In a crisis, psychologists recommend focusing on factors within our control. Bayer’s chief executive Bill Anderson has duly been focusing on self-help measures such as efficiencies and cost cuts as he seeks to turn the troubled German conglomerate around. Deteriorating market conditions, however, mean he will have to dig even deeper.
Bayer’s original problem is that it is still struggling to recover from its ill-fated $63bn takeover of US crop sciences company Monsanto, which saddled it with a hefty debt load and costly litigation over the weedkiller Roundup. It has promised to deleverage from more than three times net debt to ebitda, to 2.5 times. Declining earnings make this a moving target. A cut to its earnings forecast on Tuesday means what was already a very tricky two-to-three-year turnaround has become even more taxing.
Bayer’s latest troubles largely stem from its crop science business — the second biggest contributor to earnings last year. Here it is battling competition from lower-priced agricultural products, plus problems in Latin America. Growers in Argentina, for example, are planting less corn after the proliferation of a certain insect hit harvests last year and amid drought fears. It also has regulatory issues, including a delayed approval for soya bean herbicide Dicamba.