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  HOME | Business & Economy (Click here for more)

Bayer Faces Mounting Weedkiller Lawsuits amid Sweeping Restructuring

LEVERKUSEN, Germany – Bayer AG said the number of plaintiffs suing over its weedkillers had risen by another 1,900 over the last three months, adding legal pressure on the German pharmaceuticals and chemicals company as it navigates a broad restructuring of its businesses.

The company, which makes drugs such as Aspirin, chemicals and seeds, also reported a net loss of 3.92 billion euros ($4.46 billion) in the fourth quarter compared with a profit of 148 million euros a year ago, most of which resulted from write-offs for consumer-health brands it is selling, a pharmaceuticals plant it is closing and costs linked to acquiring United States agriculture giant Monsanto Co. last year.

Still, shares were up more than 5 percent in midafternoon trading Wednesday, after the company reported better than expected sales. That offered investors a break from a monthslong share rout, driven to a large extent by its growing legal jeopardy over the world’s most widely used herbicide.

Fourth-quarter sales rose to 11.06 billion euros from 8.6 billion euros a year ago, boosted by the integration of Monsanto, which largely offset declines at its consumer-health division.

Late last year, Bayer unveiled a sweeping reorganization, including plans to cut 10 percent of its workforce. The restructuring came months after sealing its $63 billion purchase of Monsanto. The acquisition brought the American giant’s glyphosate-based weedkiller business, including Roundup, into Bayer’s portfolio.

Shortly after it sealed the deal, a California jury awarded $289.2 million to a plaintiff who alleged in state court that Roundup caused his cancer. A judge later reduced the award to $78.5 million, but the courtroom loss was a surprise that investors interpreted as opening Bayer up to potentially costly payouts.

Bayer is appealing the verdict but the legal battle has cast a cloud over the German company’s prospects that analysts say could take months, if not years, to dissipate. Its stock has fallen than 30 percent since the courtroom defeat.

Another test-case for Bayer opened up this week, this time in federal court in California. Six others are scheduled to begin in 2019.

Bayer said Wednesday that as of late January it faced a total of 11,200 plaintiffs over its glyphosate products, compared with 9,300 at the end of October. Bayer has rejected the allegations, arguing that there are numerous studies that demonstrate the safety of glyphosate and its products.

“We have the science on our side and will continue to vigorously defend this important and safe herbicide for modern and sustainable farming,” Chief Executive Werner Baumann said. He warned though that it would take some time to get more clarity over the outcome as the first trials were only starting.

Baumann also said Bayer was “anything but happy” about the company’s share price. But he pointed to today’s market reaction as a sign that investors were beginning to acknowledge the underlying value of the company.

“15 more days like that and the world will be fine again,” he said.

Analysts expect shares to remain under pressure until more glyphosate cases have been tried in court to give a sense of how big a financial burden the litigation could or couldn’t become for Bayer.

In a sign of the complications ahead, Bayer booked a provision of 613 million euros in the fourth quarter mainly for legal defense costs anticipated for the next three years, up from 88 million euros in the same quarter a year ago. Bayer did not break down the figure by legal challenges but finance chief Wolfgang Nickl said glyphosate represented a significant proportion. Bayer has not provisioned for potential plaintiff payouts.

While all eyes are on the court cases, Bayer is forging ahead with its restructuring plan aimed at saving costs, externalizing research and development in its drugs business and fixing declining sales in consumer health.

Baumann said Bayer aimed to complete the sale of underperforming consumer brands Dr. Scholl’s foot care and Coppertone sunscreens by the end of the year while the sale of a stake in a chemicals park operator Currenta was “very advanced” and the disposal of its animal-health business should fetch “a high price.”

 

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