Low-cost Chinese generic pesticides weigh on the German giant
Bayer is restructuring Crop Science, its agrochemical and seed business, in a bid to “ensure the division’s global competitiveness” in the face of competition from low-cost Chinese generic products, Bayer says in a press release. Measures the firm will take include closing a site in Frankfurt, Germany, by the end of 2028 that produces active ingredients and formulations for herbicides. An undisclosed number of the 500 plant workers at the site will move to locations in Dormagen and Knapsack, Germany, or Bayer’s other pesticide formulation sites, the company says. Bayer will relocate R&D staff at the Frankfurt site to Monheim am Rhein, Germany, where the firm already conducts R&D on insecticides and fungicides. Additionally, Bayer says that by 2028 it will “streamline” its pesticide plant in Dormagen by discontinuing the production of generic active ingredients that are available elsewhere at significantly lower prices. The changes will result in the loss of about 200 of the 1,200 jobs at the site. The planned restructure is a response to low-cost competition, especially from China, where the spot price of pesticide active ingredients has dropped by more than 20% in recent years, Bayer says. Following a presentation by Bayer board members, BNP Paribas stock analyst Laurent Fevre asked whether pressure on profits in Bayer’s crop protection business could get worse. Crop Science president Rodrigo Santos’s response was that he does not expect the problem to go away anytime soon. “We do see competitive pricing pressure for the next quarters, as we have a significant build-up of capacity in China,” he said. Sales in Bayer Crop Science’s division fell 3.3% in the first quarter of the year to $8.2 billion; pretax profits were down 10.2% to $2.6 billion. Chinese competition does not seem to be affecting other big agrochemical companies as much. The Swiss firm Syngenta, which is owned by China’s Sinochem, reported that its sales and profits for the first quarter were up slightly compared with the same period 1 year ago. Syngenta announced during the presentation of its first-quarter results that it is pursuing a strategy to focus on higher-margin products and reduce sales of those with lower margins. Indianapolis-based Corteva Agriscience recently disclosed that its net sales in the first quarter of this year were slightly down, while profits were slightly up.