Bayer's chief executive officer Werner Baumann says another significant acquisition by the Consumer Health division would be "very, very distracting"
Bayer Consumer Health is focusing on making the most of its acquired businesses, including Merck Consumer Care, rather than seeking another big deal. Werner Baumann, Bayer's chief executive officer, said the Consumer Health division already had "critical mass" and another significant acquisition would be "very, very distracting".
Announcing the company's 2016 financial results, Baumann said Bayer Consumer Health's "first, second and third priority right now" was to make the acquisitions completed in 2014 "productive". In addition to Merck & Co's Consumer Care business, Bayer acquired Chinese OTC company Dihon Pharmaceutical.
Another acquisition of significance would "automatically lead to distraction rather than the focus we need to drive the performance of the brands we have and hold in our hands", commented Baumann.
Baumann pointed out that Bayer Consumer Health was one of three core leading businesses in the OTC industry, along with GlaxoSmithKline Consumer Healthcare and Sanofi Consumer Healthcare. He said the three players had "essentially the same market share".
Business model was adjusted
In September 2016, Bayer announced that two years after acquiring US-based Merck & Co’s Consumer Care operations for USD14.2 billion, it had adjusted the model for its Consumer Health division. Baumann said some of the adjustments addressed weaknesses in the acquired business that had not been identified during due diligence (click here to read the News story).
Set against this background, Bayer adjusted its “mid-term aspirations” for the Consumer Health division. Baumann said Bayer wanted Consumer Health to record a Compound Annual Growth Rate (CAGR) of 4%-5% on a currency- and portfolio-adjusted basis during the three years to the end of 2018.
Furthermore, Baumann said Bayer wanted Consumer Health to achieve an adjusted Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) margin of approximately 25.0% in 2018.
In 2016, worldwide sales at Bayer Consumer Health increased by 3.5% on a currency- and portfolio-adjusted basis to EUR6.04 billion (USD6.40 billion). Sales as reported were down by 0.6%, following a negative currency effect of 4.1%.
Consumer Health's EBITDA before special items decreased by 3.1% to EUR1.41 billion, giving an adjusted EBITDA margin of 23.4%. Baumann said the decline was mainly due to the higher cost of goods sold and negative currency effects of around EUR65 million.
Read about Bayer Consumer Health's strategy in a 20-page News Extra from OTCToolbox. Click here to download today.