A squeeze on glyphosate supplies, which has sent prices of the herbicide soaring, is poised to ease later this year, Bayer said, as it credited the weedkillers’ rally for spurring better-than-expected results.

The pharmaceuticals-to-sprays group, reporting an 18.7% rise to E14.64bn in revenues for the January-to-March quarter, underlined expansion in its ag division, crop science, where sales rose by 27% to E8.45bn.

Crop science’s improvement was in turn driven by glyphosate, the division’s head Rodrigo Santos said, reporting that “50% of our growth of the first quarter” came from the weedkiller.

Bayer said that glyphosate price rises reflected “tight global supply” – a factor which has been blamed on factors such as swelling raw material costs and logistical hiccups in sourcing the weedkiller from key producer China, and has been evident in soaring prices for growers.

‘Normalization’ ahead

In the current, April-to-June quarter, glyphosate prices would remain good, Mr Santos said, but he foresaw the potential for a correction later in the year.

“The second half of the year, we’re going to see a normalization,” he told investors.

“You see an increase of inventory in China… Hopefully, we can capture more opportunities on the second half, but we plan for a more normalization price.”

Wolfgang Nickl, the Bayer finance director, said that “working 25 years in this industry and with glyphosate, we saw those scenarios before” of price cycles.

Tide turns?

The weedkiller added a second boost to results in terms of a reversal of some of the provisions that Bayer has made for litigation against Roundup, the glyphosate product bought with Monsanto that has attracted a raft of lawsuits over cancer claims.

Crop science reported a E91m one-off gain related to litigation, compared with a E19m charge a year before.

The division’s operating profit soared by 73% to E3.03bn, leading the group result up 37% to E3.08bn.

Group ebitda before special items rose by 28% to E5.25bn, comfortably beating market expectations of a E4.65bn result, according to a market consensus as compiled by Vara Research.

Market reaction

The results were well received by investors, who drove Bayer shares 5.9% higher to E62.16 in late deals in Frankfurt.

Bank of America raised to E78, from E75, its target price on the shares, while Goldman Sachs kept its price at E84 with a “buy” rating.

JP Morgan stood by an “overweight” rating with a E75 target price, while Jefferies restated a “buy” with a target price of E64.