Bayer(BAYRY) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In 2022, Bayer achieved sales of €51 billion, a 9% increase on a currency and portfolio adjusted basis compared to the previous year [8] - EBITDA before special items rose by 21% year-on-year to €13.5 billion, with a core earnings per share of €7.94, exceeding expectations [11][72] - The proposed dividend increased by 20% to €2.40 per share [11] Business Line Data and Key Metrics Changes - Crop Science sales surpassed €25 billion, with a 15.6% cpa sales growth driven primarily by pricing [21] - Pharmaceuticals saw a slight increase in sales, with Eylea growing 9% and new products Nubeqa and Kerendia achieving combined sales of over €0.5 billion [10][36] - Consumer Health grew by 8.4% to over €6 billion, significantly exceeding guidance [56] Market Data and Key Metrics Changes - The Crop Science division's growth was largely attributed to higher glyphosate pricing, which accounted for approximately €2 billion of the sales increase [21] - The company anticipates a decline in glyphosate sales by 15% to 20% in 2023, impacting overall sales growth [31] - The Pharmaceuticals division faced challenges in China due to volume-based procurement regulations, significantly affecting sales of Xarelto [41][51] Company Strategy and Development Direction - Bayer's vision of "Health for All, Hunger for None" remains central to its strategy, particularly in addressing global food security and healthcare challenges [7] - The company plans to focus on innovation, with a peak sales potential for new pharmaceutical products raised to over €12 billion [13] - Bayer is optimizing its portfolio by divesting non-core assets and investing in strategic partnerships, such as with Ginkgo Bioworks [17][18] Management's Comments on Operating Environment and Future Outlook - Management highlighted the unprecedented macro volatility and geopolitical challenges faced in 2022, including the impact of the Ukraine war and COVID-19 [6] - For 2023, Bayer expects a more challenging environment with normalized glyphosate prices and continued inflationary pressures [18][19] - The company anticipates EBITDA before special items and core EPS to remain ahead of midterm planning but not reach 2022 record levels [19] Other Important Information - Bayer's free cash flow more than doubled to €3.1 billion, driven by lower settlement payments compared to the prior year [74] - The company is focused on effective cash management, projecting around €3 billion in free cash flow for 2023 despite higher net settlement payouts [79] Q&A Session Summary Question: Clarification on energy cost hedging and inventory impact on P&L - Management clarified that energy costs are a small part of COGS and that inventory increases were strategic to mitigate potential supply issues [89] Question: Reasons for revenue decline in Q4 and outlook for 2023 - The decline in Q4 was attributed to the start of Adalat VBP and soft demand in China due to COVID-19 impacts [91] Question: Pharma margin recovery path and PCB litigation process - Management indicated that margin improvement will be driven by a stronger US market and cost management, while updates on PCB litigation included ongoing settlements and appeals [95][97] Question: Glyphosate pricing assumptions and hemophilia franchise outlook - Bayer expects a €900 million decline in glyphosate sales, while the hemophilia business remains resilient despite increased competition [104][106]