Bayer crop protection sales up 6% in Q2 2013

Date:08-07-2013

Bayer CropScience’s sales increased by 5.1% to €2,392 million in the second quarter of 2013 ended Jun 30. Growth was particularly strong in Latin America, Africa and Middle East, with positive development in Asia Pacific and Europe as well. Sales in North America were adversely affected by the late start to the season and declining acreages. “Our business continued to be supported by the persistently high price levels for agricultural commoditie.” Bayer notes.

Bayer CropScience’s crop protection sales were up by 5.6% to €1,953 million year-over-year. The largest increase in percentage terms was achieved for fungicides, driven mainly by sales growth in Latin America and Europe. Sales of Herbicides and Insecticides also registered slight increases. However, SeedGrowth business declined, largely because of sales in Europe that had already been realized in the first quarter and reduced canola acreages in Canada.

Fungicide sales rose strongly by 19.4% to €733 million due to strong growth in Latin America and Europe. Herbicides sales only recorded a 0.4% increase to €700 million. Insecticide sales dropped by 1.1% to €374 million. The seed treatment business decreased by 9.3% to €146 million, largely because of sales in Europe that had already been realized in the first quarter and reduced canola acreages in Canada, Bayer says.

Sales of Seeds (seed and trait) business were up by 3.8% to €246 million in the second quarter of 2013. Bayer was particularly successful with their vegetable and rice seeds. The largest percentage sales gains were recorded in Latin America, Africa and Middle East. Bayer also posted double-digit growth rates in Asia / Pacific and Europe.However, business declined in North America as a result of reduced acreages for canola in Canada and for cotton in the United States.

Sales of the Environmental Science business increased by 2.1% to €193 million in the second quarter of 2013 . Bayer registered growth both in the consumer business and in products for professional users.

EBIT of CropScience rose by a substantial 29.8% to €496 million in the second quarter of 2013,and EBITDA were up by 21.2% to €607 million. The special charges of €18 million (Q2 2012: €53 million) were mainly attributable to restructuring measures at Crop Protection. EBIT before special items advanced by 18.2% to €514 million, while EBITDA before special items grew by 13.7% to €624 million. Earnings growth was mainly attributable to higher volumes and selling price increases.

Bayer CropScience’s Sales Results (€ million)
Q2 ended Jun. 30	Q2 2013	Q2 2012	% change	1st Half   2013	1st Half   2012	% change
Herbicides	700	697	+ 0.4	1,647	1,545	+ 6.6
Fungicides	733	614	+ 19.4	1,330	1,168	+ 13.9
Insecticides	374	378	-1.1	716	714	+ 0.3
SeedGrowth1	146	161	-9.3	371	360	+ 3.1
Crop Protection	1,953	1,850	+ 5.6	4,064	3,787	+ 7.3
Seeds2	246	237	+ 3.8	735	723	+ 1.7
Environmental Science	193	189	+ 2.1	357	376	– 5.1
EBITDA3	607	501	+ 21.2	1,684	1,476	+ 14.1
EBIT4	496	382	+ 29.8	1,460	1,236	+ 18.1
Total	2,392	2,276	+5.1	5,156	4,886	+5.5
1 the “Seed Treatment” business unit was renamed to “SeedGrowth.” 2 In September 2012 the company renamed the “BioScience” business unit within the CropScience segment to “Seeds.” 3 earnings before interest, tax, depreciation and amortisation; 4 earnings before interest and tax.

First half 2013

Bayer CropScience sales increased by 5.5% to €5,156 million in the first half of 2013. Thus Bayer succeeded in growing the business despite the late start to the season in the northern hemisphere.Contributing to the positive business performance were a favorable market environment and the new products of their Crop Protection business group. All units of Crop Protection showed positive development. Sales of Seeds were at the level of the prior-year period. Business in Environmental Science was slightly down.

For the first-half year of 2013, crop protection sales grew by 7.3% to €4,064 million. Fungicides ranked No.1 in growth percentage terms, and all category kept growing in the six months.

Herbicides remained the largest category over the first-half year of 2013, rising 6.6% to €1,647 million. Fungicides were up by 13.9% to €1,330 million. The insecticide only increased by 0.3% to €716 million, and seed treatment were up by 3.1% to €371 million.

EBIT of CropScience rose by 18.1% to 1, 460 million after special charges of €23 million (H1 2012: €63 million), and EBITDA rose by 14.1% to €1,684 million. These mainly comprised expenses for restructuring at Crop Protection. EBIT before special items increased by 14.2% to €1,483 million. EBITDA before special items came in 11.2% above the prior-year period, at €1,705 million due to the good business development, particularly at Crop Protection.

Regional sales

Sales in Europe rose by 7.9% (Fx adj.) to €800 million, driven by positive development for Fungicides in Western Europe. Business with Insecticides, especially for use in fruits and vegetables, also showed a double-digit increase. SeedGrowth sales, however, were down from the prior-year period.

In North America, sales receded in the second quarter of 2013 by 2.9% (Fx adj.) against a very strong prior-year quarter, to €487 million. This was attributable to negative business development in the United States because of the late start to the season and declining acreages. In Canada, however, sales rose considerably, with products for use in cereals posting particularly strong gains.

Sales in the Asia Pacific region advanced by 11.7% (Fx adj.) to €285 million. Here the increase was due in large part to increasing sales of Herbicides, particularly in Australia for use in cereals. Business also developed very well in India and Thailand, while sales in Japan moved lower, especially for Insecticides.

Sales in the Latin America, Africa, Middle East region climbed by 27.3% (Fx adj.) to €381 million. The sales development in Brazil and Argentina accounted for a major part of this increase, with particularly strong growth in the Fungicides business. Sales of Insecticides also rose strongly. By contrast, sales in Africa / Middle East receded.

Growth and Innovation

Research & Development

Bayer CropScience spent €386 million on research and development in the first half of 2013, including €203 million in the second quarter.

In March 2013, Bayer CropScience and Syngenta submitted applications for the approval of a new herbicidetolerance soybean trait in various countries. The application is currently being reviewed by the regulatory authorities in the United States, Canada, and major soybean-importing regions including the European Union. Its estimated launch date is between 2015 and 2020.

Capital expenditures, acquisitions and cooperations

In January 2013, Bayer CropScience acquired Prophyta Biologischer Pflanzenschutz GmbH, a leading supplier of biological crop protection products. This transaction further expands CropScience’s portfolio of biological crop protection products and supplements the acquisition in 2012 of U.S.-based AgraQuest, Inc.

In March 2013, Bayer CropScience completed the acquisition of soybean seed producer Wehrtec Ltda and the soybean business of Agricola Wehrmann Ltda. This transaction strengthens the research and development activities of CropScience in soybeans and contributes to the development of varieties tailored to the requirements of Brazilian soybean growers.

In April 2013, Bayer CropScience and Monsanto Company, U.S.A., entered into licensing agreements for next generation technologies in the field of plant biotechnology.

In May 2013, Bayer CropScience announced plans to build a world-scale glufosinate-ammonium herbicide production plant in the United States. The new facility is intended to contribute to more than doubling global production capacity for this important active ingredient. The start-up of the new plant is anticipated for the fourth quarter of 2015.

Emerging markets

Bayer CropScience raised sales in the Emerging Markets by 12.8% (Fx adj.) in the first half of 2013 to €1,795 million (H1 2012: €1,638 million). Second-quarter sales in these countries increased by 14.8% (Fx adj.) to €962 million (Q2 2012: €872 million). Business in Latin America developed particularly well in the second quarter. Bayer also achieved pleasing sales gains in Asia, Africa and Middle East. The Emerging Markets’ share of total CropScience sales was 34.8% in the first half of 2013 (H1 2012:33.5%) and 40.2% in the second quarter of 2013 (Q2 2012: 38.3%).

Outlook

Based on persistently high prices for agricultural commodities, Bayer CropScience anticipate slightly weaker but nonetheless positive development overall in the global seed and crop protection market in 2013, with growth impetus coming mainly from Latin America and Eastern Europe. In North America, too, the crop protection market is predicted to expand.

Bayer CropScience continues to expect that business growth will outpace the market, with sales advancing by a high-single-digit percentage on a currency- and portfolio adjusted basis toward €9 billion. They also plan to raise EBITDA before special items by a high-single-digit percentage.