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March 2nd, 2022 | 11:31 CET

Bayer, Desert Gold, K+S - Market facing redistribution

  • Gold
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Since Russia invaded Ukraine last week, the world has literally been turned upside down. There is bewilderment at the violence of the Russian president. Western nations are responding with sanctions against Russia, such as excluding Russian banks from the SWIFT system. In addition, the plan is to extend sanctions to other companies in various industries. Companies that are not affected benefit from this and gain market share. For example, the fertilizer industry is facing a redistribution of market conditions in favor of German suppliers.

time to read: 3 minutes | Author: Stefan Feulner

Table of contents:

    Bill Guy, Chairman, Theta Gold Mines Limited
    "[...] Both the geology and the infrastructure around the project make for a very attractive cost structure. We expect to be able to produce at 50% of the current gold price. [...]" Bill Guy, Chairman, Theta Gold Mines Limited

    Full interview


    Bayer - On the right track

    Pharmaceutical and agricultural giant Bayer put an exclamation mark on the occasion of its figures for the fourth quarter of last year and for the full year 2021. With an increase of 6.5%, total sales were up YOY, while EBITDA pre exceptionals fell by 2.5% to EUR 11.2 billion, as expected by analysts. Corn and soybeans were in particularly high demand from the Agriculture segment. In addition, prices for weed killers rose significantly. However, this was offset by higher production costs in the agricultural business, increased expenses in connection with the launch of new products such as the kidney drug Kerendia and Nubeqa for prostate cancer, and negative exchange rate effects.

    Sales are expected to be EUR 46.0 billion for the current year, with an adjusted EBITDA margin of 26%. According to company management, earnings per share are expected to be EUR 7.00, higher than the analyst consensus, which expects EUR 6.89 per share.

    The Bayer CEO is also optimistic about the long-drawn-out glyphosate dispute and expects the US Supreme Court to accept the Company's appeal in the case brought by California plaintiff Edwin Hardeman. "The fact that the Supreme Court has asked for an opinion from the US government, we take as a fundamentally positive sign." If the court rules in favor of Bayer, that could essentially end the litigation. According to the Leverkusen-based Company, about 107,000 of the 138,000 claims currently filed have either been settled or, for various reasons, do not meet the settlement criteria.

    US investment bank Goldman Sachs left Bayer at "buy" with a price target of EUR 76 after quarterly figures. Both Bayer's sales and earnings per share exceeded expectations thanks to its good agrochemicals business, analyst Keyur Parekh wrote. The analyst was also positively surprised by the outlook.

    Desert Gold - Milestone reached

    The safe-haven gold is establishing itself again above the USD 1,900 area due to the escalating situation. Especially gold exploration companies could not yet profit from the movement after the rise of the fundamental value and have catch-up potential. Little attention was paid to the share of Desert Gold after the extremely positive news at the beginning of the year. Since September of last year, the stock has been in a bottoming out phase at EUR 0.10. The stock market value of the junior explorer is EUR 12.59 million.

    Desert Gold announced the first pit-limited mineral resource from five deposit zones at its flagship SMSZ project. The zones are located within a tight, 12km radius in the southern half of the 440 sq km area - the resource estimate totals over 1 million ounces of gold. Accordingly, the measured and indicated mineral resource totaled 310,300 ounces of gold at 8.47 million tonnes and a grade of 1.14 g/t gold. The majority was in the "inferred" category, i.e. associated with higher uncertainty, with 769,200 ounces of gold (at a tonnage of 20.7 million and a grade of 1.16 g/t).

    Jared Scharf, President & CEO of Desert Gold, commented, "The release of this maiden mineral resource is a significant milestone for the Company and represents an excellent starting point."

    K+S - Winner of the reorganization

    In order to achieve disproportionate returns, it is not always necessary to put high-technology companies with high risk into the portfolio. Even rather "boring" companies can mutate into new stock market stars. The example of K+S, formerly Kali und Salz, proves this with an impressive performance. Since September 2020, the share of the German mining company with a focus on potash and salt production has increased by 360%.

    With the current Ukraine crisis and sanctions against Russian companies from the agricultural sector, further market share is likely to be gained soon. In addition, the potash price continues to rise due to tight supply and should have a positive impact on the margin of the Kassel-based Company. From a chart perspective, a breakout of the resistance at EUR 24.77 could result in a new buy signal.

    The Ukraine crisis and the sanctions that have been imposed could create new market opportunities for German fertilizer companies like Bayer and K+S. The uncertainty is causing investors to migrate to the safe haven of gold. Desert Gold is an attractive second-tier exploration company and could provide positive surprises.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Stefan Feulner

    The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
    He is passionate about analyzing a wide variety of business models and investigating new trends.

    About the author

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