Bayer shares jump as strong pharma performance prompts guidance upgrade

(Sharecast News) - Shares in German pharmaceuticals and chemicals group Bayer surged on Tuesday after the company raised its full-year profit outlook following stronger third-quarter sales and earnings, driven by growth in its pharmaceuticals division. The stock was up around 6.6% at €53.32 in Frankfurt afternoon trading after Bayer increased its forecast for full-year earnings before interest, tax, depreciation and amortisation (EBITDA) before special items to between €9.8bn and €10.3bn, from €9.6bn to €10.1bn previously.

The company also improved its free cash flow guidance by €1bn to a range of minus €1.5bn to minus €500m, while reducing its year-end net debt forecast to between €28bn and €29bn, from €29bn to €30bn.

Third-quarter revenues rose 4.1% to €10.05bn, or 1.9% after adjusting for currency and portfolio effects, while EBITDA before special items increased 6.9% to €1.62bn.

The pharmaceuticals division was the main driver of growth, with revenues increasing 8% to €4.68bn and EBITDA before special items jumping 23.6% to €1.29bn.

Sales of cancer treatment Nubeqa and kidney and heart disease drug Kerendia increased 58.3% and 64.9%, respectively, on a currency- and portfolio-adjusted basis, offsetting declines in older medicines affected by patent expirations.

Bayer raised its full-year pharmaceuticals EBITDA margin forecast to between 25% and 27%, from 23% to 25%, and now expects sales growth towards the upper end of the division's existing guidance range.

Chief executive Bill Anderson said: "We've reached a turning point in Pharma's growth trajectory and we're beginning to see the other side."

Performance was weaker elsewhere. Crop Science revenues increased 0.7% to €3.88bn on a reported basis but declined 2.4% after currency and portfolio adjustments, while adjusted EBITDA slumped 41.3% to €101m due to higher costs.

Consumer Health revenues rose 2.1% to €1.45bn, although adjusted EBITDA fell 4.4% to €347m as higher marketing expenditure weighed on profitability.

Chief financial officer Judith Hartmann said: "Our year-to-date performance is a proof point that our strategy is working, and it gives us the confidence to improve our targets for the year on adjusted EBITDA, cash and debt."

Overall, the company reported a net loss of €672m, reflecting impairment charges and litigation-related expenses, though narrowing from €963m a year earlier. Core earnings per share declined to €0.31 from €0.49, partly due to non-cash charges resulting from interest rate changes.