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Bayer Crop Science

Data Year Ending December 2006

Agrochemical Industry Ranking: 1

Corporate Sales Breakdown
Key Points
  • The Bayer Group is now organised into the three main divisions of Material Science, HealthCare and CropScience. Group sales in 2006 were €28,956m, up 17.2% from the year before.
  • The CropScience division contains the group’s Crop Protection, Environmental Science and BioScience businesses. Reported division sales in 2006 were €5,700m, a decrease of 3.3% compared to the previous year.
  • The largest division for 2006 is Healthcare, which achieved sales of €11,724m in 2006, up 46.6% from the previous year, largely due to the acquisition of Schering.
  • Material Science sales were 7.6% higher at €10,161m.
  • The Chemicals division, along with part of Polymers, was spun-off as Lanxess during 2004.
Agrochemical Sales History
Key Points
  • Bayer’s reported agrochemical turnover fell 3.8% to €5,358m in 2006. This was equivalent to a dollar decrease of 2.8% to $6,724m. Reasons behind the decline were weather-related, although included tougher economic conditions in Brazil and range rationalisation also.
  • Bayer remained positioned as the largest company in the agrochemical sector in 2006, with sales about $350m larger than its nearest rival, Syngenta.
  • Since 1996, pro forma sales have fallen 0.4% p.a. in $ terms and 0.3% p.a. in € terms.
  • Since 2001, the equivalent growth rates are 2.0% p.a. in $ terms and –4.6% p.a. in € terms.
  • Part of the reason for these relatively modest growth rates has been the enforced divestments due to the merger with Aventis, and to the spread of genetically modified crops.
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Geographical Sales Split
Key Points
  • Although Bayer reports sales segmented into four regions, we have divided sales into Cropnosis’s regional format for ease of comparison.
  • Europe was Bayer’s largest regional market. Sales gained 1.4% to $2,557m, and in € terms there was a 0.3% gain to €2,037m.
  • The North American business declined primarily due to the effect of dry conditions and increases in GM crops. Sales decreased by 4.2% to $1,744m.
  • The Far East region was affected by drought in Australia and overall lower pest levels. Sales fell by 2.5% to $1,025m.
  • Latin American sales decreased by 9.2% to $946m, due to a weaker farm economy in Brazil and to a reduction in the soybean area.
  • “Rest of the World” sales fell 6.0% to $452m.
Product Class Sales Split

  • Herbicide sales decreased 3.5% to $2,206m (-4.5% in €), due to dry conditions in some areas and to increasing cultivation of herbicide-tolerant crops.
  • There was a 6.0% decrease in insecticide sales to $1,530m (-7.0% in €). This was attributable to difficult conditions in Brazil, the spread of insect-tolerant crops and divestments.
  • Fungicide sales fell 2.9% to $1,506m (-3.8% in €). Flint (trifloxystrobin) and Folicur (tebuconazole) sales were affected by dry conditions, and the weak farm economy in Brazil.
  • The remaining sales rose 2.1% to $1,482m (+1.0% in €), due to improvement in sales in Environmental Sciences. Seed treatment sales declined by 0.7%.
    Budget/Trends
  • Bayer CropScience spent a total of €614m or $771m on research and development in 2006. Of this figure, €534m ($670m) was allocated to agrochemicals (Crop Protection and Environmental Science) and €80m ($100m) to BioScience. Agrochemical R&D expenditure was therefore equivalent to 10.0% of sales.
  • Agrochemical R&D is headquartered in Monheim, with major activities also in Frankfurt, Lyon, Yuki and Kansas.
 Product Candidates
  • Fluopicolide (AEC 638206), an acylpicolide fungicide for the control of oomycete diseases in vine and vegetables.
  • Flubendiamide (NNI-0001), a phthalic acid diamide insecticide for broad-spectrum control of lepidopteran pests in a wide range of crops. Development in conjunction with Nihon Nohyaku.
  • Tembotrione (AE 0172747), a triketone herbicide for use in maize, in combination with a safener.
  • Spirotetramat (BYI 08330), the third ketoenole insecticide/acaricide with broad-spectrum control through systemic action. For use in fruit, vine and vegetables.
  • Pyrasulfotole (AE 0317309), a pyrazole cereal herbicide. The product is reported to have a new mode of action and a good broad-spectrum activity

Bayer CropScience was created in October 2001 as a separate legal entity of the Bayer Group. However, the current business wasn’t established until June 2002, when the acquisition of Aventis CropScience was closed. On formation, the company immediately became the largest company in the agrochemical industry. This leading position was maintained in 2006, despite a 2.8% decrease in sales to $6,724m. Bayer CropScience is in a period of range rationalisation, with older products being superseded through launch of a number of new materials.

In 2006, 38.0% of agrochemical sales were achieved in Europe, where the key markets are France, Germany, Spain, Italy and the UK. Sales (€) in Europe were a little higher, partly due to growth in the fungicide prothioconazole. North America was the next largest regional market with 25.9% of global sales. This region is dominated by the US, with only about one-tenth of sales achieved in Canada. North American sales declined due to unfavourable weather conditions, divestments and the increased planting of genetically-modified crops.

The Far East accounted for 15.2% of sales. Revenues in this region fell due drought and the continuing weakness of the Japanese market. Latin American sales fell to account for 14.1% of the total, some 4.6% lower compared with 2004. The weaker farm economy and reduced soybean area in Brazil were responsible for the decline.

Bayer was ranked first globally in insecticides, second in fungicides and third in herbicides. The company also occupies the leadership position in the seed treatment and environmental science sectors. Despite only being the third-largest herbicide manufacturer globally, this product class accounted for the largest proportion of the company’s sales in 2006. Key products include Basta/Liberty (glufosinate), Puma (fenoxaprop) and Atlantis (mesosulfuron).

Bayer is the clear leader in the insecticide market, even without the contribution from fipronil and other divested insecticides. The company’s strength in this sector is underpinned by the neonicotinoid imidacloprid, the largest selling insecticide in the world. This is supported by deltamethrin and clothianidin in particular, although a range of organophosphate, carbamate and pyrethroid products, as well as other newer chemistries, are together significant.

Bayer is the second largest fungicide manufacturer in the world, though sales are around $200m below those of Syngenta. The company is the pioneer and sales leader in the triazole chemistry group, in particular tebuconazole, with the new prothioconazole showing rapid growth. Other key fungicides are trifloxystrobin and fosetyl.

Bayer had no involvement in agricultural biotechnology prior to the acquisition of Aventis CropScience. The purchase brought with it a substantial portfolio of technology and intellectual property built up by AgrEvo and Rhône-Poulenc, the two predecessors of Aventis CropScience. Commercialised products include a range of glufosinate- and bromoxynil-tolerant crops. These products have only so far achieved limited success. Revenue upsides from these technologies are primarily from increased sales of the herbicide glufosinate. The company does not charge farmers a technology fee for use of its traits.

While the company is beginning to benefit from its involvement in agricultural biotechnology, particularly in oilseed rape and cotton, it is not among the leaders of the sector. Its agrochemical business has also not generally suffered, due to relatively low exposure to crops such as soybean and maize, however increased planting of the latter and of cotton has had an effect on recent US sales. In June 2007, concerns over the development of glyphosate resistant weeds prompted Monsanto to licence Bayer’s LibertyLink technology for use in maize and soybean. This is expected to benefit sales of glufosinate for use in dual herbicide tolerance crops. However, competition in this area will increase with the DuPont’s forthcoming Optimum GAT technology.

Range rationalisation is having a noticeable effect on Bayer’s product portfolio, and to a certain extent on sales. The company has divested a number of older products recently, not only organophosphate insecticides but certain other insecticides and herbicides as well. As a result, sales have declined in some countries. This is part of the strategy to modernise the range, and to re-align resource so as to concentrate on newer, higher-margin products.

With a strong commitment to agrochemical R&D, new product sales are increasing and should help Bayer return to growth in the near term. The company has recently raised its forecast for annual sales of crop protection products containing new active ingredients, to €2 billion. This will help offset losses due to rationalisation and generic imidacloprid and tebuconazole competition.

 

Introduction

Bayer CropScience is one of the three key divisions in the Bayer Group. The division was created in October 2001 as a separate legal entity and incorporates the CropScience business acquired from Aventis in June 2002. Bayer CropScience segments its operations into Crop Protection, Environmental Science and BioScience. In this profile, we class Crop Protection and Environmental Science activities under agrochemicals, whilst BioScience is examined under the agricultural biotechnology section.

Bayer CropScience reported division sales of €,5,358m in 2006, an decrease of 3.8% from the previous year (or -2.8% to $6,724m). This was comprised of €4,644m ($5,828m) in Crop Protection, €714m ($896m) in Environmental Science and €342m ($429m) in BioScience.

With agrochemical sales of $6,724m, Bayer CropScience remained ranked first in the industry (the company is ranked second, behind Syngenta, if seed sales are included). At this sales level the company accounted for 20.9% of the global agrochemical market, a good percentage point ahead of Syngenta’s 19.8% share.

Sales Performance Index vs. Industry

Combined with historical Aventis CropScience sales

The above chart shows Bayer/Aventis CropScience’s combined agrochemical sales performance over the past ten years compared to industry performance. Since 1996, sales have grown on average by -0.4% p.a. (compared to the industry growth rate of -0.1% p.a.). Since 2001, the equivalent sales growth has been 1.6% p.a. (compared to the industry rate of 2.9% p.a.).

The combined business has therefore underperformed the industry marginally over the last ten years, although this gap has widened over the last five years. With the formation of Aventis CropScience in 1999, sales in both 1999 and 2000 fell faster than the industry decline as a result of various anti-trust mandated product divestments.

The strong growth in 2001 was partly a result of a restatement by Bayer during the formation of Bayer CropScience, which added c.$116m in Environmental Science sales that were formerly accounted for in the Animal Health group. However, both the Aventis and Bayer businesses performed well in that year, due to higher sales of key products such as isoxaflutole, fipronil, imidacloprid, tebuconazole, trifloxystrobin and flufenacet.

The business continued to perform well in 2002, growing by 0.1% against the overall industry decline of -4.9%. In 2003, sales were below par compared to the industry due to divestments. Bayer grew strongly in 2004, with a 12.8% sales increase more or less on par with the overall industry’s 13.4% growth. The last two years sales have been characterised by decline greater than that of the industry; this has followed drought-induced sales falls in key fungicide sectors, along with heightened generic competition and increases in genetically-modified crops.

Bayer CropScience reported agrochemical sales of €5,358m in 2006, split €1,758m herbicides, €1,219m insecticides, €1,200m fungicides, €467m seed treatment and €714m environmental science.

Regional Sales Split

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Product Class Split

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