Bayer’s 2Q Sales Expected Lower After Full-Year Guidance Cut — Earnings Preview

EBITDA BEFORE SPECIAL ITEMS FORECAST: The metric is expected to be about EUR2.5 billion in the quarter, down from EUR3.35 billion the previous year, according to Bayer’s preliminary results. A FactSet consensus puts it at EUR2.46 billion.

WHAT TO WATCH:

– CROP SCIENCE: Lower glyphosate prices and unfavorable weather conditions were among the main factors that contributed to Bayer lowering its group guidance on July 24, although the company didn’t provide forecasts at the divisional level. Given this, it would be surprising if Bayer didn’t adjust its guidance for the agricultural division, Jefferies analysts say in a note. According to the analysts, warnings coming from peers as well as companies participating in the same supply chain–such as BASF, Croda and Lanxess–have made clear the extent of the challenge to de-stocking in the Crop Science business.

– PHARMA: Bayer could adjust its guidance for the division, given that already during first-quarter results it had become apparent that margins were difficult to bridge, Jefferies analysts say in a note. According to FactSet estimates, pharmaceutical sales are expected to have declined slightly in the second quarter to EUR4.70 billion from EUR4.82 billion the previous year.

– GUIDANCE: Bayer lowered its full-year guidance on July 24, and the market is now set to focus on whether that outlook is now completely de-risked, UBS analysts say in a note. The company said it now expects free cash flow of approximately minus EUR0.5 billion, and investors may now consider this much more significant than the downward adjustment in Ebitda forecasts, the analysts say. The CEO will host a call, but meaningful strategic commentary probably won’t be seen until early next year, according to the analysts.

Write to Cecilia Butini at [email protected]