Group guidance for 2008 confirmed

Bayer continues on path of growth in third quarter

Sales €7.9 billion (+2.0 percent; adjusted +5.1 percent)

HealthCare and CropScience improve earning power

MaterialScience earnings significantly lower

Group EBITDA before special items €1.5 billion (– 4.2 percent)

Group EBIT before special items €0.9 billion (– 6.5 percent)

Net income €0.3 billion

Overview of Sales, Earnings and Financial Position

Third quarter of 2008
Bayer continued on its path of growth in the third quarter of 2008. Sales rose by 2.0 percent to €7,948 million (Q3 2007: €7,793 million). Adjusted for currency and portfolio effects, sales rose by 5.1 percent. HealthCare improved sales by 6.1 percent. Sales of CropScience gained a substantial 14.0 percent. Business of MaterialScience was at the previous year’s level (-0.5 percent) in a difficult market environment.

Sales by Market

EBITDA Before Special Items

EBITDA before special items for the third quarter came in at €1,493 million, down 4.2 percent from the prior-year figure of €1,559 million in the face of continuing adverse exchange-rate effects and higher raw material and energy costs compared to the previous year. HealthCare earings grew by 6.8 percent to €1,018 million (Q3 2007: €953 million). CropScience raised earnings by 24.0 percent to €207 million (Q3 2007: €167 million) thanks to the strong performance of the business. By contrast, EBITDA before special items of MaterialScience fell by 39.4 percent to €255 million (Q3 2007: €421 million). As a result, third-quarter EBITDA for the Bayer Group as a whole declined by 7.3 percent to €1,334 million.

EBIT before special items declined by 6.5 percent in the third quarter of 2008 to €891 million (Q3 2007: €953 million). Special items totaled minus €207 million (Q3 2007: minus €276 million), with HealthCare accounting for minus €160 million (Q3 2007: minus €269 million), CropScience for minus €42 million (Q3 2007: minus €4 million) and MaterialScience for minus €5 million (Q3 2007: minus €3 million). EBIT edged ahead by 1.0 percent to €684 million (Q3 2007: €677 million).

After a non-operating result of minus €276 million (Q3 2007: minus €266 million), income before income taxes for the third quarter came in at €408 million (Q3 2007: €411 million). The non-operating result contained net interest expense of €159 million (Q3 2007: €180 million). After tax expense of €133 million (Q3 2007: tax income of €769 million), income from continuing operations came to €275 million (Q3 2007: €1,180 million). The net tax income in the prior-year quarter was due to €911 million in one-time non-cash tax income arising in connection with the corporate tax reform in Germany. After minority stockholders’ interest, net income in the third quarter of 2008 came to €277 million (Q3 2007: €1,175 million). Earnings per share amounted to €0.37 (Q3 2007: €1.46). Core earnings per share improved to €0.85 (Q3 2007: €0.81). The calculation of core earnings per share is explained on Bayer-Stock.

Gross Cash Flow

Net Cash Flow

Gross cash flow edged ahead by 0.5 percent year on year in the third quarter of 2008, to €1,171 million. Due to a smaller decline in working capital than in the prior-year quarter, net cash flow was down by 24.0 percent to €1,234 million. Net debt was €13.7 billion as of September 30, 2008, up €0.4 billion from June 30, 2008. This increase was due in part to shifts in exchange rates between the euro and other major currencies, which had a €0.5 billion effect, and to €0.4 billion in disbursements for acquisitions. The Group’s net pension liability declined from €3.9 billion on June 30, 2008, to €3.4 billion on September 30, 2008. The decrease was mainly due to higher long-term interest rates on the capital market.

First three quarters of 2008
The Bayer Group continued to improve its operating performance in the first three quarters of 2008. Sales from continuing operations grew by 2.7 percent to €24,995 million (9M 2007: €24,345 million). Adjusted for currency and portfolio changes, the increases were 7.2 percent for the Group as a whole, 7.1 percent for HealthCare, 17.4 percent for CropScience and 1.8 percent for MaterialScience.

EBITDA before special items grew by 4.1 percent to €5,574 million (9M 2007: €5,355 million). EBIT before special items in the first three quarters increased by 3.5 percent to €3,636 million (9M 2007: €3,513 million). Special items totaled minus €504 million (9M 2007: minus €744 million), with HealthCare accounting for minus €386 million, CropScience for minus €104 million and MaterialScience for minus €14 million. EBIT of the Bayer Group rose by 13.1 percent to €3,132 million (9M 2007: €2,769 million).

After a non-operating result of minus €813 million (9M 2007: minus €741 million), income before income taxes in the first three quarters came in at €2,319 million (9M 2007: €2,028 million). The non-operating result contained net interest expense of €535 million (9M 2007: €541 million). After tax expense of €701 million (9M 2007: tax income of €221 million), income from continuing operations came to €1,618 million (9M 2007: €2,249 million). The €2,396 million after-tax income from discontinued operations recorded for the first three quarters of the prior year largely comprised the proceeds from the divestitures of the Diagnostics business, H.C. Starck and Wolff Walsrode.

After minority stockholders’ interest, net income for the first three quarters of 2008 totaled €1,613 million, against €4,644 million in the prior-year period. Earnings per share amounted to €2.06 (9M 2007: €5.73). Core earnings per share increased to €3.46 (9M 2007: €3.09). The calculation of core earnings per share is explained on Bayer-Stock.

Gross cash flow rose by 10.1 percent year on year in the first three quarters of 2008, to €4,144 million (9M 2007: €3,763 million) in light of the strong business performance. Net cash flow dropped by 5.8 percent to €2,651 million (9M 2007: €2,814 million).