German chemicals giant Bayer is facing higher legal charges for cancer claims relating to its weedkiller Roundup and US$10.82bn for impairments on agriculture businesses, much of it related to its 2018 Monsanto acquisition, Reuters reported on 3 November.
The company said the write-downs, driven by weaker demand from farmers due to low biofuel prices, plus an increase of about US$750M in the costs of settlement terms with US plaintiffs over Roundup, had resulted in a loss before interest and tax of €9.4bn (US$11bn) in the third quarter.
Bayer is facing lawsuits over its glyphosate-based Roundup herbicide following its 2018 takeover of Monsanto for about US$63bn.
“The impact of the (coronavirus) pandemic is placing additional strain on our Crop Science Division. We are also facing negative currency effects,” Bayer chief financial officer Wolfgang Nickl was quoted as saying.
A massive depreciation of the Brazilian real was weighing heavily on business, he was reported to have said.
Bayer said it was unable to say what part of the impairment was due to legacy Monsanto businesses, saying only that two-thirds of the write-downs were due to currency and interest rate effects.
On 30 September, the company had predicted impairment charges would be in the mid to high-single-digit billions euros range on agricultural assets and had warned of a slight decline in 2021 core earnings per share, Reuters said.
Bayer had agreed a US$11bn Roundup outline agreement with US plaintiffs’ lawyers in June. However, a judge had taken issue with a side arrangement on future cases that might yet be lodged, known as a class plan.
On 3 November, the company said addressing those concerns would prove to be about US$750M more costly.
Bayer said it was ‘far enough along in the negotiations to know that the new plan will come in at approximately US$2bn, an increase over the original cost of US$1.25bn.’
“This situation confirms our belief that Crop Science is a business with low visibility,” Jean-Jacques Le Fur, an analyst at brokerage Bryan Garnier, was quoted by Reuters as saying.
The charges had more than offset combined gains during the quarter from the sale of Bayer’s Animal Health business to Elanco and the divestment of a stake in industrial park operator Currenta of €5bn (US$5.9bn).
That had resulted in a net loss of €2.7bn (US$3.1bn) compared with an average analyst projection of €1bn (US$1.2bn) in net income.
Bayer said that 88,500 of the 125,000 glyphosate claims in the class settlement had been agreed in principle and that it was hoping to make considerable progress over the next few months.