Bayer CropScience Looks Toward Seed Profit Growth

Amid restructuring, U.S. Bayer processing facilities will be downsized.

Published on: Sep 19, 2006

Bayer CropScience will be boosting its seeds business more than double from now through 2015, pushing seed income from 6% of total sales to more than 15%, says CEO Friedrich Berschauer.

Bayer CropScience board member Rudiger Scheitza says the U.S. cotton producer should feel "absolutely no" change from Bayer's planned restructuring of production facilities and staff downsizing. Scheitza says instead, the coming years will bring American producers better FiberMax selections, aimed at specific milling and spinning requirements.

Speaking to a gathering of international agricultural and financial journalists in Monheim, Germany today, Berschauer outlined a three-prong plan for Bayer’s next 10 years – a plan that also includes the recently announced restructuring and downsizing of labor force.

“Our planning...is based on three pillars: a strong Crop Protection business with innovative active ingredients as the mainstay, a dynamically growing Environmental Science business (home and garden products), and a rapidly expanding Seeds and Traits business,” Berschauer explained. To back up the new decade’s plan, Bayer announced it is planning to boost research spending from EUR 580 million to EUR 750 million by 2015.

The ambitious spending announcement comes on the heels of an August announcement that Bayer CropSciences would be cutting its processing facilities worldwide from 50 facilities to 35 and trimming its global workforce by 1,500 employees – beginning immediately. Bayer board member Wolfgang Welter says the cuts will be shared nearly equally by Bayer staff in Europe and the United States, noting much of the trimming will come in plants obtained in Bayer’s purchase of Adventis.

Welter and Berschauer both blamed drought and fickle weather conditions in the U.S. for significantly lowered profit figures from North America, and said those economic changes forced the company to make changes in its processing and delivery systems there. Similarly, severe turmoil in Brazilian agriculture and drought in Australia, the U.S. and in parts of Europe got the blame for Bayer’s missing its past two year’s profit projections.

Replacing generics
Today’s announcements note Bayer’s plans to begin replacing crop protection chemicals for which there are generic equivalents - particularly in the U.S. While not an immediate change, the global plan calls for gradual replacement with “value-adding” products for which a premium can be charged, says board member Rudiger Scheitza. He says this will allow crop protection to remain profitable while growing as new products come on line.

The real growth will come in seeds and traits technology for cotton, canola, vegetables and rice, he says.

For U.S. cotton growers, who have planted roughly 20% of their fields to Bayer’s FiberMax cotton, Scheitza said the American grower should see ‘absolutely no’ changes in the coming reorganization and employee downsizing. In fact, he says research dollars will be flowing into boosting spinning and milling qualities of FiberMax varieties.

Scheitza told Farm Progress Cos., Bayer will be working with end users of FiberMax cotton to somewhat custom-make varieties for various end products at the mill. Cotton fiber quality will remain an emphasis in the company’s research, he notes.