Bayer: The Five-Year Plan Is Taking Shape
The Leverkusen-based company is currently undergoing a noticeable restructuring of its business. While the pharmaceuticals division struggles with expiring patents, Crop Science is emerging as the operational backbone. The quarterly results presented in early August confirm this. While the Pharmaceuticals and Consumer Health divisions posted declines in earnings, the agricultural business saw adjusted EBITDA rise by over 30%. How the stock price performs in the medium term depends largely on this division, partly due to existing legal risks. The five-year plan for this business unit, presented in September 2026, is divided into two clearly distinct phases.
The first few years will be focused on internal restructuring. Bayer has already achieved annualized earnings improvements of approximately EUR 380 million, about 40% of the target of more than EUR 1 billion set for 2029. In-house production of active pharmaceutical ingredients is set to decline from 35% to 25%, and formulation capacity is expected to shrink by up to 25% accordingly. Bayer has already sold five non-strategic active pharmaceutical ingredients and discontinued more than 100 product groups. While this will slow revenue growth in the short term, it will improve profitability. In terms of working capital, Bayer expects to free up approximately EUR 1 billion by the end of 2026, primarily through lower inventory levels.
The actual revenue boost is expected to come in the second half of the program. Ten blockbuster products, each with peak sales of at least EUR 500 million, are set to be launched. The first market launches are already underway. The insecticide Plenexos™ has been launched in Colombia, and the digital short-stalk corn system Preceon™ is being marketed in several countries. In the soybean pipeline, Vyconic™ and Intacta 5+™ are set for launch in 2027/2028. By 2029, Bayer expects additional sales of more than EUR 3.5 billion from its agricultural division, with an EBITDA margin exceeding 20%. To achieve this, the Group is investing approximately EUR 2 billion in research and is using the AI-powered CropKey platform to bring the more than 15 new modes of action in the pipeline to market.
MustGrow Biologics: Milestone Payment from Bayer
MustGrow Biologics received the first significant milestone payment from its partnership with Bayer in August. This payment confirms the technological progress made on the mustard-based biopesticide product TerraMG™. MustGrow estimates that Bayer will invest approximately USD 35 to 40 million over the next five to seven years to advance the approval and commercialization of TerraMG™ for Europe, the Middle East, and Africa (EMEA). At the same time, MustGrow has divested itself of its low-margin third-party distribution unit and is now focusing entirely on its own product platform. This makes the company smaller but operationally leaner and more focused on its in-house developments, TerraMG™ and TerraSante™.
The second quarter of 2026 presents a mixed picture. Sales for TerraSante™, the organic biofertility product, remained weak at CAD 75,000 due to production adjustments and expensive air freight, while licensing revenue of CAD 1.4 million generated a net profit of CAD 400,000. Year-to-date TerraSante™ revenue of CAD 900,000 is already 46% higher than the total revenue for the previous year. Production adjustments impacted gross margins. However, management expects them to return to the 25–30% range after switching to more cost-effective ocean freight. Operating costs are approximately CAD 900,000 per quarter. With CAD 4.4 million in cash and cash equivalents and CAD 5.2 million in working capital, the company is well-positioned for the next phase of growth.
Analysts at GBC expect revenue and margins to increase significantly. Following an estimated revenue of CAD 4.5 million in the current year, it is projected to rise to over CAD 14.1 million in 2027 and to CAD 31.6 million the following year. The EBITDA margin would improve from a negative figure to 26.8% in 2028. The driver behind this is the scaled-up production of TerraSante™, coupled with rising gross margins resulting from more efficient manufacturing. The financing of CAD 3.74 million finalized in June secures the necessary inventory levels. With the appointment of Tyler Reinheimer, management has strengthened the finance division and continues to professionalize the company. The focus now is on achieving the production ramp-up and margin improvements.
K+S: Operational Strength with a Question Mark
The latest financial results from the Kassel-based fertilizer manufacturer came as a surprise. In the second quarter, revenue rose by 12% to EUR 978 million, while EBITDA surged by 60% to EUR 176 million, significantly exceeding analysts’ estimates. This was driven by higher sales volumes and rising prices in the core agricultural business. The segment increased revenue to EUR 700 million at an average price of EUR 343 per metric ton. Higher capital tied up resulted in free cash flow of EUR 40 million, missing expectations.
Management raised its full-year EBITDA forecast to between EUR 680 million and EUR 760 million, a noticeable upward revision. However, the midpoint of the new range aligns with consensus expectations, suggesting a shift between quarters rather than a genuine improvement. Unlike last year, the maintenance shutdown at the Bethune plant in Canada will take place entirely in the third quarter. Analysts are divided. DZ Bank upgraded its rating to “Buy,” while Deutsche Bank and Jefferies maintain their “Sell” ratings. They do not see the raised forecast as providing any real momentum for the valuation.
The company is nevertheless pressing ahead with its transformation. The EUR 600 million “Werra 2060” project is intended to secure production through 2060 and reduce environmental impact. The acquisition of two salt sites in Poland and Saxony-Anhalt for up to EUR 380 million expands the specialty business. Drought along the Werra River remains a risk, as low water levels could hamper production until the new plant comes online in mid-2028. On gas prices, K+S is well positioned, with 70% of its 2026 needs hedged; for 2027, 50% of its European demand is already hedged.
Brussels’ regulatory course is forcing the industry to realign itself toward organic production. With its agricultural division and AI-supported pipeline, Bayer could benefit from the five-year plan in the long term. MustGrow Biologics is an exciting agricultural biotech company thanks to its partnership with Bayer and its focus on TerraSante™. K+S demonstrates operational strength but is struggling with high transformation costs and environmental risks along the Werra River. The market remains in flux, but the direction is clear: organic.
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