Outstanding performance by CropScience

Bayer continues its success in the 2nd quarter

Sales up 3.6 percent to €8.5 billion - strong volume growth

EBITDA before special items up 5.0 percent to €1.9 billion

EBIT before special items up 5.3 percent to €1.2 billion

Net income €0.6 billion

Guidance for CropScience raised again

Positive Group forecast for 2008 confirmed

Overview of Sales, Earnings and Financial Position

2nd quarter of 2008
With a successful second quarter, the Bayer Group continued the positive performance of the preceding quarters. Sales rose by 3.6 percent to €8,511 million (Q2 2007: €8,217 million). Adjusted for currency and portfolio effects, business expanded by 9.5 percent. This growth came mainly from higher volumes. Sales of CropScience jumped by 23.0 percent, while those of HealthCare and MaterialScience advanced by 6.6 and 5.3 percent, respectively.

Sales by Market

EBITDA Before Special Items

Second-quarter EBITDA before special items improved by 5.0 percent to €1,896 million (Q2 2007: €1,806 million), despite continuing unfavorable currency parities. Earnings of HealthCare increased by 2.6 percent to €994 million (Q2 2007: €969 million). CropScience improved underlying EBITDA by 26.5 percent to €501 million (Q2 2007: €396 million) thanks to the very strong sales performance. However, EBITDA before special items of MaterialScience fell by 9.0 percent to €372 million (Q2 2007: €409 million). Bayer Group EBITDA rose by 12.8 percent in the second quarter, to €1,774 million.

EBIT before special items grew by 5.3 percent in the second quarter of 2008 to €1,248 million (Q2 2007: €1,185 million). There were net special charges of €143 million (Q2 2007: €268 million), of which HealthCare accounted for €126 million (Q2 2007: €209 million), CropScience for €8 million (Q2 2007: €51 million) and MaterialScience for €9 million (Q2 2007: €24 million). EBIT increased by 20.5 percent to €1,105 million (Q2 2007: €917 million).

After a non-operating result of minus €262 million (Q2 2007: minus €257 million), income before income taxes for the second quarter came in at €843 million (Q2 2007: €660 million). The non-operating result included net interest expense of €187 million (Q2 2007: €205 million). After tax expense of €262 million (Q2 2007: €247 million), income from continuing operations amounted to €581 million (Q2 2007: €413 million). Net income came in at €574 million. The prior-year net income of €660 million contained income of €244 million from discontinued operations, largely comprising the proceeds of the divestiture of Wolff Walsrode. Earnings per share were €0.73 (Q2 2007: €0.83). Core earnings per share improved to €1.18 (Q2 2007: €1.03). The calculation of core earnings per share is explained on Bayer-Stock.

Gross Cash Flow

Net Cash Flow

Gross cash flow moved back by 11.4 percent year on year in the second quarter of 2008, to €1,322 million (Q2 2007: €1,187). Despite a seasonal increase in cash tied up in working capital, net cash flow grew by 8.9 percent to €889 million. Net debt as of June 30, 2008 was €13.3 billion, up €1.2 billion from the end of March. The increase was attributable largely to €1.0 billion in dividend payments, a further factor being the annual payments of variable compensation to our employees and the higher interest payments that are regularly made in the second quarter. The net pension liability declined by €0.2 billion compared with March 31, 2008, to €3.9 billion. The decrease was mainly due to higher long-term rates on the capital market.

1st half of 2008
The Bayer Group also considerably improved its operating performance in the first half of 2008. Sales from continuing operations grew by 3.0 percent to €17,047 million (H1 2007: €16,552 million). The currency- and portfolio-adjusted increase was 8.2 percent. HealthCare sales rose by 7.6 percent, CropScience by 18.6 percent and MaterialScience by 2.9 percent.

EBITDA before special items grew by 7.5 percent to €4,081 million (H1 2007: €3,796 million). First-half EBIT before special items increased by 7.2 percent to €2,745 million (H1 2007: €2,560 million). There were net special charges of €297 million (H1 2007: €468 million), of which HealthCare accounted for €226 million, CropScience for €62 million and MaterialScience for €9 million. EBIT of the Bayer Group rose by 17.0 percent to €2,448 million (H1 2007: €2,092 million).

After a non-operating result of minus €537 million (H1 2007: minus €475 million), income before income taxes in the first half amounted to €1,911 million (H1 2007: €1,617 million). The non-operating result contained net interest expense of €376 million (H1 2007: €361 million). After tax expense of €568 million (H1 2007: €548 million), income from continuing operations came in at €1,343 million (H1 2007: €1,069 million).

The €2.4 billion after-tax income from discontinued operations in the first half of 2007 largely comprised the proceeds of the divestitures of the Diagnostics business, H.C. Starck and Wolff Walsrode. After minority stockholders’ interest, net income for the first half of 2008 totaled €1,336 million, against €3,469 million in the prior-year period. Earnings per share amounted to €1.69 (H1 2007: €4.27). Core earnings per share rose to €2.62 (H1 2007: €2.28). The calculation of core earnings per share is explained on Bayer-Stock.

Gross cash flow rose by 14.4 percent year on year in the first half of 2008, to €2,973 million (H1 2007: €2,598 million), due to the strong business performance. Net cash flow advanced to €1,417 million (H1 2007: €1,191 million).