Bayer Ag S/Adr

Good afternoon and good morning, everybody, and welcome to our conference call to discuss the first quarter results for 2025. To kick things off, Bill will share his insights on our overall business performance and the progress we've made on our strategic priorities thus far. Wolfgang will then provide further insights into the quarter one financials, the current geopolitical environment and our outlook for the remainder of the year. The presentations will be followed by our Q&A session, which will also include the presidents of our three divisions. As a reminder, we invite you also to join us for a crop science webinar later today. We start that at 4 p.m. Central European time or 10 a.m. Eastern time, and where we will delve further into the division strategy and outlook. Before we begin, please note the cautionary language in our safe harbor statement. And with that, over to you, Bill.

Thanks, Joost. And yeah, hi, everyone. Thanks for joining our call today. We're looking forward to going through our Q1 business results with you. And we're also aware that the present geopolitical and economic uncertainty is top of mind. So Wolfgang and I will try to give you a sense of how we're approaching that as well. So let's start with our first quarter performance. First, a reminder that we speak about our sales growth in currency and portfolio adjusted terms. As a group, our sales are flat year over year, positioning us well within the minus 3% to plus 1% corridor that we guided for in 2025. Core EPS came in at 249 euros, and we're on track to reach our outlook of four euros, 50 to five euros at constant currencies. Free cash flow is at minus 1.5 billion euros. And as we've explained before, the negative figure is due to the seasonality of the crop business. It's also 1 billion euros ahead of where we were last year at this time. So we're on pace to land within our 2025 guidance. I'll now go through our businesses one by one. In March, we said we expected mid-single-digit sales declines in crop science in Q1. Sales declined 3%. As expected, regulatory impact cut into some of our higher margin sales, which is why our EBITDA margin is behind last year's Q1 number. Overall, we expect growth in Q2, and we're on track to deliver our outlook for the year. In pharmaceuticals, we posted a strong first quarter with 4% growth. Nubeca and Corandia continued their exceptional momentum. Together, they grew 80% year over year. These gains more than offset the declines we're seeing on Xarelto. I also want to call out our cost management in pharma. We have launch activities underway across the business, so 12% earnings growth is a remarkable feat and an encouraging sign that our model is helping teams do more with less. We know the Xarelto declines will weigh heavily on our top and bottom line over the remainder of the year, but we're equally confident in the momentum of our launches and the fundamentals of our business. In fact, in a more certain environment, we would likely have adjusted our guidance for pharmaceuticals upward, but given the uncertainty around tariffs, we feel it's prudent to reaffirm what we said in March and then closely monitor developments. Given what we see right now, we expect our pharma business to come in at the upper end of our 2025 outlook in both the top and bottom line. In consumer health, we grew 2.5% with contributions from across the business while experiencing soft conditions in key markets. Most importantly, we saw 2% volume growth in Q1. On margins, we were slightly behind prior year, but our guidance of 23 to 24% is well within reach. Overall, these results put us in a good position to deliver the year. Now on to our strategic priorities. You see them captured on the slide. I'll touch on select highlights here. On the pharma pipeline, the Beantra launch is underway in the EU, and we're prepping to launch Elanzanitent in the second half of the year. On litigation, we received an adverse decision by the Superior Court of Pennsylvania, an appeal court, last week. That led to a technical revision of the provision, while we will continue to appeal. This also underscores the need of the U.S. Supreme Court to provide clarity on federal preemption. Our multi-pronged strategy to significantly contain litigation proceeds apace. We filed for U.S. Supreme Court review in the Durnell case, and we've received notable amicus briefs in support of the argument from legal scholars, commodity groups, and other experts in support of the merits of our petition. We also filed two hold petitions with SCOTUS for the Johnson and Salas cases, as the issue of federal preemption exists for both, as in Durnell, and we seek the court to hold cases pending final resolution of the Durnell case. In the legislative realm, we welcome the progress we've seen in several states, including passage in North Dakota and in Georgia, where the governor just signed this important bill last Friday. We await developments in additional key states as legislative sessions conclude in the coming weeks and months. And on crop science profitability, our team is taking action to improve midterm performance. Yesterday, we announced some changes to our production and R&D network in Germany. These are difficult decisions. We don't make them lightly, but they're necessary to position our business for the future. Later today, Rodrigo and his team will provide more color on how we're setting the business up for gains in growth, in profit, and in cash over a five-year horizon. And finally, onto our new system. The people of Bayer forge ahead in our journey to make Bayer leaner, faster, and more productive. We reduced around 2,000 rolls in the first quarter of 2025, amounting to a reduction of roughly 11,000 rolls since we started the system in July of 2023. We're currently focused on two big enablers. First, freeing up resources so our teams can flow to the highest impact work. And second, installing people enablement tools that are fit for our new system and that we continue to attract and retain top talent. So I want to close with three points. First, despite headwinds from patent expiries and regulatory impact, our first quarter puts us in a good spot to deliver in a challenging and important year for the company. Second, we have a plan to address the company's biggest priorities. You have a chance to get some more color on one of them, crop science profitability, later today. Finally, it's our mission to provide health and nutrition solutions, whatever comes. So we're keeping a close eye on the macro environment and we'll adapt as required. So over to you, Wolfgang. Thanks, Bill.

And also, hello from my side. I would like to start with some more color on the drivers of our first quarter results first. For the group Q1, net sales were flat versus the prior year quarter, both in currency and portfolio adjusted terms and as reported. A decline in crop science was offset by growth in both pharmaceuticals and consumer health. EBITDA before special items came in at 4.1 billion euros, which is 7% or about 300 million euros below the prior year quarter. The decline is largely related to lower crop science earnings and a lower reconciliation result. The latter was driven by higher long-term incentive provisions and balance sheet related hyperinflation postings. For Q1, the FX headwind on EBITDA before special items was €165 million, largely driven by the before-mentioned hyperinflation impacts. Core earnings per share of €2.49 were 33 cents, or 12% below the prior year quarter, mainly impacted by the lower EBITDA before special items. In Q1, we recorded EBITDA-relevant special items of 587 million euros, including the glyphosate litigation-related provision update Bill referred to earlier. Consequently, we now expect to come in rather towards the minus 1.5 billion euros of our full-year modeling range provided. Driven by the crop business seasonality, we saw a negative free cash flow of 1.5 billion euros in the first quarter. This reflects an improvement of about 1 billion euros compared to last year, primarily due to effects relating to advance payments from our crop science customers and including a change in factoring. In line with the seasonality of our cash flow profile, net financial debt increased by 1.7 billion euros to 34.3 billion euros since year end 24. Year on year, however, net financial debt was down by about 3 billion euros. Let's now take a closer look at the divisional performance. When I talk about sales growth, I will also always refer to currency and portfolio adjusted figures. For crop science, net sales came in at 7.6 billion euros in the first quarter, down 3% versus the prior year. As a reminder, we had projected mid single-digit declines for the first quarter, so we are largely in line with our internal assumptions. The core business declined by 3% with seats and trades down 5% impacted by lower soybean and cotton sales due to the US dicamba label vacature and corn volume facing to the second quarter following a strategic adjustment of our distribution network. The core crop protection business was up 2%, driven by higher non-glyphosate herbicide volumes, partially offset by lower insecticide volumes in the EU due to the expiration of the Movento registration. The regulatory impact related to dicampa and Movento in Q1 is in line with the previously communicated 200 to 300 basis points margin impact for the full year. We expect the majority of the effect in the first half of the year. Glyphosate sales declined by 10%, driven by phasing into subsequent quarters to support just-in-time purchases in the southern hemisphere. On profitability, EBITDA before special items came in 10% lower at 2.6 billion euros, resulting in a margin of 33.7%. As expected, the lower margin is primarily an effect of high margin sales losses due to the regulatory impacts and the corn phasing to Q2. We were able to partially compensate these effects by cost savings. Let's now move on to our pharma business. Net sales of 4.5 billion euros were up 4% in the first quarter, with growth across the portfolio more than offsetting the expected XRL to decline. Our launch assets Nubeka and Corentia continued to perform particularly well, growing 80% year over year and reaching combined sales of 680 million euros. This was largely driven by strong contributions from the United States. ILEA grew by a solid 5% supported by the ongoing rollout of 8 milligram and sales were particularly strong in Europe and also in Japan. Our base business grew by 6%, driven by strong contributions from radiology and women's health, in addition to high demand for cardio-aspirin and Adelaide in China. And as expected, Xarelto declined in the first quarter, coming in 31% below the prior year. This was mainly driven by continued generic pressure in Europe and in Japan. On the bottom line, EBITDA before special items increased by 12% to 1.3 billion euros in the first quarter, resulting in a margin of 29.5%. Both higher sales as well as continued efficiency gains more than offset slightly higher R&D investments and an FX headwind of one percentage point. Finally, turning to consumer health, sales here grew by nearly 3% with balanced category and regional growth. Volumes were up by 2% while price increases contributed 1%. All regions performed well with growth in North America, APEC, and EMEA. In Latam, we remained flat due to muted consumer sentiment influenced by the U.S.-Mexico trade relations. The digestive health category increased by 13%, driven by product launches, as well as supply improvements in products like Iberogast. For pain and cardio, we record a growth of 7%, fueled by product launches and good consumption of siredone in Asia Pacific. Additionally, aspirin also performed well across all regions. Dermatology was up 2% for the quarter thanks to Bepantene and Canistane, along with innovations within our product range, Kangwang in China. The allergy and cold category grew by 2% with strong growth for cold products in North America, partially offset by a slow start to the allergy season. Finally, nutritional declines by 5% year over year due to weak demand in our prenatal nutrition supplements in China and the discontinuation of the care-of business in the U.S. in June of last year. Our EBITDA before special items increased to €342 million, resulting in a margin of 22.8%, slightly below prior year, but within reach of our guidance range. The improvement in EBITDA before special items was primarily driven by increased sales. Additionally, our ongoing cost management effort positively impacted profitability, including a reduction in COGS. This was partially offset by lower divestment income and increased investments in marketing our innovative products. So let's now look at the outlook. As we see high volatility in the geopolitical environment, I will also share our thinking about the potential direct and indirect impacts around tariffs, as well as FX. We are continuously monitoring the various tariff announcements. Our experts are analyzing potential impacts and working on possible solutions to secure supply to our customers. We are focused on maintaining the stability of our supply chains and on minimizing any potential impact. Based on the current status of tariff announcement and our mitigation measures, we expect to manage the impact and we confirm our outlook at constant currencies for the full year 2025. For crop science, we expect the direct tariff effects to be limited overall, mainly impacting the crop protection portfolio, as seeds and trades are mostly produced in the regions where they are sold. As of now, most of our crop protection active ingredients, as well as glyphosate, are exempt from the latest tariffs. We're also evaluating indirect business implications. These could include, amongst others, the magnitude of acreage shifts from soy to corn in the United States, potential shifts to lead in soy, as well as several pricing and volume scenarios for glyphosate and the broader crop protection portfolio. For the full year for crop science, we are taking decisive measures to maintain stable sales and margins in spite of notable regulatory headwinds. As the anticipated regulatory impact materializes, recovery in Latin America and crop protection, along with strong efficiency gains, will help to compensate to achieve our full year guidance. Let me move on to pharma. On tariffs, we expect to see certain direct effects on parts of our portfolio, mainly product flows between the US and China. With our production footprint in the EU, there is an additional risk of potential tariffs on pharmaceutical imports from the EU into the US. As you know, these are currently exempt, but under a Section 232 investigation. The business performance in the first quarter, particular for our launch assets, provides confidence in our ability to sustainably compensate the Xarelto generalization. Considering this, together with what we currently know about tariffs, we expect pharma to deliver at the upper end of our sales and profitability guidance range. For consumer health, our expectations for the phasing throughout the year are in line with the full year guidance. Based on the current tariff announcement, we expect to be able to manage the direct impacts within the guidance range. We are monitoring additional indirect risks mainly related to potential demand impacts stemming from lower consumer confidence. Let me close with some comments on foreign exchange rates as well. In the past weeks, we have seen a material depreciation of the US dollar and other currencies against the euro, which negatively impacts our top line and, to a lesser extent, our bottom line. In line with long-standing practice and legal requirements, we are updating the FX estimate based on March month-end spot rates. Compared to constant currencies, this leads to the numbers shown in the last column of the table on page 11 of our investor deck. However, as we all know, currencies have materially changed since the announcements from the US administration in early April. To illustrate the potential impact, we performed further analysis based on the spot rates of April 24th. In that scenario, there is an incremental FX headwind of about 900 million euros in net sales and approximately 10 cents in core EPS. On the other hand, this would reduce net financial debt by another 500 million euros compared to the figures shown on the slide. We will monitor these further developments and update you on the impact with our next reporting. And with that, I close my remarks and hand it over to you, Joost, to moderate the Q&A, please.