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Bayer - Update 08/20/2026 - ISIN DE000BAY0017 · Warren's Watchlist - english

• 0:07
  Speaker 0: Recently, Bayer's stock jumped just under twenty percent in a single day.
• 0:14
  Speaker 0: The U.S.
• 0:14
  Speaker 0: Supreme Court had ruled seven to two...in Bayer favor.
• 0:19
  Speaker 1: So the nightmare is over after eight years of glyphosate?
• 0:22
  Speaker 0: That s story.
• 0:22
  Speaker 0: that was everywhere and our report says SCORE ONE THE BOTTOM
• 0:27
  Speaker 2: RUNG.
• 0:27
  Speaker 2: It s based on the Twenty-Twenty Five Annual Report
• 0:30
  Speaker 0: And the ruling came only afterward.
• 0:33
  Speaker 0: which brings us.
• 0:35
  Speaker 0: Does that make my score of one obsolete?
• 0:38
  Speaker 2: Well, Warren does it.
• 0:40
  Speaker 0: No Corey and the reason is the most important sentence I can tell you today.
• 0:44
  Speaker 0: The ruling takes away a risk.
• 0:46
  Speaker 0: It doesn't create a return.
• 0:48
  Speaker 1: Okay You'll have to explain that To me.
• 0:50
  Speaker 0: That's exactly what we're doing Today.
• 0:52
  Speaker 0: Welcome to an episode about A German industrial icon And About the difference between good news & sound business substance.
• 0:59
  Speaker 2: For anyone hearing us for the first time, I'm talking with Warren Wise an AI technology that analyzes like a value investor.
• 1:07
  Speaker 0: Exactly!
• 1:24
  Speaker 0: Also
• 1:28
  Speaker 1: AI, the voice of the retail investor.
• 1:31
  Speaker 1: For many people buyer is almost family history in the portfolio.
• 1:35
  Speaker 1: Aspirin, crop protection a stock you once wanted to hold forever
• 1:40
  Speaker 0: and one whose share price has lost over seventy percent since the Monsanto acquisition In twenty eighteen
• 1:46
  Speaker 2: which Is exactly why I want To understand.
• 1:48
  Speaker 2: how does A name like that end up?
• 1:50
  Speaker 2: A score Of One.
• 1:51
  Speaker 2: And Does This ruling Really Change?
• 1:53
  Speaker 2: Nothing About That.
• 1:54
  Speaker 0: for Us One Means The Knockout Zone from a value investor's perspective, currently not investable.
• 2:02
  Speaker 2: That sounds harsh, Warren!
• 2:03
  Speaker 0: It is harsh but it's a verdict specific to my perspective... ...it doesn't mean this company is going under and it doesn't means the stock would be mistake for everyone.
• 2:12
  Speaker 1: Then what does that mean?
• 2:14
  Speaker 0: By my standards I wouldn't tie up capital here in its current state.
• 2:18
  Speaker 1: And now comes the surprising part.
• 2:20
  Speaker 0: We assess eight categories.
• 2:21
  Speaker 0: None of them sits on lowest rung A one and Bayer passes Graham's survival test cleanly, not a single knockout criterion triggered.
• 2:30
  Speaker 2: So know where the worst rating – every test passed… And yet...the lowest score overall?
• 2:36
  Speaker 0: That is exactly what I'll do the math on for you at the end!
• 2:39
  Speaker 0: But first the court ruling in what it actually changes.
• 2:42
  Speaker 1: Then explain to me what was actually decided.
• 2:45
  Speaker 0: It was about illegal construction Not about question of whether glyphosate causes cancer.
• 2:52
  Speaker 0: The vast majority of the lawsuits claimed Bayer should have warned about the cancer risk and didn't under the law of individual states.
• 3:00
  Speaker 1: And what did the court say?
• 3:02
  Speaker 0: That federal law takes precedence, the U.S.
• 3:04
  Speaker 0: Environmental Agency approved the product and required no warning label.
• 3:08
  Speaker 0: so individual States can't demand one.
• 3:11
  Speaker 0: seven justices in favor two against...
• 3:14
  Speaker 1: ...and with that the basis for thousands of lawsuits falls away.
• 3:17
  Speaker 0: Bayer itself says Existing suits of this kind should be dismissed, future ones prevented.
• 3:23
  Speaker 0: And that's no small thing—that is a real turning
• 3:26
  Speaker 0: point.".
• 3:27
  Speaker 1: But...
• 3:27
  Speaker 0: "...but by that point…a multi-billion settlement was already on the table.
• 3:32
  Speaker 0: Four months before the ruling in February, Bayer reached a class settlement up to seven point two five billion
• 3:38
  Speaker 0: dollars.".
• 3:39
  Speaker 1: Over what period?
• 3:40
  Speaker 0: Upto twenty one years.
• 3:42
  Speaker 2: Twenty ONE YEARS!
• 3:43
  Speaker 2: So Bayer keeps paying into the twenty fourties for
• 3:46
  Speaker 0: illnesses tracing back to exposure before February, twenty-twenty six.
• 3:50
  Speaker 0: But also for cases only diagnosed later and the provisions were raised to eleven point.
• 3:55
  Speaker 0: eight billion euros in twenty twenty six alone.
• 3:59
  Speaker 0: around five billion flows
• 4:01
  Speaker 1: out despite the ruling?
• 4:02
  Speaker 0: Despite the ruling.
• 4:04
  Speaker 0: that's why buyer signed a credit line of eight billion dollars to finance it without a capital increase at least.
• 4:10
  Speaker 2: so The ruling protects against what might still come.
• 4:13
  Speaker 2: But it doesn't simply void the settlement costs, already agreed.
• 4:17
  Speaker 0: That's a very precise summary!
• 4:19
  Speaker 0: It caps the tale...it doesn't clear the bill.
• 4:22
  Speaker 1: And then came Ruvion
• 4:23
  Speaker 0: Exactly and its interesting because Bayer reorganized his US glyphosate business right after the ruling.
• 4:30
  Speaker 0: One week after that ruling Bayer bundles entire U.S.
• 4:33
  Speaker 0: Glyphosates into their own company based in St Louis.
• 4:37
  Speaker 0: Ruvon LLC stays part of this group.
• 4:41
  Speaker 2: Why is that relevant now?
• 4:43
  Speaker 0: Bayer justifies it with agility.
• 4:45
  Speaker 0: The market is shaped by generic products, so it needs its own pricing and distribution decisions.
• 4:51
  Speaker 0: That's plausible.
• 4:52
  Speaker 1: And the other reading?
• 4:53
  Speaker 0: that you're putting a liability heavy business into its own box.
• 4:57
  Speaker 0: I'm not insinuating anything.
• 4:58
  Speaker 0: Ruvion expressly stays part of the group... ...and the provisions remain with the group.
• 5:04
  Speaker 0: But the question will be asked And in the board's place, I'd answer it proactively.
• 5:08
  Speaker 0: Is this just an operational restructuring?
• 5:11
  Speaker 0: Or could become something more down-the
• 5:13
  Speaker 0: line?".
• 5:14
  Speaker 2: So... The ruling caps future risk but doesn't clear costs.
• 5:18
  Speaker 2: and now business is being re-structured.
• 5:20
  Speaker 2: on top of that.
• 5:21
  Speaker 2: What does mean for score?
• 5:23
  Speaker 0: I can only tell you once know how came about.
• 5:26
  Speaker 0: first because….
• 5:28
  Speaker 0: This whole point of episode.
• 5:30
  Speaker 0: lawsuits are one of four reasons.
• 5:33
  Speaker 1: Then start at beginning Because in my head, Bayer is still the aspirin company.
• 5:37
  Speaker 0: And that picture hasn't been true for years!
• 5:39
  Speaker 0: Think of Bayer as three big machines under one roof.
• 5:43
  Speaker 0: Farmer Prescription Medicines – seventeen point eight billion euros in revenue.
• 5:48
  Speaker 0: Consumer Health Aspirin and The Like – five point eight million.
• 5:52
  Speaker 0: Crop Science Seeds.
• 5:54
  Speaker 0: Crop Protection.
• 5:55
  Speaker 0: Digital Farming – twenty-one point six billion.
• 5:59
  Speaker 1: So the agriculture division is the biggest?
• 6:01
  Speaker 0: Forty seven point four percent almost half, and the idea behind it is called diversification.
• 6:08
  Speaker 0: when one machine sputters.
• 6:09
  Speaker 0: The others carry it
• 6:11
  Speaker 1: classic textbook.
• 6:12
  Speaker 0: And now the image that carries the whole case.
• 6:15
  Speaker 0: picture a rowing boat with three rowers to our top athletes perfectly in sync.
• 6:20
  Speaker 1: In the third?
• 6:21
  Speaker 0: Is the strongest?
• 6:22
  Speaker 0: he rose with full force backwards and on the side He's dropped an anchor.
• 6:27
  Speaker 2: A single rower is pulling the boat back.
• 6:29
  Speaker 0: better remember the boat or even better Remember the anchor.
• 6:33
  Speaker 0: It'll turn out to be the real issue.
• 6:35
  Speaker 1: But
• 6:35
  Speaker 2: who are the two top athletes rowing in sync, In this picture?
• 6:39
  Speaker 0: Farmer is running really well.
• 6:41
  Speaker 0: Seventeen point eight billion in revenue.
• 6:44
  Speaker 0: Three-point one billion.
• 6:45
  Speaker 0: operating profit Seventeen-point five percent margin.
• 6:49
  Speaker 0: Earnings up twelve point one percent.
• 6:51
  Speaker 0: Return on capital twelve percent.
• 6:53
  Speaker 1: And what does the capital cost?
• 6:55
  Speaker 0: Seven percent.
• 6:57
  Speaker 0: So clearly above it.
• 6:58
  Speaker 0: That's real quality.
• 7:00
  Speaker 0: Driven by new medicines, New Becker brings in two point four billion, corendia eight hundred twenty nine million
• 7:07
  Speaker 1: and consumer health
• 7:08
  Speaker 0: five point eight billion in revenue.
• 7:10
  Speaker 0: fifteen points seven percent margin calm predictable reliable.
• 7:14
  Speaker 1: so together over twenty three billion in Revenue at seventeen percent margin.
• 7:19
  Speaker 1: In any other setting that would be the basis for a solid blue chip?
• 7:26
  Speaker 0: Governance and risk transparency are two of the few crystal clear strengths in The Warren-Wise report.
• 7:32
  Speaker 0: A four each.
• 7:33
  Speaker 1: What do you base that on?
• 7:34
  Speaker 0: One hundred percent free float, no shareholder above three percent one class of shares... ...the supervisory board on the capital side.
• 7:42
  Speaker 0: ninety percent independent And the litigation risks are laid out fully in the report including the uncomfortable numbers.
• 7:50
  Speaker 1: That's worth more than it sounds.
• 7:52
  Speaker 1: You can only criticize this precisely because they let you look in this precisely.
• 7:56
  Speaker 0: Exactly, and the dividend fits the picture— eleven cents —the legal minimum for a third year in a row.
• 8:03
  Speaker 1: Wait!
• 8:04
  Speaker 1: Your citing cut-dividend as strength?
• 8:06
  Speaker 0: As an honest signal we need every euro for balance sheet And were not dressing up to pay out on credit.
• 8:12
  Speaker 0: I genuinely respect that.
• 8:14
  Speaker 1: So no one here is acting wrongly.
• 8:16
  Speaker 0: That's exactly why case so interesting.
• 8:19
  Speaker 0: We're talking about company which behaves badly.
• 8:22
  Speaker 0: We're talking about one that behaves exemplarily and still destroys value.
• 8:27
  Speaker 2: Destroying value is a harsh verdict, what do you base it on?
• 8:30
  Speaker 0: On single number
• 8:32
  Speaker 1: Which is...
• 8:33
  Speaker 0: A company receives money from banks or shareholders.
• 8:35
  Speaker 0: That's not free.
• 8:37
  Speaker 0: At buyer It costs seven percent per year And buyer states the number itself.
• 8:42
  Speaker 1: So rent for capital.
• 8:43
  Speaker 0: Nice way to put it.
• 8:45
  Speaker 0: The technical term is cost of capital.
• 8:47
  Speaker 0: Now other side.
• 8:48
  Speaker 0: What does this throw off?
• 8:50
  Speaker 0: Take your guess Corey A
• 8:52
  Speaker 1: gap of eight point four
• 9:01
  Speaker 0: percentage points.
• 9:02
  Speaker 0: In technical language, the return side is called Return on Capital Employed.
• 9:07
  Speaker 0: translated every euro that goes into business brings back less than it cost.
• 9:13
  Speaker 0: In twenty-twenty three, the figure was still plus zero point seven.
• 9:17
  Speaker 0: Then minus zero point one.
• 9:20
  Speaker 0: now minus one point four.
• 9:22
  Speaker 1: so Three years downhill
• 9:23
  Speaker 0: third year in a row below the cost of capital.
• 9:26
  Speaker 0: and here's The Point where I come back to the ruling.
• 9:29
  Speaker 0: this figure gets not One single percentage point better because Of the court decision
• 9:34
  Speaker 1: Because A risk That's Been Removed Doesn't Generate Revenue
• 9:37
  Speaker 0: And No Profit.
• 9:38
  Speaker 0: that'S Exactly What i mean by it Takes away A Risk It doesn'T Create A Return.
• 9:42
  Speaker 1: Then back to the third rower,
• 9:44
  Speaker 0: Crop Science.
• 9:45
  Speaker 0: And technologically this division is a heavyweight.
• 9:48
  Speaker 0: with FieldView buyer runs one of the largest data platforms in world.
• 9:52
  Speaker 0: agriculture.
• 9:53
  Speaker 0: over two hundred seventy five million acres plus seed patents and intangible assets of twenty point six billion on the balance sheet.
• 10:01
  Speaker 1: so exactly what value investors rave about?
• 10:04
  Speaker 1: The lead that no-one copies overnight!
• 10:12
  Speaker 0: Reported margin minus eleven point seven percent.
• 10:16
  Speaker 1: Minus?
• 10:17
  Speaker 0: And now the point that almost every report on buyer gets wrong inside, that minus eleven points seven per cent sit five point five billion euros of roundup one-off effects.
• 10:27
  Speaker 1: and without those
• 10:28
  Speaker 0: strip them out and crop science earns around three billion.
• 10:32
  Speaker 0: about thirteen point eight percent margin.
• 10:34
  Speaker 2: wait Warren.
• 10:35
  Speaker 2: so The Division isn't a loss maker at all.
• 10:38
  Speaker 0: it's profitable underneath And that matters to me because it's told differently everywhere.
• 10:43
  Speaker 0: The charge isn't, this division loses
• 10:46
  Speaker 0: money.".
• 10:46
  Speaker 1: Then what is it?
• 10:48
  Speaker 0: It earns thirteen point eight percent where Pharma earns seventeen point five... ...it almost half the group and weakest of three machines….
• 10:57
  Speaker 1: …and now the ruling comes into play!
• 10:59
  Speaker 0: "...And in a way that surprised myself—because when litigation costs run out...".
• 11:04
  Speaker 0: "...the excuse disappears with
• 11:05
  Speaker 0: them!".
• 11:06
  Speaker 1: Oh until you could say Crop science only looks bad because of the lawsuits.
• 11:10
  Speaker 0: And then that sentence falls away, what's left is a division with thirteen point eight percent margin carrying twenty-eight billion euros of goodwill.
• 11:19
  Speaker 0: The question doesn't get easier.
• 11:21
  Speaker 0: for the first time in years it becomes askable at all.
• 11:25
  Speaker 2: So the Good News takes away.
• 11:26
  Speaker 2: crop sciences excuse.
• 11:28
  Speaker 2: now the weak return stands there fully exposed
• 11:32
  Speaker 0: Exactly That.
• 11:33
  Speaker 2: A quick word on our own behalf since It fits right here.
• 11:36
  Speaker 2: Exactly this kind of uncompromising deep analysis sits behind every Warren-wise report.
• 11:43
  Speaker 2: If you sit on a management or supervisory board, Or are responsible for investor relations and want an even more detailed deep dive for your own company, warren-wise.com.
• 11:55
  Speaker 2: So back to Bayer.
• 11:56
  Speaker 2: then explain the twenty twenty five result to me.
• 11:59
  Speaker 0: buyer reports in operating loss around one point one billion euros before one off effects.
• 12:05
  Speaker 0: It's plus around five point one billion
• 12:08
  Speaker 1: over six billion difference for the same year, The Same Company.
• 12:12
  Speaker 0: Around six point two billion to be exact almost entirely from around seven point five billion euros of litigation charges.
• 12:19
  Speaker 1: and how do you assess that
• 12:21
  Speaker 0: through a metric?
• 12:21
  Speaker 0: That measures How large the adjustments are relative To reported earnings.
• 12:25
  Speaker 0: For equality company it's below one point three guess
• 12:29
  Speaker 1: Two two-and-a-half Five
• 12:31
  Speaker 0: point seven
• 12:32
  Speaker 1: five point seven.
• 12:33
  Speaker 1: The adjustments are almost six times as big as what's actually reported.
• 12:40
  Speaker 1: And was that real money
• 12:43
  Speaker 0: in twenty-twenty five?
• 12:54
  Speaker 1: So the money is still there, it just already promised!
• 13:01
  Speaker 0: On paper, the year looks better than it is.
• 13:06
  Speaker 1: And when does the bill come?
• 13:07
  Speaker 0: Now, twenty-twenty six around five billion and a free cash flow of minus one point five to minus two point five billion.
• 13:15
  Speaker 0: that's buyer zone forecast... ...and its stands despite the ruling
• 13:18
  Speaker 1: In The Lesson?
• 13:20
  Speaker 0: Not That Buyer Is Fudging!
• 13:21
  Speaker 0: The report explicitly praises the disclosure.
• 13:24
  Speaker 0: Rather, when the adjustments are almost six times as large as reported earnings.
• 13:29
  Speaker 0: The nice adjusted figure is no longer a reliable proxy for real earning power.
• 13:34
  Speaker 1: It's not wrong.
• 13:35
  Speaker 1: it just no longer says anything.
• 13:37
  Speaker 0: I couldn't have put it better.
• 13:38
  Speaker 1: And how deep does Monsanto sit in the balance sheet?
• 13:41
  Speaker 0: Deeper than many realize.
• 13:43
  Speaker 0: Imagine you buy A big house at a proud price.
• 13:45
  Speaker 0: Everything You pay above the tangible value lands As goodwill.
• 13:49
  Speaker 0: on the Balance Sheet The technical term is goodwill, translated the paid-for hope of future earnings.
• 13:56
  Speaker 1: And how much is that?
• 13:57
  Speaker 0: Around twenty eight billion euros.
• 13:59
  Speaker 0: and now the question that counts How much equity does the group have in total?
• 14:04
  Speaker 1: Considerably more.
• 14:05
  Speaker 1: I'd assume
• 14:06
  Speaker 0: around twenty six billion.
• 14:07
  Speaker 1: Wait!
• 14:08
  Speaker 1: The Good Will Is Larger Than The Entire Equity?
• 14:10
  Speaker 0: A hundred seven point seven percent.
• 14:12
  Speaker 0: the entire equity is mathematically eaten up by this one acquisition.
• 14:19
  Speaker 1: And that doesn't change the verdict.
• 14:21
  Speaker 0: Not by a single euro, The house is standing and in the cellar lies a legacy burden... ...the court ruled.
• 14:28
  Speaker 0: new water does not keep flowing-in it didn't drain the cellars.
• 14:32
  Speaker 1: How does balance sheet look overall?
• 14:34
  Speaker 0: Strained net debt twenty nine point eight billion.
• 14:38
  Speaker 0: The equity ratio has fallen from twenty eight point nine to twenty four point nine percent
• 14:43
  Speaker 2: In leverage factor.
• 14:45
  Speaker 0: Here I have to be careful because a lot of nonsense is made with this number.
• 14:49
  Speaker 0: Measured against reported earnings, seventeen point five.
• 14:52
  Speaker 1: Seventeen and half?
• 14:53
  Speaker 1: I thought above three or four.
• 14:55
  Speaker 1: it gets critical.
• 14:57
  Speaker 0: Hence the caveat The seventeen-point-five arises Because the denominator holds earnings near zero Before one off effects... ...the factor is three point zero nine.
• 15:06
  Speaker 1: So not quite so dramatic
• 15:08
  Speaker 0: Strained but not absurd.
• 15:10
  Speaker 0: Whoever only cites the seventeen point five is grandstanding.
• 15:14
  Speaker 0: Whoever Only Cites The Three Is Playing It Down.
• 15:17
  Speaker 1: And the number that nails it?
• 15:18
  Speaker 0: The debt service coverage ratio, it measures whether ongoing earnings cover interest and repayment.
• 15:24
  Speaker 0: Buyer is at zero point five eight for the second year in a row.
• 15:28
  Speaker 1: So barely sixty percent of what comes due...
• 15:31
  Speaker 0: ...and still this absolutely belongs here.
• 15:34
  Speaker 0: liquidity is the strongest pillar around thirteen billion available immediately, against five point seven billion in short-term financial liabilities plus the new credit line of eight billion dollars.
• 15:48
  Speaker 1: So no acute distress?
• 15:50
  Speaker 0: The next year and a half to two years aren't the question—the question is what comes after!
• 15:54
  Speaker 0: And all three rating agencies stand with a negative outlook on the lowest rung of the good range simultaneously.
• 16:01
  Speaker 0: that's not coincidence That's consensus
• 16:04
  Speaker 1: In the future — the pipeline?
• 16:06
  Speaker 0: That's where it gets uncomfortable.
• 16:07
  Speaker 0: Research spending fell by seven point one percent to around five point.
• 16:11
  Speaker 0: eight billion euros and Eight hundred fewer positions in research.
• 16:16
  Speaker 1: Eight hundred, fewer researchers at a life science group that lives off the next big medicine.
• 16:21
  Speaker 1: Aren't they literally eating their own seed corn?
• 16:24
  Speaker 0: A very fitting image almost ironically apt for an agriculture Group.
• 16:28
  Speaker 0: add a second number Capital expenditure.
• 16:31
  Speaker 0: is it zero?
• 16:32
  Speaker 0: point seven of the depreciation volume
• 16:34
  Speaker 2: translate that
• 16:36
  Speaker 0: Less is being invested than substance is being used up.
• 16:39
  Speaker 0: The group living off itself while it
• 16:41
  Speaker 0: deleverages.".
• 16:42
  Speaker 1: And, Is that wrong?
• 16:43
  Speaker 0: No and That's the honest part.
• 16:45
  Speaker 0: you can't repay debt pay for lawsuits and fully fund the pipeline all at once.
• 16:50
  Speaker 0: something gives.
• 16:52
  Speaker 1: but this forced rationality of today It's tomorrows growth weakness.
• 16:56
  Speaker 0: and thats where the central risk lies.
• 16:58
  Speaker 0: buyer has seven platform assets in cell and gene therapy Parkinson's programs thematically All-the-right things.
• 17:05
  Speaker 0: Only none of them reaches meaningful revenue before twenty-twenty eight to twenty thirty.
• 17:10
  Speaker 1: And the litigation payments?
• 17:12
  Speaker 0: Are running now and class settlement runs upto twenty one years.
• 17:16
  Speaker 1: So between what costs money, there's a whole four or five years.
• 17:20
  Speaker 1: The
• 17:21
  Speaker 0: report calls it the timing mismatch... ...and court ruling doesn't change that either.
• 17:25
  Speaker 1: But isn't this just an outlier year?
• 17:27
  Speaker 1: Distorted by lawsuits!
• 17:29
  Speaker 1: Now after the ruling everything looks normal again.
• 17:32
  Speaker 0: That is decisive question.
• 17:34
  Speaker 0: And the answer is no, because I stripped out the special charges completely once.
• 17:39
  Speaker 1: So just a cleaned up number?
• 17:41
  Speaker 0: Only one buyer itself likes to show most In twenty-twenty-one.
• 17:45
  Speaker 0: The adjusted earnings margin was twenty five point four percent.
• 17:48
  Speaker 0: Guess where it stands in the latest fiscal year.
• 17:51
  Speaker 1: Twenty-four?
• 17:52
  Speaker 0: At twenty-one point two
• 17:54
  Speaker 2: Over four points down...in three years!
• 17:57
  Speaker 0: ...and in absolute terms even more starkly adjusted.
• 18:01
  Speaker 0: operating profit fell from eleven point two billion in twenty-twenty one to nine points seven.
• 18:07
  Speaker 0: In the latest fiscal year a billion and half gone, And revenue likewise.
• 18:13
  Speaker 0: From forty seven point six billion in Twenty twenty three To forty five point six most recently.
• 18:19
  Speaker 1: So even the cleaned up number points down?
• 18:24
  Speaker 0: That's not a litigation issue, that is slow sustained erosion.
• 18:28
  Speaker 0: and exactly why the ruling changes.
• 18:30
  Speaker 0: so little about my diagnosis.
• 18:33
  Speaker 1: In
• 18:34
  Speaker 0: my Warren Buffett check overall picture unfortunately doesn't hold together.
• 18:39
  Speaker 0: signals contradict each other.
• 18:41
  Speaker 0: exemplary discipline negative return full transparency.
• 18:46
  Speaker 0: earnings have to be adjusted six times over two excellent machines.
• 18:51
  Speaker 0: biggest one drags down.
• 18:53
  Speaker 0: That costs half a point.
• 18:55
  Speaker 2: And in the monger check?
• 18:56
  Speaker 0: Here I'm not looking at individual warning signs, but at the pattern At buyer.
• 19:00
  Speaker 0: four clusters are active.
• 19:02
  Speaker 2: Which ones are they?
• 19:03
  Speaker 0: first lack of acquisition discipline an oversized takeover financed with high debt.
• 19:10
  Speaker 0: second goodwill risk The Goodwill exceeds equity.
• 19:13
  Speaker 0: third financial stress leverage above-the threshold debt service coverage below one.
• 19:20
  Speaker 0: Fourth, earnings quality.
• 19:22
  Speaker 0: The adjustments are large over years.
• 19:24
  Speaker 1: And now the
• 19:25
  Speaker 2: crucial question How many of those clusters does the court ruling clear away?
• 19:29
  Speaker 0: One-the fourth overtime
• 19:31
  Speaker 1: In the other three...
• 19:35
  Speaker 0: The debt from that purchase, not even the best ruling pulls it up.
• 19:50
  Speaker 2: So all four factors reinforce each other and the ruling diffuses only one of them?
• 20:09
  Speaker 1: And now do the math
• 20:12
  Speaker 0: on financial resilience, the strongest at a fore governance and risk transparency.
• 20:23
  Speaker 0: On average that would land closer to three than
• 20:26
  Speaker 0: one.".
• 20:26
  Speaker 1: So almost of three?
• 20:28
  Speaker 0: But my score is no-average.
• 20:29
  Speaker 0: The Warren Buffett cheque takes off half point... ...the Charlie Munger cheque a whole one.
• 20:34
  Speaker 0: And because both hit load bearing links what counts in end is weakest.
• 20:39
  Speaker 1: That's why I won without a one standing anywhere.
• 20:42
  Speaker 0: It not single failure puts this company on bottom rung And that's why a single piece of good news doesn't lift it back up, either.
• 20:50
  Speaker 2: Then be fair and do the counter calculation.
• 20:53
  Speaker 2: The report names five conditions for step-up.
• 20:56
  Speaker 2: How many does the Monsanto ruling meet?
• 20:59
  Speaker 0: Good question!
• 21:00
  Speaker 0: I'll go through them one by one.
• 21:02
  Speaker 0: First reported earnings must turn positive and return on capital above five percent two years in a row.
• 21:08
  Speaker 1: Does the ruling help there?
• 21:10
  Speaker 0: Not at all.
• 21:11
  Speaker 0: not a euro operating profit is added.
• 21:13
  Speaker 1: Second
• 21:14
  Speaker 0: Free cash flow in twenty-twenty six must beat the company's own forecast.
• 21:19
  Speaker 0: Twenty, twenty seven back above two billion.
• 21:21
  Speaker 0: there it helps but only from twenty twenty seven on.
• 21:24
  Speaker 0: The five billion for this year is locked in
• 21:28
  Speaker 1: third
• 21:29
  Speaker 0: debt down debt service coverage above one.
• 21:32
  Speaker 0: Indirectly helpful because less uncertainty makes refinancing cheaper But not in the short term.
• 21:38
  Speaker 2: fourth
• 21:39
  Speaker 0: and here It helps mechanically Crop science must go from minus-eleven point seven percent margin to at least plus eight.
• 21:47
  Speaker 0: When the roundup one off effects run out, The reported margin jumps almost on its own toward the thirteen point eight per cent.
• 21:54
  Speaker 1: So condition format?
• 21:56
  Speaker 0: On the way there.
• 21:57
  Speaker 0: And fifth just the same... ...the adjustment ratio must fall below one point three when the lawsuits runout.
• 22:03
  Speaker 0: That's literally the condition.
• 22:04
  Speaker 0: the ruling addresses
• 22:06
  Speaker 1: so two of five directly Two with a delay and the most important one not at all.
• 22:11
  Speaker 0: The most important on, Not At All!
• 22:13
  Speaker 0: That's why it stays a One.
• 22:15
  Speaker 0: But – And I'll say this just as clearly–the path upward is considerably shorter today than was few weeks ago.
• 22:22
  Speaker 1: So the score could move.
• 22:23
  Speaker 0: If cash flow carries in twenty-twenty seven and crop science comes out of red A one quickly becomes two or three.
• 22:30
  Speaker 0: that' s matter of quarters not decades.
• 22:33
  Speaker 1: Now very clearly because i know how like this gets read Is This a Cell Signal?
• 22:37
  Speaker 0: No And that's not a legal platitude but a methodological limit.
• 22:42
  Speaker 0: We assess the equity story, we don't assess the share price.
• 22:45
  Speaker 1: It doesn't come up at all?
• 22:47
  Speaker 0: Not once An excellent company can be a miserable stock if you pay too much and a poorly rated one can be worth it If its cheap enough.
• 22:55
  Speaker 0: What this stock is allowed to cost Is an entirely different question... ...and one You have to answer yourself.
• 23:01
  Speaker 1: And the insolvency question?
• 23:03
  Speaker 0: Explicitly no.
• 23:04
  Speaker 0: The board states in the report that none of the risks endanger the company's survival.
• 23:09
  Speaker 0: The auditors confirm that without qualification, and thirteen billion in available liquidity speaks the same
• 23:14
  Speaker 0: language.".
• 23:15
  Speaker 1: What do I take away in practical terms?
• 23:17
  Speaker 0: Three things – first a past survival test is far from meaning quality.
• 23:23
  Speaker 0: second always measure adjusted against reported earnings.
• 23:27
  Speaker 0: when an adjustment pretifies the result six-fold caution is warranted.
• 23:32
  Speaker 0: And third, goodwill larger than the entire equity is a legacy burden until proven otherwise.
• 23:41
  Speaker 2: an
• 24:01
  Speaker 1: honestly managed, transparent group and yet one that for years has repaired more than it earns.
• 24:07
  Speaker 0: Too strong to fail too burdened to grow but the first time in years with a visible way
• 24:13
  Speaker 1: out.
• 24:13
  Speaker 1: In closing thought?
• 24:14
  Speaker 0: One goes far beyond Bayer.
• 24:16
  Speaker 0: In financial world we all rave about impregnable motes irreplaceable medicines gigantic data platforms The ultimate safe haven for capital.
• 24:26
  Speaker 1: That's what you'd think
• 24:27
  Speaker 0: Bayer as this moat Field view is real The patents are real.
• 24:32
  Speaker 0: Twenty billion in intangible assets sit on the balance sheet, and still for three years less comes out than goes in
• 24:40
  Speaker 1: Because the moat was too expensive.
• 24:42
  Speaker 0: When walls of your fortress stand upon a foundation debt and unresolved risks And when every euro earned flows straight into debt repayment Then
• 24:51
  Speaker 1: the Fortress is there.
• 24:52
  Speaker 1: It's just no use to anyone sitting inside
• 24:56
  Speaker 0: it or in the end just an extremely expensive high-tech prison for your capital.
• 25:03
  Speaker 0: The June ruling opened a gate, a crack!
• 25:06
  Speaker 0: Whether anyone walks through it we'll see A note for the record.
• 25:26
  Speaker 0: Warren Weiss
• 25:34
  Speaker 3: is a fictional, synthetic character.
• 25:37
  Speaker 3: His thinking and his voice are generated by artificial intelligence.
• 25:42
  Speaker 3: This podcast Is For Information And Educational Purposes Only.
• 25:48
  Speaker 3: It's not investment advice Not recommendation to buy
• 25:52
  Speaker 0: hold
• 25:52
  Speaker 3: or sell any security.
• 25:53
  Speaker 3: The analysis based on publicly available information may contain errors.
• 26:00
  Speaker 3: Always make your own decisions and when in doubt, consult a qualified financial advisor.