German chemical firm Bayer announced today that rising prices and strong demand for its glyphosate-based weedkillers contributed to its quadrupling of net profit in 2022.
But, the Leverkusen-based company issued a warning that it anticipated prices to decline once further, which would result in lower profitability in 2023.
In 2022, net profit increased from 1.0 billion to 4.15 billion euros (US$4.3 billion), according to a statement from Bayer.
Sales for the group increased by 8.7% to 50.7 billion euros, in line with expert predictions.
Notwithstanding the difficult environment, Bayer had a very good year in 2022, according to outgoing CEO Werner Baumann.
Record revenues in the company's agricultural segment, increasing more than 15% annually to 25 billion euros, helped the results.
In a period when "supply for glyphosate-based products was restricted," Bayer claimed that this was "in particular thanks to higher costs" for herbicides across all areas.
Nevertheless, Bayer added, those prices are probably going to drop this year as supply chain restrictions loosen.
But sales in the group's pharmaceuticals division only increased by 1% in 2022.
The firm is under pressure to introduce new products to make up for the patents on several successful drugs expiring in the upcoming years.
In Brazil, the patent on the most popular blood thinner, Xarelto, has already expired. The patent on the eye medication Eylea is also about to expire.
Sales of over-the-counter medications, which are sold by the group's consumer health division, increased by 8.4% as a result of the high demand for allergy and cold medications.
In 2023, group sales are expected to increase by a meager "two to three percent," according to Baumann, as the company prepares for dropping pricing for several pharmaceuticals and herbicides.
Pre-tax earnings (EBITDA), down from 13.5 billion in 2022, are anticipated to be between 12.5 and 13.0 billion euros by Bayer.
New CEO
Following demands for a change in strategy at the German company from activist investors, Baumann will be replaced starting in June by former Roche CEO Bill Anderson.
The company will be divided into an agricultural and a pharmaceutical group by the new investors, which include Bluebird Capital Partners.
A separate Bayer pharmaceutical company, according to some analysts, may be a target for acquisition, making the proposition contentious.
During his tenure, Baumann handled the contentious $63 billion acquisition of American company Monsanto in 2018.
Bayer took up Monsanto's legal problems over its glyphosate-containing Roundup weedkiller.
Since then, Bayer has been the target of a flurry of litigation in the US over allegations that Roundup causes cancer, which the company disputes.
The legal battle has cost Bayer tens of billions of euros and severely impacted its stock price.
Around midday in Frankfurt, shares of Bayer were trading roughly 4% lower at 56.20 euros. — AFP
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