Market News

 November 13, 2018
Bayer reassures investors on Monsanto, vows to back Roundup

 Bayer AG vowed to defend its embattled weedkiller Roundup as investors worried about the health of the agricultural business the German company bolstered with the $63 billion acquisition of Monsanto Co.

The shares fell as much as 4 percent in Frankfurt, reversing earlier gains, amid concerns that the company may be setting too high a bar for the crop-science unit. Bayer earlier reported adjusted earnings that beat analysts' estimates but also disclosed a rising number of Roundup lawsuits.

Bayer repeated that profit and sales will grow this year, even as its consumer health and animal businesses struggle. Chief Executive Officer Werner Baumann defended the herbicide's key ingredient, glyphosate, after a judge last month upheld a jury's verdict that it contributed to a dying groundskeeper's cancer, saying its safety is backed by more than 800 scientific studies.

"We've decided to defend ourselves by every means available, because glyphosate is a fully safe and good product when properly used," Baumann said on a conference call with reporters.

The number of Roundup plaintiffs has increased to about 9,300 according to the Leverkusen, Germany-based company. That's about 600 more than previously disclosed. Uncertainty over the liability has hurt the stock price.

Sales at Bayer's crop science division increased 84 percent last quarter, boosted by the addition of Monsanto. The new lines of business picked up in the takeover performed much better than other parts of Bayer's agriculture unit, Gunther Zechmann, an analyst at Sanford C. Bernstein & Co., wrote in a note to clients.

Still, estimates of the agricultural unit's profitability may be too high, analyst David Evans at Kepler Cheuvreux said.

"It would take quite some significant growth to reach" consensus figures, Evans said by phone. Aside from all accounting complications related to the merger, Evans said, it's "been a tough year as well with drought in Europe and trade tensions."

While Bayer expects to meet its full-year earnings forecasts overall, the consumer health and animal health units may fall short of their own targets, the company said. The singling out of those divisions doesn't indicate anything about the company's future plans for them, Baumann said.