Agrochemical giant Bayer has announced it is looking for ways to reduce global annual costs by €1.5bn (£1.36bn) by 2024, with the coronavirus pandemic hitting profits in the agricultural side of its business harder than expected.
The share price of the German company dropped sharply after it issued a statement last week revealing that it needs to accelerate a cost-cutting programme introduced in 2018.
It said that Covid-19 was having a particularly big impact on its crop science division, with factors including detrimental currency movements and a significant reduction in demand for bioethanol because of the drop in mileage being driven.
Werner Baumann, Bayer chief executive, warned investors: “We expect the Covid-19 situation to weigh particularly heavily on our crops science business in the second half of 2020 and then throughout fiscal 2021.”
Share price drop
It has been a difficult couple of years for Bayer, which has had to set aside about $11bn (£10bn) to settle US lawsuits alleging its Roundup weedkiller causes cancer.
Roundup was originally manufactured by US chemical firm Monsanto, which Bayer bought in June 2018 in a $63bn (£50.7bn) acquisition.
The deal has proved an expensive headache for Bayer, with its share price losing 47% of its value since the merger agreement was first signed in September 2016.
In order to meet its long-term targets, the business has said it will be writing down the value of assets in its agriculture business to the tune of several billion euros, through non-cash impairment charges.
It is also looking at cost-saving measures, which may lead to additional job reductions, and is considering selling off certain brands.