Bayer says close to Monsanto merger after weak Q1

Bayer secured regulatory approval for the tie-up with Monsanto from the European Commission in March

Frankfurt am Main (AFP) – German chemicals firm Bayer said Thursday exchange rate headwinds had undermined revenues and profits in the first quarter, but kept its eyes on a planned takeover of US seeds and pesticides maker Monsanto.

Net profits at the Leverkusen-based group fell 6.2 percent year-on-year, to just under 2.0 billion euros ($2.4 billion).

Operating, or underlying profits lost 4.8 percent to reach 2.3 billion euros, on the back of revenues down 5.6 percent at 9.1 billion euros.

Sales fell at all the group’s divisions — prescription drugs, over-the-counter medicines, crop science and animal health — although Bayer said that, adjusting for currency effects, sales of pharmaceuticals and veterinary products had in fact increased.

Meanwhile operating profits were burdened by one-off costs linked to the group’s mammoth buyout of Monsanto, one of the largest in German corporate history with a value of around $62.5 billion.

Nevertheless, “we are quite happy with the first quarter,” chief executive Werner Baumann said in a telephone conference.

“We are looking forward to both a good underlying performance for the next quarters, and of course the conclusion of the acquisition of Monsanto” by the end of June, he added.

– Green for go –

Bayer secured regulatory approval for the tie-up from the powerful European Commission in March, over the warnings of some environmentalists and politicians that it would create an over-mighty giant dominating global agriculture.

Bayer has agreed to trade away large chunks of its existing seeds and pesticides business to rival BASF in exchange, with the two chemical giants so far agreeing the sale of activities worth some 7.6 billion euros.

Meanwhile, the Wall Street Journal reported in April that US authorities would also green-light the deal.

Chief executive Baumann said the firm was engaged in “very constructive” talks with remaining regulators who have yet to clear the buyout.

Executives do not expect to be asked to offer up more activities in exchange for approval, he added.

One tricky holdout is Russia, where authorities have ordered Bayer to share technology with local companies in exchange for their rubber stamp.

Looking ahead to the full year, Bayer forecast a “low-single-digit percentage” decrease in sales mainly driven by currency effects, to below 35 billion euros, with a similar decline in underlying profits before special items.

Baumann noted that core earnings per share, a measure that excludes one-off costs, would “be just about at prior year level”.

He added that the prediction would hold even after the firm issues some 31 million new shares in a capital increase, allowing Singaporean state-owned investment firm Temasek to climb aboard to the tune of 3.0 billion euros.

Investors’ response to Bayer results was muted, with the stock almost unchanged at 99.58 euros around 15:40 local time (1340 GMT) in Frankfurt, outperforming the DAX index of leading German shares, which fell slightly.