Bayer Ag S/Adr

Good afternoon and good morning, everybody. Welcome to our conference call to review Q4 and full year 2025 and to look into 2026. To begin, Bill will share his perspective on our business development, the progress we've made in our transformation and the path ahead of us. Wolfgang will then provide an overview of our financials in 2025 and the outlook for 2026. We will then hear from our divisional presidents on the performance of their businesses and plans going forward to execute their strategies. And then we move to the Q&A. Before we begin, please note the cautionary language in our safe harbor statement. Let me also remind you that we'll speak about our sales growth in currency and portfolio adjusted terms throughout today's presentation, if not stated differently. And with that, over to you, Bill.

Thanks, Joost. Thanks all of you for joining today's call. We're really happy to go through our 2025 results and to provide an outlook for 26. Before doing that, I do want to share a short update on company leadership. As we announced in November, Judith Hartman has joined the company and the Board of Management as of March 1st. So she's going to spend the coming weeks getting to know the company, its customers, our people, our products, before taking over as CFO in June. So she's looking forward to meeting you. I know some of you know her already, picking up from Wolfgang, who's definitely locked in on steering the company through an important next three months. So let's get into 2025. In July, we upgraded our currency-adjusted sales and earnings guidance for the year. And today, we're announcing that we delivered that guidance, landing comfortably within the improved corridor. Sales came in at 45.5 billion, and we posted core earnings per share of 4 euros and 91 cents, and our free cash flow came in at 2.1 billion euros. Here's a picture of our businesses. CropScience progressed in the first year of its profitability improvement program. A rejuvenated picture of our pharmaceuticals business emerged, with launch medicines establishing themselves as growth drivers and others advancing through our pipeline to the market. Our consumer health business suffered from the market softness in the United States and China, but maintained the bottom line. And across the firm, we're seeing improvements to the way we operate. Launches are moving at great speed, resources moving much more fluidly. Our organization is considerably flatter and leaner, less managerial and more mission-oriented. We have roughly half as many layers and we've reduced management by two-thirds compared with when we kicked off this work. The 88,000 people of Bayer are doing more, faster, with less. And all in all, we recognize progress on our comprehensive turnaround plan, but the journey is far from over. There's much more to do in each of our priorities and each of our businesses. Our focus is on the important work ahead. One of those key priorities is significantly containing litigation. Two weeks ago, Monsanto and plaintiff lawyers in the U.S. announced a nationwide class settlement to resolve eligible current and future cases in the glyphosate litigation. And today, I want to reiterate a few key points. First, the class settlement is moving through approvals. Just as we said two weeks ago, we're confident in the merits of the agreement. We await the judge's ruling and we'll be ready for any scenario. Second, Monsanto has filed its opening briefs with the U.S. Supreme Court, and the case has received strong support from the U.S. government, attorneys general in 15 states, the U.S. Chamber of Commerce, and many more. We will continue preparing our case in anticipation of a ruling likely in the second half of June. We're particularly grateful for the backing we've gotten from farmer groups across the United States, who know better than anyone how important glyphosate is for their vital work. In fact, the White House recently recognized how essential glyphosate is for US food security with an executive order. We share that view and we're fully prepared to comply. Overall, our multi-pronged strategy proceeds apace. We know we have some important milestones ahead of us. We'll stay focused on taking the right steps for the company and remaining prepared for all outcomes. Beyond that, this issue has garnered a lot of attention lately, and in the coming months, we expect a rigorous debate about American agriculture and what's needed to create a food system that's robust, sustainable, healthy, and regulated by sound science. We appreciate that people come to this issue with a range of opinions, and we welcome that conversation. Most importantly, we've got to be clear on the facts. Fact one. Glyphosate safety is resoundingly confirmed by regulators. More than 50 countries, including the U.S., Canada, and countries across Europe, say so. These are thorough reviews, not designed at getting clicks or going viral, but carefully assessed risk and reaching scientific assessments. Fact two, glyphosate is essential for agriculture and food systems. It keeps carbon in the soil and protects harvests from being wiped out by weeds. It helps keep a trip to the grocery store affordable at a time when food prices are a topic of concern. American farmers are a bedrock of the nation's economy and a force for food security around the world, and we want to keep it that way. Fact three, Litigation in the U.S. is big business. Litigation costs amount to more than $600 billion a year. That's taking more than $4,000 out of the pocket of every American household. And it's growing thanks to backing by private equity and foreign investors who enjoy tax-free returns. Last week, the Washington Post called on Congress to pass tort reform and specifically cited the glyphosate litigation as an example of how the system has gone wrong. So the next time the narrative is framed as sticking it to the big corporation, people should question who is actually the big corporation here and who's ultimately bearing the cost. For years now, Bayer has been on the record on this issue and many others surrounding the glyphosate litigation. We've made our case to politicians across political lines and the general public, and we'll continue to be clear and transparent about our interests. We'll engage with people of differing opinions, and we'll hope to find common ground. Most importantly, when it comes to questions this big, we'll always start with what's true. Now, beyond litigation, we have a full agenda for 2026. We have ambitions to help many more patients with Nubeka and Corendia. 2026 will be the first full year of sales for both Biantra and Linquet, and we want to launch Azindexian as soon as possible. Our crop science business set the foundation in 2025, establishing its five-year framework. Execution is underway and will continue in 2026 with the goal of improving the top and bottom line in 26, all while preparing important launch plans scheduled for 27 and beyond. Consumer health plans to advance its road to billions strategy, offsetting an uncertain market by making the right investment decisions in categories where we have the most to win. And in a year where we're bearing the brunt of litigation-related impact, we're exercising vigilant discipline in how we manage our resources. Cash conversion is of the utmost importance. De-leveraging remains a big focus area, and Wolfgang will tell you more about our financing plans for this year. And we're laser-focused on delivering the 2 billion euros in organizational savings through our operating model. In terms of our outlook, we expect a solid performance in 2026 with product declines in pharma and crop science due to loss of exclusivity and regulatory pressure in the EU, offset by continued strong performance of our launch products and our annual portfolio refresh. In addition, we want to ensure continued investment in our pipeline and launch products in 2026 to set ourselves up for growth in 2027 and beyond. Before accounting for FX changes, we see our core earnings per share landing roughly in line with last year. And as we shared two weeks ago, we're expecting a negative free cash flow this year due to litigation-related payouts. That outlook is emblematic of the company's current strategic position. Strong signs of progress, but still working on a comprehensive turnaround. We've made major gains across the company, but that work is not yet complete. We're focused on delivering what we've committed for 26 and making the right long-term decisions to set Bayer up for sustained profitable growth. We have a clear picture of what needs to be done in every area. We're dialed in on the tasks at hand, and we're ready to deliver. So Wolfgang will walk you through the numbers. Over to you. Thanks, Bill.

Welcome also from my side. Let's first take a closer look at the group financials for the full year 25. In a pivotal year, we fully achieved our raised financial guidance for all group KPIs. Group net sales grew by 1% year over year in a currency and portfolio adjusted terms. All divisions delivered their adjusted guidance. Let me briefly highlight the main business drivers by division. For crop science, the anticipated regulatory headwinds from the dicampa label vacature and the Movento expiration were offset by strong corn seeds and traits growth. Corn growth was driven by several factors. Historically high corn acreage in North America, strong performance of our corn seeds and traits globally, and finally a portion of incremental licensing revenue from the resolutions with Cultiva in Q4. Let me pause for a few additional comments on the Coteva resolutions. First, the resolutions represent licensing fees rightfully owed to us for the usage of our proprietary technology across multiple periods, including the years 25 and 26. Licensing fees are an important element of our business model and thus are accounted for as operating revenue. Second, Based on content and timing of the resolutions, about 300 million euros supported our corn performance in Q4 of 25. And as you may have read in the annual report, about 450 million euros will support our soy performance in Q1 26, which is reflected in our outlook. We always had a high level of confidence that we would prevail, but these numbers were higher than what we modeled before. Third, given the positive impact, we decided to advance certain strategic measures like product portfolio streamlining. Together with an impact on incentives, this is largely offsetting the positive effects from licensing income in 2025. It is important to note that the underlying operational targets would have been achieved without these effects as well. Our pharma business fully delivered on its raised guidance. Nubeka and Carinthia continued their significant growth momentum and finished the year ahead of our raised expectations. With that, the launch assets performance more than offset the expected declining Xarelto as well as headwinds in ILEA. Our consumer health division delivered resilient performance in a challenging market environment with net sales stable year over year and in line with our revised guidance. Nutritionals were partially affected by difficult market conditions in both China and the U.S., while softer seasonality in cough, cold, and allergy led to a decline in this category. As previously indicated, our group top line was impacted by material FX headwinds of around 1.7 billion euros, driven by the depreciation of the US dollar, the Brazilian RAI, and some hyperinflation currencies. Let's move to the bottom line. Group EBITDA before special items came in at 9.7 billion euros compared to the prior year. Negative foreign exchange effects of around 500 million euros weighed on profitability. We also saw higher incentive provisions and gross investments compared to the prior year, while top line growth and cost savings helped to compensate. In an important year for our transformation, all our divisions and the enabling function delivered on the profitability commitments, balancing necessary growth investments with disciplined resource allocation and cost savings. Core earnings per share came in at €4.91. The decline versus the prior year was driven by the expected lower EBITDA before special item and includes FX headwinds of about $0.30. Our core financial result came in better than anticipated. Compared to the prior year, it improved markedly, mainly driven by lower interest expenses and positive changes in equity results. Reported earnings per share were at minus 3 euros and 68 cents, as you can see in the appendix. Main drivers for the delta, next to the regular amortization of intangibles, are significant litigation related provisions and liabilities classified as special items. Litigation related special items amounted to 7.5 billion euros in total, including the increases that we announced two weeks ago. Let me also clarify again that our litigation-related provisions and liabilities are based on a comprehensive assessment. The provision and liabilities of €11.8 billion contain all litigation-related costs we know today and can reliably forecast, also covering past glyphosate verdicts, either settled or pending in appeals. Our free cash flow came in at the upper end of our guidance range at 2.1 billion euros. The anticipated year-over-year decrease is mainly driven by the expected higher incentive and litigation-related payouts. With our continued focus on improving working capital and prioritizing capital expenditures, we have further reduced our year-end working capital-to-sales and our capex-to-sales ratios in 25. Net financial debt was reduced to below 30 billion euros by the end of 25 due to the cash flow contribution and about 1.4 billion euros in foreign exchange tailwinds driven by a weaker US dollar. Let's now move to the outlook for 26. Let me start by explaining the background for a methodology change that we will implement for our core earnings per share KPI as of this year. What we want to achieve with that is to provide enhanced transparency around our operational performance, reflecting necessary cost of doing business and moving core EPS closer to reported EPS. Previously, our core EPS definition only included the core depreciation linked to usual depreciation of property, plant, and equipment. All amortizations of intangibles were excluded. As of this year, we will also factor in the amortization of certain intangible assets, in particular software. The change in methodology leads to an approximately 35 cents step down in 2025. Adjusting for the new methodology, we come from the €4.91 that I just mentioned to €4.57 in 2025. For 26, we anticipate stable core earnings per share at constant currencies on a like-for-like basis. All businesses plan to further progress in their transformation, continue to execute their strategic agenda, and set the basis for future growth. overall expected higher earnings contributions from crop science and consumer health will be offset by anticipated lower earnings in pharma in line with the divisional strategies. On the corporate level, our outlook assumes higher long-term incentive provisions due to the increased share price compared to 25. This also results in higher reconciliation cost as you can see in our modeling assumptions in the appendix. We also expect higher interest expenses impacting our core financial result. This is driven by an anticipated increase in net financial debt due to the substantial litigation-related payouts and the resulting negative free cash flow in 2026. Finally, on geopolitics. Let me start by addressing the recently started war in the Middle East. Our thoughts are with the people across the region. Our focus is on ensuring the safety of our people and the continuity of our business. At this point in time, we do not see a material impact on our business, and we will continue to closely monitor the situation. we are in close contact with our people on the ground who ensure continued supply of our essential products. Regarding tariffs and FX, we are prepared to deal with a new dimension of volatility across businesses In 25, we successfully managed the dynamic trade environment and limited the impact of additional tariffs. This was achieved through a combination of mitigating measures by our cross-functional teams, as well as tariff exemptions based on the relevance of our products. Our new way of working proved extremely helpful in flexibly handling the situation, and we will continue to build on that strength going forward. For 2026, our outlook includes our latest assessment of estimated direct and indirect geopolitical impacts, As mentioned previously, we expect foreign exchange rate fluctuations to remain a major swing factor. Based on year-end spot rates, we anticipate continued foreign exchange headwinds of about 30 cents to our core earnings per share, as shown on the right side of the chart. Managing our FX exposure in the geopolitical context has been a major priority for us in 2025 and will continue to be a major priority in 2026. Overall, we will continue to monitor the situation very closely. This includes the future of the US-EU trade relations following the recent court ruling on IEPA-based tariffs. Let me summarize with the outlook for all group KPIs for 2026. We anticipate net sales of between 45 and 47 billion euros at constant currencies, representing a growth range of 0 to 3% in currency and portfolio adjusted terms. For EBITDA before special items, we target between 9.6 and 10.1 billion euros in 26 at constant currencies, representing a minus 1 to plus 4% development versus the prior year. As mentioned, core earnings per share are expected to come in between 4 euros and 30 cents and 4 euros and 80 cents at constant currencies. In our free cash flow outlook of minus 1.5 to minus 2.5 billion euros of constant currencies, we account for the expected significant litigation-related payouts of around 5 billion euros, as also announced two weeks ago. With the negative cash flow, we expect net financial debt to increase to between 32 and 33 billion euros at constant currencies. As also announced two weeks ago, ultimate financing for the litigation resolutions is planned to rely on senior bonds on the one side and instruments receiving equity credit ratings by the rating agencies on the other side and not on the HM authorized capital increase. While finalizing these measures, please note that the current net financial debt outlook for now conservatively reflects straight debt financing. In the last column of this slide, you will find the estimated foreign exchange impact based on months and December 2025 spot rates. And for modeling purposes, we have included all relevant assumptions in the appendix to this presentation, including the combined value for core depreciation and core amortization based on the core EPS methodology change. And with that, Rodrigo, over to you.