Future Perspectives

Economic outlook

We expect global economic growth to slow in the second half of 2008 compared to the previous year. Uncertainties remain in view of the ongoing crisis on the financial markets, the weakness of the U.S. real-estate sector, increased oil and energy costs and significantly greater inflation risks. We anticipate that economic growth in the industrialized countries will slow during the second half, mainly due to a decline in consumer spending. For the emerging economies we expect continued growth, albeit at a slower pace, driven by robust domestic demand.

We predict steady overall growth in the markets relevant to our HealthCare business. The market environment for crop protection and seed products should continue to develop favorably in the second half of the year. We expect prices for agricultural commodities to remain high in light of continuing strong demand for food, energy and feed plants and low inventories worldwide, resulting in more intensive crop production and expanded acreages. We see increasing economic risks in the markets of importance for our MaterialScience business.

Bayer Group sales and earnings forecast

Our successful performance in the first half strengthens our confidence for the full year. We are now targeting over 5 percent currency- and portfolio-adjusted growth in Bayer Group sales (previously: approximately 5 percent) and plan to further improve EBITDA before special items and the underlying EBITDA margin.

We remain confident about the performance of our HealthCare business and expect all divisions to grow with or above the market after adjusting for currency changes. We aim to improve our EBITDA margin before special items toward 27 percent.

Our CropScience business performed very well in the first half of 2008. Against the background of the positive market environment, which we expect to continue, we are again raising the full-year guidance for this business. We now believe that we can increase sales by well over 10 percent on a currency- and portfolio adjusted basis (previously: more than 5 percent) and improve the EBITDA margin before special items to about 25 percent (previously: about 24 percent). This would mean that our goal of an approximately 25 percent EBITDA margin before special items, originally targeted for 2009, would be achieved a year earlier than planned.

Our MaterialScience business turned in a pleasingly robust performance in the first half of the year. However, we anticipate a slackening pace of growth in the third quarter, accompanied by further increases in raw material and energy costs. We therefore expect to report lower EBITDA before special items in the third quarter of 2008 than in the second quarter. For the year as a whole, we continue to expect that we can achieve a good, value-creating earnings level, though without matching the 2007 figure.

For the Bayer Group we continue to predict special charges in the region of €650 million for the full year, of which €400–450 million will be cash items.