Bayer lifts 2018 outlook after Monsanto fusion

Source: Xinhua| 2018-09-05 21:44:58|Editor: Yurou
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BERLIN, Sept. 5 (Xinhua) -- Bayer will achieve higher revenue and profits than previously expected in 2018 following its successfully-concluded merger with Monsanto, the DAX-listed German pharmaceutical and agrochemical giant announced on Wednesday.

Bayer now expects to record gross revenue of more than 39 billion euros (45 billion U.S. dollars) this year in spite of having had to divest business units worth billions of euros in order to obtain regulatory approval for the fusion with Monsanto. Chief executive officer Werner Baumann had previously set a lower target of under 35 billion euros for 2018 sales.

The Leverkusen-based company also revised its forecast for earnings before interest taxes and depreciation (Ebidta) in 2018 upwards. Earnings figures for the second quarter (Q2) showed that Ebidta, adjusted for one-off effects, rose faster than expected by 3.9 percent to 2.3 billion euros.

As of mid-August, Bayer has officially completed its acquisition of Monsanto by fulfilling all requirements set by antitrust regulators in the 63-billion-euro agrochemical industry merger. Towards this end, the company sold business units with combined revenue of 2.2 billion euros to German rival BASF for 7.6 billion euros.

After clearing all regulatory hurdles in the deal, Baumann told press that Bayer would focus on achieving synergy effects anticipated from the merger. The CEO described the takeover as a "strategic milestone" but warned that its success would hinge on "developing a joint corporate culture."

Baumann has said that he wants to "double" Bayer's business in the agriculture sector as a result of the corporate fusion with Monsanto. Thanks to the deal, Bayer is set to become the world's largest producer of seeds, pesticides and herbicides with gross revenue of 23 billion euros recorded from agriculture-related business alone.

Even after taking the necessary divestments into account, the new corporate entity will employ a global total of 115,000 staff. The company expects to achieve annual savings on its earnings before interest, taxes, depreciation and amortization (EBIDTA) of 1.2 billion dollars due to synergies.

However, Bayer's share price recently slumped by more than 10 percent in a day following a ruling by a U.S. court that the glyphosate-based "Roundup" pesticide produced by Monsanto was the likely cause of cancer in a terminally-ill groundskeeper. Monsanto was ordered to pay a total of 298 million dollars in damages for selling a carcinogenic weed killer without adequate consumer warning.

Bayer subsequently issued a statement which described the court ruling as running "contrary to existing scientific knowledge, as well as practical experiences and assessments of regulatory authorities."

Following the formal integration of the U.S. acquisition target as a Bayer subsidiary which began in August, Monsanto will cease to exist as a company name. Critics of the Bayer-Monsanto merger have repeatedly cautioned that Bayer could suffer reputational damage from the move given that Monsanto is mainly known as the producer of the controversial pesticide glyphosate in Europe.

Earlier, Baumann emphasized in response to such concerns that his company was aware of the "heightened responsibility" which it will shoulder with a globally "leading position in the agricultural sector". The Bayer-Monsanto merger is not just the largest acquisition made in Bayer's history but also the most expensive foreign takeover to date conducted by a German firm in general.

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