Bayer, First Hydrogen, Volkswagen – Turnaround Candidates for 2025 Under Review

Bayer – Plenty to do

In 2024, Bayer was facing enormous challenges. A low sales growth of just 1% year-on-year and a decline in earnings per share to EUR 4 put the Company's difficulties in perspective. The performance of the agriculture business, which is traditionally considered a key revenue driver, was particularly negative, with revenue falling by 2% in the first 9 months and as much as 4% in the third quarter. The reasons for this were a series of unfavourable weather conditions, diseases such as corn stalk disease in Latin America, falling raw material prices, price competition, and price indexation. Glyphosate sales experienced a particularly sharp decline of 19%.

Nevertheless, there are some bright spots. Ophthalmology remains a high-growth business, with the drug Eylea showing an 8.6% increase in sales. Furthermore, the new high-dose version Eylea HD has proven successful in a Phase 3 study, raising hopes for further growth. In Australia, Bayer was cleared in a judgment in the context of the Monsanto class action lawsuits, which should resolve all legal disputes. Of the last 22 cases, 15 have been won, and it seems possible to contain the litigation surrounding glyphosate in the United States.

Nevertheless, Bayer will remain an uncertain candidate for 2025. Strong growth of new products such as Nubeqa and Kerendia, as well as stabilizing Eylea, provide opportunities, but the loss of sales from the expired Xarelto patent continues to weigh on the share. Investors will need to assess how the Company addresses competitive challenges and structural difficulties, particularly in the Crop Science division. If Bayer manages to manage costs better, consistently expand new business areas, and end the glyphosate litigation, the Company could stabilize in the long term. The share is currently trying to break through the EUR 20 mark and is trading at EUR 19.898.

First Hydrogen – Hydrogen from modular nuclear reactors

First Hydrogen's shares were also unable to escape the downward pull of the hydrogen division and fell by a good 75% last year. The Company, which specializes in green hydrogen solutions, was able to demonstrate some successes. The light hydrogen-powered commercial vehicle, manufactured using the best-of approach, received road approval and was put through its paces by a number of fleet operators. The feedback was very positive and the advantages over electric vehicles were clear. In order to offer customers everything from a single source, the Canadians worked on the 'Hydrogen-as-a-Service' concept, which, in addition to a refuelling station infrastructure, also includes the production of green hydrogen.

In December, a company update was provided indicating that the production of green hydrogen using small modular nuclear reactors (SMRs) is being looked at more closely. These SMRs offer a cost-effective and low-carbon alternative to conventional energy sources and ensure a stable power supply, even in regions with limited grid access. With a cost of around USD 36 per MWh, or the equivalent of 3.6 US cents per kWh, SMRs are a competitive energy source for the production of hydrogen. France has long been promoting the use of nuclear power for the production of green hydrogen.

In addition to the constant availability of SMRs, scalability, fast construction times, safety, and efficient land use are significant advantages. Installing SMRs for hydrogen production near petrol stations minimizes transport costs and allows excess electricity to be fed into local grids. This strategy facilitates the energy transition and opens up new sources of income. The low-priced hydrogen significantly improves economic efficiency and can finally lead to a breakthrough for the technology. Since September, the share price has been moving sideways between CAD 0.31 and CAD 0.44. It is currently available for CAD 0.375.

Volkswagen – Fast charging network with XPeng

2024 was a challenging year for Volkswagen, and it ended bitterly. The subsidiary Cariad, which has already been criticized for the poor software for its electric vehicles, had to announce a serious data breach. The Chaos Computer Club had brought this to the attention of the Wolfsburg-based company. The data of around 800,000 vehicles was freely accessible on Amazon cloud servers, and in some cases, even precise location data was available. CEO Oliver Blume emphasized in an interview that comprehensive reforms were necessary to solve the structural problems and lead Volkswagen into a better future.

In my previous article on Volkswagen, I pointed out the favourable valuation of the share. Shortly afterwards, the collaboration with XPeng to establish a joint fast-charging network in China was announced. A total of 20,000 charging points are planned, offering a charging capacity of up to 800 kW. The modern charging infrastructure will help the Wolfsburg-based company to polish up its image in China. Experts view the partnership between the two parties as promising.

Positive news came from the subsidiary Rivian, which delivered convincing results. Around 14,000 vehicles were delivered in the fourth quarter, exceeding analyst expectations and successfully resisting the challenging market environment. Rivian may become profitable as early as 2025, which could further boost its share price. For Volkswagen investors, the future dividend policy will be of particular interest. A cut seems to be a foregone conclusion, but the extent remains to be seen. After hitting a low of around EUR 80 in early September, the stock has recovered and is currently trading at EUR 89.76.

Bayer continues to struggle with structural challenges, but new products like Nubeqa and a focus on ophthalmology offer long-term opportunities. First Hydrogen relies on innovative technologies, such as small modular nuclear reactors, to make hydrogen production more economical and offers an interesting alternative for fleet operators with its hydrogen-powered light commercial vehicles. Volkswagen is trying to gain a foothold in China through its partnership with XPeng. At the same time, the Wolfsburg-based company needs to get its software problems under control. On the positive side, the numbers from its Rivian subsidiary are promising, with the Company nearing profitability.