EUR35.99 billion as of 30 June 2020.

Bayers businesses delivered a solid performance in the quarter despite COVID-19 and the associated uncertainties, says chairman Werner Baumann. Thanks to the growth in our agricultural business, we raised EBITDA before special items, and we did so in a challenging environment, Baumann says. Sales in the pharmaceuticals and consumer health divisions receded, however.

Baumann says that Bayer is taking the necessary steps to safeguard the continuity of its business operations in the current challenging times and ensure reliable supplies of its products and services to hospitals, physicians, patients, consumers, and farmers.

Bayer says it has downgraded its full-year guidance, made in February, because the financial impact of the COVID-19 pandemic remains difficult to predict. Bayer now forecasts currency-adjusted 2020 sales of EUR4344 billion, down from previous guidance of EUR4445 billion, or an increase of 01% compared with a previous forecast for growth of about 34% on a currency- and portfolio-adjusted basis. Bayer has maintained its target of an increase in its EBITDA margin before special items to about 28% on a currency-adjusted basis, which would correspond to EBITDA before special items of about EUR12.1 billion, down from previous guidance of EUR12.312.6 billion on a currency-adjusted basis.

Bayer says it anticipates substantial negative currency effects this year, primarily due to the depreciation of the Brazilian currency. Based on 30 June exchange rates, this could push full-year sales down to 4243 billion, the company says.

Taking into account the financing of the litigation payments, Bayer now expects to reduce net debt to about EUR33 billion this year, compared with a previous expectation of EUR27 billion.

As MRC wrote before, Covestro has closed the sale of its European polycarbonates (PC) sheets business to the Munich-based Serafin Group effective January 2, 2020. This includes key management and sales functions throughout Europe as well as production sites in Belgium and Italy.

Covestro (formerly Bayer MaterialScience) is an independent subgroup within Bayer. It was created as part of the restructuring of Bayer AG from the former business group Bayer Polymers, with certain of its activities being spun off to Lanxess AG. Covestro manufactures and develops materials such as coatings, adhesives and sealants, polycarbonates (CDs, DVDs), polyurethanes (automotive seating, insulation for refrigerating appliances) etc. 

According to MRC's ScanPlast report, Russia's overall estimated consumption of PC granules totalled 47,300 tonnes in the first two quarters of 2020 (excluding imports and exports to/from Belarus), compared to 40,700 tonnes a year earlier. Demand increased by 16% year on year.
Author:Margaret Volkova
Tags:Europe, PC, sheet extrusion, petrochemistry, Bayer, Covestro, Russia.
Category:General News
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