GERMANY – German multinational corporation Bayer has announced a colossal 2.5-billion-euro (U.S$2.8-billion) write-down on the potentially carcinogenic herbicide glyphosate.
The announcement comes amid growing concerns and controversies surrounding the widely used weedkiller.
Bayer’s grim warning projected that the write-down would lead to a net loss of 2.0 billion euros for the second quarter, leading the company to lower its annual outlook.
The financial hit is a result of ongoing price declines and destocking, especially for glyphosate-based products, coupled with adverse weather conditions.
At the heart of the matter is the contentious herbicide glyphosate, which has faced intense scrutiny from environmental groups and health authorities alike.
The European Food Safety Authority (EFSA) recently asserted that it had not discovered any critical concerns preventing glyphosate’s reauthorization for use within the European Union.
However, environmentalists remain skeptical, citing scientific evidence suggesting that glyphosate may pose risks to human health, aquatic life, and vital pollinators such as bees. The International Agency for Research on Cancer had already classified the substance as a “probable” carcinogen, fueling further controversy.
A goodwill impairment, as explained by Bayer, is a reduction in the valuation of the company’s assets, directly impacting its current earnings. With the anticipated write-down, Bayer now expects a negative Group net income of approximately 2 billion euros for the second quarter of 2023.
Bayer’s financial challenges are not limited to the second quarter alone. The company anticipates a significant drop in second-quarter operating earnings, predicted to decline by 25% to 2.5 billion euros, while sales are projected to plummet by 14% to 12.8 billion euros.
Looking ahead, the once-promising sales growth forecast has dramatically changed course. Previously expected to achieve modest sales growth between 51 billion and 52 billion euros in 2023, Bayer now foresees sales declining to a range of 48.5 billion to 49.5 billion euros on a currency-adjusted basis.
This marks a considerable setback for the chemical giant, considering its sales of 50.7 billion euros in 2022.
Likewise, operating profits are facing a gloomy outlook. Bayer now projects operating profits between 11.3 billion and 11.8 billion euros for 2023, down from the previously forecasted 12.5 billion to 13.0 billion euros. This stark decrease follows the 13.5 billion euros in operating profits recorded by the company in the previous year.
The aftermath of this substantial write-down raises serious questions about the future of glyphosate and its implications for Bayer’s financial stability. With environmental concerns and regulatory pressures mounting, the company faces an uphill battle to regain investor confidence and secure a sustainable path forward.
Bayer is set to release its detailed results for the second quarter on August 8, where the world will be watching closely to see how the chemical giant plans to navigate this challenging chapter in its history.
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