Bayer demonstrates dynamic growth, progress in innovation in fiscal year 2021

The Bayer Group had a successful year in 2021, both operationally and strategically.

"We posted substantial growth, strengthened our innovation pipeline and made progress toward our sustainability targets. All this shows that Bayer is on the right track," said Werner Baumann, chairman of the Board of Management, on Tuesday during the company's Financial News Conference.

"We not only met our updated Group forecast, but in fact exceeded it. What's particularly encouraging is that all three divisions grew dynamically in 2021, and what's more, they all outpaced their respective markets."

All divisions successfully launched innovations last year, with Baumann naming the Kerendia? kidney disease drug, Intacta 2 Xtend? soybean seeds and the Bepanthen? Derma skincare product as examples. The company invested a record amount in research and development and continued to strengthen its innovation capabilities by making numerous acquisitions, taking stakes in other companies and entering into partnerships, he explained.

The company's objective is to harness the huge opportunities of the Bio Revolution offered by the state-of-the-art technologies emerging in this digital age, Baumann continued.

"We are leveraging the potential of gene editing in the fields of both healthcare and agriculture. In medicine, we are researching the targeted editing of individual genes responsible for illnesses such as Parkinson's disease. And in agriculture, we can give crops the traits they need to better withstand extreme weather conditions."

Baumann also emphasized Bayer's progress in its transformation toward becoming a carbon-neutral company. He said Bayer had reduced its direct and indirect greenhouse gas emissions by 11.5 percent in 2021 and is on course to be carbon-neutral by 2030.

"Last year we grew our business while at the same time reducing emissions. This means we've decoupled growth and CO2 emissions. So, we're on the right track here, too."

A contributing factor was that Bayer concluded agreements in 2021 covering around 600,000 megawatt-hours of green electricity, thereby raising its share within the electricity mix to approximately one quarter. In addition, Bayer has set an internal CO2 price of 100 euros per metric ton to be factored into investment decisions and to accelerate its decarbonization efforts.

Group sales and earnings per share increase

Sales of the Bayer Group rose by 8.9 percent to 44.081 billion euros in 2021 after adjusting for currency and portfolio effects (Fx& portfolio adj.). Core earnings per share from continuing operations rose by 1.9 percent to 6.51 euros. Free cash flow increased by 5.4 percent to 1.415 billion euros in 2021 "This once again underscores our operational strength," said CFO Wolfgang Nickl.

Crop Science achieves record sales and grows earnings

In the agricultural business (Crop Science), Bayer increased sales by 11.1 percent (Fx& portfolio adj.) to 20.207 billion euros. The division grew sales significantly across all regions, especially in Latin America and Asia-Pacific region. At Corn Seed & Traits, sales were up 9.2 percent (Fx& portfolio adj.) thanks to increased market share in North America and Latin America, as well as to higher prices worldwide.

Bayer grew sales by double-digit percentages at Herbicides (15.4 percent), Fungicides (13.8 percent) and Soybean Seed & Traits (14.9 percent) on a currency-and portfolio-adjusted basis. The main drivers were price increases for glyphosate-based products at Herbicides, and higher Fox Xpro? volumes in Latin America at Fungicides. Soybean Seed & Traits benefited from higher volumes and prices, particularly in North America and Latin America.

EBITDA before special items at Crop Science increased by 3.6 percent to 4.698 billion euros, resulting in a margin of 23.2 percent. The growth in earnings was mainly driven by higher prices and volumes as well as contributions from ongoing efficiency programs.

Bayer sees encouraging steps regarding the glyphosate litigation in the United States. The US Supreme Court showed interest in the Hardeman case by inviting the Solicitor General, representing the US government, to file a brief on whether this case should be accepted.

Moreover, the company has won two consecutive jury trials on product liability cases in California. The company is continuing to execute its five-point plan and is prepared for any outcome at the Supreme Court.

Pharmaceuticals benefits greatly from Eylea? growth

Sales of prescription medicines (Pharmaceuticals) rose by 7.4 percent (Fx& portfolio adj.) to 18.349 billion euros. The ophthalmology, radiology and women's healthcare businesses recovered from the impact of the COVID-19 restrictions, with this positive development more than offsetting price-related sales headwinds caused by tender procedures in China.

The division's ophthalmology business additionally benefited from growth in market share and the launch of Eylea? prefilled syringes, with total Eylea? sales up 18.7 percent (Fx& portfolio adj.).

Within the radiology business, the CT Fluid Delivery, GadovistTM and UltravistTM product families all delivered double-digit percentage growth (Fx& portfolio adj.). Sales of the oral anticoagulant Xarelto? grew by 6.0 percent (Fx& portfolio adj.).

Higher volumes in China and Russia were partially offset by price declines. Sales of Adalat?, a product for the treatment of heart disease, surged by 21.3 percent (Fx& portfolio adj.) due to strong volume growth in China. The cancer drug Nubeqa? also performed well, primarily driven by higher volumes in the US.

Consumer Health increases sales and earnings

Sales of self-care products (Consumer Health) advanced by 6.5 percent (Fx& portfolio adj.) to 5.293 billion euros against a very strong prior year, with growth across all regions. Intensified by the COVID-19 pandemic, greater focus on health and prevention led to higher demand, especially in the Nutritionals category, which saw sales increase by 11.7 percent (Fx& portfolio adj.).

Growth was also driven by the launch of innovative products across all categories. Sales in the Digestive Health category also showed particularly strong growth of 9.7 percent (Fx& portfolio adj.).

EBITDA before special items increased by 6.8 percent to 1.190 billion euros. The EBITDA margin before special items improved for the third year in a row, rising by 0.5 percentage points to 22.5 percent.

Earnings primarily benefited from the division's strong business performance and continuous price and cost management, while allowing for investment in the launch of innovative products and compensating for inflation-related cost increases. Earnings were impacted by negative currency effects of 39 million euros.

Outlook: Bayer aiming to significantly increase sales, earnings and free cash flow

In 2022, Bayer expects to generate sales of approximately 46 billion euros on a currency-adjusted (Fx adj.) basis (i.e. based on the average monthly exchange rates from 2021). This corresponds to an increase of about 5 percent after adjusting for currency and portfolio effects.

The Group expects the EBITDA margin before special items to come in at around 26 percent (Fx adj.), corresponding to EBITDA before special items of around 12 billion euros (Fx adj.).

Bayer expects to post core earnings per share of approximately 7.00 euros (Fx adj.). Free cash flow is forecast to come in at around 2 billion to 2.5 billion euros (Fx adj.) after deducting settlement payments. The company also expects net financial debt to be approximately 33 billion to 34 billion euros (Fx adj.) as of December 31, 2022.

As part of its currency-adjusted forecast for the divisions, Bayer is anticipating sales growth (Fx& portfolio adj.) of around 7 percent at Crop Science, some 3 to 4 percent at Pharmaceuticals, and approximately 4 to 5 percent at Consumer Health.

In addition, Bayer expects the currency-adjusted EBITDA margin before special items to come in at around 25 to 26 percent at Crop Science, some 32 percent at Pharmaceuticals, and approximately 22 to 23 percent at Consumer Health.

Based on the exchange rates as of December 31, 2021, Bayer expects to generate Group sales of approximately 47 billion euros in 2022.

The company's outlook assumed a stable environment in Eastern Europe, which in the meantime has changed dramatically. Bayer will closely monitor and mitigate these risks to the extent possible.