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Bayer has announced plans to slash its dividend by 95 per cent as the German conglomerate steps up its effort to bring down its debt eight years after its ill-fated acquisition of Monsanto.
The German pharma and crop sciences conglomerate warned late on Monday that it would pay a dividend of just €0.11 per share for 2023, adding that it was the minimum level required under German law. Bayer paid a dividend of €2.40 for 2022.
Analysts had expected Bayer to pay a dividend of €1.92 per share for 2023, a far more modest cut. The company, which has been under pressure from investors to break itself up, is still struggling with the damage from its $63bn takeover of US crop sciences group Monsanto in 2016.
Designed to turn Bayer into a powerhouse in the global food industry, supplying farmers with everything from seeds to crop sprays, the deal instead saddled the German company with vast levels of debt and left it exposed to an expensive legal fight over a weedkiller in the US.
Explaining the move to cut the payout, Bayer said in a statement that it was facing “a high level of debt, coupled with high interest rates and a challenging free cash flow situation”.
Chief Executive Bill Anderson, who joined last year after heading the pharma unit of Swiss rival Roche, said the decision “was not taken lightly” and had “considered investor input.”
Nevertheless, it is likely to come as a significant blow to investors. The company also warned shareholders to brace for two more years of modest dividends, saying that it planned to “to pay out the legally required minimum” for 2024 and 2025 as well.
Previously, Bayer had promised to pay out 30 per cent of its core earnings, which analysts forecast at about €6 per share per year between 2023 and 2025. As a result of the move, the total size of its payout to investors for 2023 would be reduced by more than €2.2bn. The company had almost €39bn in net financial debt at the end of September.
Bayer’s woes have not been confined to the fallout from the Monsanto transaction. The suspension of a trial of its most promising new drug after it failed to meet expectations hit the group’s share price, which has fallen 51 per cent over the past 12 months.
In November, Anderson blasted Bayer’s performance, pointing out that “nearly €50bn in revenue but zero cash flow” was simply “not acceptable”.
He has kicked off a major restructuring designed to cut layers of internal bureaucracy and make the group more nimble. Bayer said on Monday that the revamp will include “significant job reductions”, without giving details.
Bayer will report full-year results on March 5, when Anderson will also give an update on his strategic plans. Analysts are expecting that the group will report a net loss of €3.6bn for 2023, down from a net profit of €4.15bn in 2022. Sales are expected to have fallen 6.5 per cent to €47.4bn.
