Bayer's standalone credit rating outlook to be downgraded by S&P.
Bayer, the German pharmaceutical and agricultural company, is currently facing a series of financial challenges. This week, S&P downgraded its outlook for Bayer from 'stable' to 'negative'.
The downgrade is due to further provisions made by Bayer in relation to the ongoing glyphosate lawsuits in the US. These lawsuits continue to burden Bayer's balance sheet, adding to the company's financial woes.
CEO Bill Anderson, who took over in 2023, is implementing a cost-cutting program to address these issues. This includes a leaner corporate structure, job cuts, and a temporary minimum dividend payment. The aim is to reduce the debt burden that Bayer has been carrying, much of which is due to the multi-billion dollar acquisition of Monsanto a few years ago.
The current outlook could potentially cause difficulties in raising capital for Bayer. This is reflected in the company's stock price, which is at the bottom of the DAX. However, it's worth noting that Bayer's stock has shown resilience in the past, often climbing after good news.
As of June end, Bayer's net financial debt stands at €33.3 billion, a decrease from €36.8 billion last year. This decrease, while promising, may not be enough to alleviate the company's debt concerns entirely.
Investors are remaining on the sidelines with Bayer's DAX stock, potentially due to the pessimistic outlook. S&P maintains Bayer's credit rating at 'BBB', but the negative outlook could potentially lead to higher interest rates for the company.
Formycon's next deal for an Eylea biosimilar could potentially increase pressure on Bayer. If successful, this could provide a much-needed boost to Bayer's bottom line.
Despite these challenges, Bayer's current market capitalization is around €27 billion. With Anderson's cost-cutting measures and potential successes like the Eylea biosimilar, Bayer may be able to navigate these difficult times and return to financial stability.
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