Bayer AG set to decrease debt levels and workforce numbers.
Bayer AG, a leading multinational life sciences company, has unveiled an adjusted dividend policy and a new global organisational model, "Dynamic Shared Ownership," as part of a broader financial strategy to manage debt, navigate high interest rates, and bolster free cash flow.
The adjusted dividend policy represents a strategic balance between returning value to shareholders and maintaining financial health in the current economic climate. Bayer aims to gradually increase dividends, with the dividend per share projected to rise significantly from €0.41 in 2024 to €1.80 by 2027, corresponding to a yield increase from 0.4% to around 6.8%.
This dividend approach is closely tied to Bayer’s broader financial strategy. The company is focusing on debt reduction, given its historically high leverage (debt ratio around 70-73% in recent years). Lowering debt improves financial stability and reduces interest expenses, which is crucial in a high interest rate environment.
Elevated borrowing costs make debt servicing more expensive, incentivizing Bayer to prioritize cash flow generation and debt repayment before significantly increasing dividends. The gradual dividend growth indicates prudence in balancing shareholder returns with debt management.
Bayer’s free cash flow is projected to strengthen considerably, from approximately €2.04 billion in 2024 to €4.44 billion by 2027. This improved cash generation capacity supports the company’s ability to both reduce debt and increase dividends, reflecting confidence in sustainable cash flows from its diversified operations in crop science, pharmaceuticals, and consumer health.
The "Dynamic Shared Ownership" model, announced on February 19, 2024, is a worldwide initiative by Bayer to transform its organisational structure. The model is designed to make Bayer significantly more agile and significantly improve its operational performance. Key aspects include reducing hierarchies, eliminating bureaucracy, streamlining structures, and accelerating decision-making processes.
The implementation of this model includes significant job cuts within the company, which are a part of Bayer’s efforts to reduce its debt and increase its flexibility. According to CEO Bill Anderson, these measures are necessary to set the company up for future success.
If shareholders approve at the annual meeting on April 26, a dividend of eleven cents per share will be paid for the 2023 business year. The dividend proposal is made by both the board and supervisory board of Bayer for voting at the annual meeting.
The adjusted dividend policy and the "Dynamic Shared Ownership" model are part of Bayer’s efforts to improve its overall performance and competitiveness. The company believes that these measures will benefit all stakeholders in the long run.
The adjusted dividend policy is a strategic move aimed at striking a balance between returning value to shareholders and maintaining financial health, with Bayer planning to gradually increase dividends over the next few years.
The implementation of the "Dynamic Shared Ownership" model, which is designed to improve operational performance and make Bayer more agile, is a key part of the company's broader financial strategy, involving debt management and optimizing cash flow.
