The Bayer Group has weathered a global pandemic with little visible impact to the bottomline as 2020 earnings before interest, taxes, depreciation and amortization were steady with the prior year at 11.461 billion euros ($14 billion).
Group sales were at 41.400 billion euros ($50.6 billion), impacted by negative currency effects of 1.941 billion euros ($2.4 billion). Core earnings per share were 6.39 euros ($7.80), up .2%, but earnings per share were impacted negatively by litigation and impairments. Net financial debt improved by 11.8% to 30.041 billion euros ($41.6 billion).
“If you factor out the negative currency effects, core earnings per share would have been just under seven euros ($8.60), which is almost the level we had been targeting before the pandemic spread,” said Werner Baumann, board chairman, during the company's financial news conference on Thursday.
The Board of Management and Supervisory Board of Bayer AG will propose to the Annual Stockholders’ Meeting on April 27, 2021, a dividend payment for fiscal 2020 of 2.00 euros ($2.40) per share, compared to 2.80 euros ($3.40) per share in 2019. The company is thus upholding its dividend policy of distributing 30% to 40% of core earnings per share, with this year’s proposed dividend being at the lower end of this corridor. With 982.42 million shares entitled to the dividend, the total dividend payment would amount to 1.965 billion euros ($2.4 billion) compared to 2.751 billion euros ($3.4 billion) in fiscal 2019.
Free cash flow in 2020 was impacted by payments of just under 4 billion euros ($4.9 billion) to resolve litigation and amounted to 1.343 billion euros ($1.6 billion).
In the agricultural business, Bayer increased sales by 1.3% to 18.840 billion euros ($23 billion). The businesses in the Latin American and Asia/Pacific regions contributed to the increase, while declines occurred particularly in North America. Sales growth was particularly strong with fungicides at 8.5% and environmental science at 11.5%, with these businesses expanding in all regions.
Bayer posted sales gains in Latin America thanks to Fox Xpro, which was launched in 2019. Sales also rose in soybean seed and traits by 2.3%. Greater market penetration in Latin America had a positive effect, while business in North America saw lower selling prices and volumes, mainly due to increased competition. In addition, Crop Science launched its new short-stature corn Vitala in Mexico as part of a pilot project.
Sales remained at the prior-year level in corn seed and traits. In North America, shifts in demand into 2019 and 2021 had a negative impact, while sales moved ahead in all the other regions. Herbicide sales declined by 1%, particularly because the company lost registrations – in some cases only temporarily – in the Europe/Middle East/Africa and North America regions.
EBITDA before special items at Crop Science decreased by 3.8% to 4.536 billion euros ($5.5 billion). Business was particularly impacted by negative currency effects of 537 million euros ($656.8 million), while the decline in sales in North America due to shifts in demand was also a key factor. By contrast, earnings benefited from the realization of cost synergies as the company progresses with the integration of the acquired business.
As regards the glyphosate litigation in the United States, the company announced in early February 2021 that it had reached an agreement with plaintiffs' counsel on a class plan intended to manage and resolve future Roundup cases, and plaintiffs' counsel filed a motion for preliminary approval of the class agreement. Both parties have worked diligently to address questions the court raised after their first settlement proposal for future Roundup cases last summer. The new agreement is now subject to court approval. The class plan is intended to be one part of a holistic solution designed to provide further closure to the Monsanto Roundup litigation. Approximately 90,000 current claims in the Roundup litigation overall are covered by settlement agreements, or did not meet the settlement program eligibility criteria. The company continues to negotiate with plaintiffs’ counsel to reach agreements in the remainder of current cases.
Progress made on sustainability targets
Last year, Bayer drew up a roadmap based on the United Nations’ Sustainable Development Goals and took steps to implement it. The independent Science Based Targets initiative reviewed Bayer’s climate protection goals and confirmed that, by reducing its own emissions, the company is helping to limit global warming to 1.5°C and fulfill the Paris Climate Agreement. For example, Bayer has now switched to 100% green electricity in Spain and Mexico. As part of its efforts to protect the climate, the company has also initiated a pilot project in the United States and Brazil to help farmers adopt climate-friendly practices and utilize carbon capture and storage.
In line with its goals of reaching more people on low incomes, the company has launched the “Better Farms, Better Lives” program. Under this program, the company has provided more than 1.5 million smallholder farmers with access to modern crop protection products.
For 2021, Bayer expects to achieve solid operational growth and stable earnings at constant currencies.
“Our operational strength in these turbulent times shows just how resilient our businesses are, even during the pandemic,” Baumann said. “We also used the past year to lay the foundation for future growth."