Bayer takes tougher stance on glyphosate talks due to downturn

German chemicals giant Bayer has said that the need to preserve cash due to economic downturn has forced it to take a tougher stance in ongoing settlement talks over the claims that its glyphosate-based weedkiller Roundup caused cancer, despite a rise in earnings in the first quarter of 2020.

The drugs and pesticides company added that the coronavirus pandemic has meant the mediation process has slowed down significantly.

“The company will consider a deal only if it is financially reasonable and puts in place a mechanism to resolve potential future claims efficiently,”said CEO Werner Baumann.

“This applies now more than ever,” he added, with regard to a looming recession and huge problems with liquidity.

The number of plaintiffs in the US who blame the use of Roundup and Bayer's other glyphosate-based weedkillers for their cancer has reached 52,500, up more than 10,000 from November 2019.

Bayer has long refuted the claims that Roundup and its active ingredient glyphosate cause cancer, citing decades of studies that have shown it safe for human use. Despite the company's protests, the German Environment Ministry has announced a ban on the use of glyphosate weedkillers from the end of 2023.

The company saw first-quarter adjusted earnings before taxes, depreciation and amortisation (EBITDA) rise by 10.2% to €4.49 billion, which surpassed analysts' expectations of €4.17 billion.

Bayer, which is due to hold its annual shareholder meeting virtually tomorrow, warned that it was unable to assess the impact of the pandemic on results this year.

The first-quarter was driven by a 14% gain in earnings at the agriculture division from higher sales of crop chemicals and corn seeds. Earnings were also underpinned by an increase of 19% in revenue from Xarelto - a stroke prevention drug.

Bayer also said that the stockpiling of over-the-counter medication had contributed to the rise in earnings as patients sought extra prescriptions as a safety net when the coronavirus began to spread.

Despite the bright-looking earning from the first quarter, Bayer's operating cash flow fell to an outflow of €189 million - down from an inflow of €1 billion the previous year as the company brought forward the settlement of agriculture payables, with receivables being paid later.

“Despite this good performance, we have a question mark regarding cash-flows,” said an analyst at Bryan Garnier investment bank, who also raised concerns regarding the creditworthiness of customers in the agricultural sector.

This morning, Bayer's shares were up at 3% at €61.36, beating a 2% gain in the wider German market.

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