July 29, 2010

MaterialScience leaves the crisis behind

Bayer increases sales and earnings in the second quarter

Sales grow by 14.6 percent to EUR 9,179 million / EBITDA before special items up 8.6 percent to EUR 1,917 million / Core earnings per share increase by 9.5 percent to EUR 1.15 / Investing in the future: research and development expenses in 2010 to reach a new high of approximately EUR 3.1 billion / Group outlook confirmed for 2010
Leverkusen, July 29, 2010 - The Bayer Group once again achieved gains in sales
and earnings in the second quarter of 2010. "MaterialScience has left the
crisis behind and saw business expand more strongly than expected. Volumes have
returned to the pre-crisis level," explained Management Board Chairman Werner
Wenning on Thursday following the publication of the interim report for the
second quarter. Sales at HealthCare improved slightly, while the subgroup's
earnings matched the prior-year level. CropScience was down year on year. That
subgroup saw volumes and selling prices decline in a market environment made
difficult by the competitive situation and unfavorable weather conditions. "We
can confirm the 2010 Group outlook we raised in April," Wenning said.

The Bayer Chairman announced that the company will increase its investment for
the future more substantially than planned. "We now expect research and
development expenses for the full year to come in at a record level of some EUR
3.1 billion. In this way we are supporting our successful pharmaceutical
research and development pipeline - and underscoring our position as the
leading research-based pharmaceutical and chemical company in Germany," said
Wenning. Previously the company had planned to raise research and development
spending in 2010 to approximately EUR 2.9 billion, compared to EUR 2,746
million in the previous year.

Sales of the Bayer Group rose by 14.6 percent in the second quarter, to EUR
9,179 million (Q2 2009: EUR 8,009 million). Adjusted for currency and portfolio
effects, business grew by 9.2 percent. Earnings before interest, taxes,
depreciation and amortization (EBITDA) - before special items - improved by 8.6
percent to EUR 1,917 million (Q2 2009: EUR 1,765 million). This was
attributable primarily to the gratifying business trends at MaterialScience and
Consumer Health, as well as to positive currency effects. The operating result
(EBIT) before special items advanced by 14.4 percent to EUR 1,260 million (Q2
2009: EUR 1,101 million). Research and development expenses rose by 12.7
percent to EUR 747 million (Q2 2009: EUR 663 million).

Pleasing growth in the Consumer Health business

Sales of the HealthCare subgroup rose by 6.4 percent in the second quarter, to
EUR 4,305 million (Q2 2009: EUR 4,045 million). Adjusted for currency and
portfolio effects (Fx & portfolio adj.), business was up by 2.0 percent. "Both
of the subgroup's segments contributed to this performance, with Consumer
Health posting particularly pleasing growth," explained Wenning.

The Pharmaceuticals segment raised sales by 4.3 percent (Fx & portfolio adj.
1.1 percent) to EUR 2,748 million. Business expanded especially in the
Asia/Pacific and Latin America/Africa/Middle East regions, more than offsetting
the declines in North America. Among the segment's top products, the hemophilia
medication Kogenate® posted the highest growth rate of 25.2 percent (Fx adj.),
benefiting from fluctuations in the ordering schedule. Business with the
antibiotic Avalox®/Avelox® was also very successful, growing by 20.8 percent
(Fx adj.), as was performance of the cancer drug Nexavar® at plus 19.6 percent
(Fx adj.). Also achieving substantial gains were Aspirin® Cardio (Fx adj. plus
11.2 percent) and Kinzal®/Pritor® (Fx adj. plus 8.5 percent). By contrast,
business with the YAZ® family of oral contraceptives fell by 14.9 percent (Fx
adj.). These declines resulted mainly from lower demand in the United States,
where business was additionally hampered by intensified generic competition.
Sales of the multiple sclerosis drug Betaferon®/Betaseron® receded by 10.7
percent (Fx adj.), mostly because of intensified competition especially in
Germany and the United States.

Sales of the Consumer Health segment climbed by 10.3 percent (Fx & portfolio
adj. 3.8 percent) in the second quarter, to EUR 1,557 million. All regions, and
particularly North America and Asia/Pacific, contributed to this increase. In
the non-prescription medicines business (Consumer Care), there were
particularly gratifying performances by the One-A-Day® multivitamin product
line (Fx adj. plus 14.8 percent) and the analgesic Aleve®/naproxen (Fx adj.
plus 14.3 percent). Canesten® for the treatment of fungal infections also
improved significantly, gaining 14.0 percent on a currency-adjusted basis.
Sales of the Medical Care Division grew less dynamically, particularly as a
result of the weak trend in the U.S. diabetes care market. On a
currency-adjusted basis, sales of the Contour® blood glucose meter line moved
back by 8.8 percent. By contrast, the medical equipment business saw sales
expand by 10.8 percent (Fx adj.). A substantial increase in sales was
registered by the Animal Health Division, due especially to the positive
performance of the Advantage® line of flea and tick control products (Fx adj.
plus 20.5 percent).

EBITDA before special items at HealthCare came in nearly level with the prior
year at EUR 1,102 million (Q2 2009: EUR 1,112 million), despite a significant
increase of 13.9 percent in research and development costs. "With these
expenditures, we are supporting the continued positive development of our
research and development pipeline," explained Wenning. Lower earnings in the
Pharmaceuticals segment were nearly offset by a gratifying improvement at
Consumer Health.

Difficult market and weather conditions in the crop protection business

CropScience saw sales rise by 1.7 percent in the second quarter, to EUR 1,884
million (Q2 2009: EUR 1,852 million). After adjusting for currency and
portfolio effects, sales fell by 5.5 percent. "The declines in the conventional
crop protection business were partially offset by the continued positive
business performance in Environmental Science and BioScience," Wenning
explained.

Sales in the Crop Protection segment fell by 1.3 percent (Fx adj. 8.6 percent)
to EUR 1,520 million. While sales of herbicides came in close to the prior-year
level on a currency-adjusted basis, business with insecticides, fungicides and
seed treatment products was down significantly in some cases. In Europe, sales
declined by 3.0 percent after adjusting for currency effects, due mainly to the
unfavorable weather conditions. Sales in North America moved back by a
currency-adjusted 30.0 percent. Business there was hampered by the difficult
market and competitive situation, as well as by pressure exerted on prices by
generic manufacturers in the United States. By contrast, a positive performance
was seen in Asia/Pacific, where sales increased by 6.5 percent on a
currency-adjusted basis, due especially to the gratifying business trend in
Australia. In Latin America/Africa/Middle East, sales advanced by 3.1 percent
(Fx adj.).

The Environmental Science, BioScience segment raised sales by 16.7 percent (Fx
& portfolio adj. 9.8 percent) to EUR 364 million. Sales in the Environmental
Science business unit climbed by 15.7 percent (Fx adj. 9.1 percent). Sales of
products for professional users for use in non-agricultural applications rose
significantly, in the United States and in Germany and Japan. By contrast,
there was a slight decline year on year in sales of products for private users.
Thanks especially to higher sales of canola seed, the BioScience business unit
saw business expand by 17.9 percent (Fx & portfolio adj. 10.8 percent).

EBITDA before special items of CropScience was down by 20.3 percent to EUR 396
million (Q2 2009: EUR 497 million). This was attributable to much lower
earnings at Crop Protection, while the Environmental Science, BioScience
segment improved profitability.

MaterialScience successful in all product groups and regions

The significant improvement in the high-tech materials business continued:
MaterialScience posted sales of EUR 2,689 million (Q2 2009: EUR 1,830 million)
in the second quarter of 2010. The subgroup thus improved sales by 46.9 percent
(Fx adj. 40.5 percent) against the prior-year quarter, which was impacted by
the global financial and economic crisis. "This very gratifying improvement was
due especially to the considerable increase in demand in our primary customer
industries," Wenning explained. Volumes rose significantly in all product
groups and regions. MaterialScience also expanded sales by a substantial 21.3
percent (Fx adj. 15.9 percent) compared to the first quarter of 2010.

Business with raw materials for foams (Polyurethanes) improved by a
currency-adjusted 37.1 percent year on year thanks to a marked expansion of
volumes. Furthermore, selling prices increased in Asia/Pacific and Europe,
enabling the subgroup to more than offset price declines in North and Latin
America. Growth in the Polycarbonates business was even stronger, with sales of
these high-performance plastics climbing by a currency-adjusted 59.4 percent.
Here MaterialScience managed to raise selling prices substantially overall, as
well as significantly grow volumes in all regions. Business with raw materials
for coatings, adhesives and specialties also trended successfully, with sales
up by a currency-adjusted 37.3 percent.

The subgroup more than tripled its year-on-year earnings in the second quarter
thanks to the improved business situation. EBITDA before special items advanced
to EUR 371 million (Q2 2009: EUR 121 million). This success was based on the
substantial expansion of volumes and the associated clear improvement in
capacity utilization, as well as on higher selling prices and efficiency
improvements. By contrast, earnings of MaterialScience were diminished by
higher purchase prices on the raw material markets as a result of the global
economic recovery.

Core earnings per share rise by 9.5 percent

Earnings in the second quarter were diminished by special charges of EUR 255
million (Q2 2009: net special charges of EUR 80 million). Of these special
charges, EUR 123 million related to litigations at HealthCare and CropScience
and EUR 132 million to the partial write-down for the cancer drug Zevalin®.
After special items, the operating result (EBIT) fell by 1.6 percent to EUR
1,005 million (Q2 2009: EUR 1,021 million). Net income came in level year on
year at EUR 525 million (Q2 2009: EUR 532 million). Core earnings per share
rose by 9.5 percent to EUR 1.15 (Q2 2009: EUR 1.05).

Gross cash flow increased by 3.0 percent to EUR 1,286 million (Q2 2009: EUR
1,248 million), due especially to the upward business trend at MaterialScience.
Net cash flow improved by 10.4 percent to EUR 1,545 million (Q2 2009: EUR 1,399
million), thanks in part to our measures to further optimize working capital
management. Net financial debt of the Bayer Group increased from EUR 9.7
billion on March 31 to EUR 10.7 billion on June 30. This increase, which is
typical for the second quarter, was mainly due to the dividend payment of EUR
1.2 billion, to annual payments of variable compensation to Bayer's employees
and to the expected high interest payments resulting from the fact that the
interest payment dates for the company's bonds occur mainly in the second
quarter. Negative currency effects of EUR 0.6 billion were an additional factor.

First-half sales and earnings benefited from the recovery at MaterialScience

Sales and earnings of the Bayer Group increased significantly in the first half
of 2010, thanks above all to the recovery at MaterialScience. Sales climbed by
10.0 percent (Fx & portfolio adj. 7.7 percent) to EUR 17,495 million (H1 2009:
EUR 15,904 million). EBITDA before special items rose by 10.8 percent to EUR
3,835 million (H1 2009: EUR 3,460 million), while EBIT before special items
improved by 19.6 percent to EUR 2,534 million (H1 2009: EUR 2,118 million).
EBIT grew by 10.4 percent to EUR 2,202 million (H1 2009: EUR 1,994 million).
Net income was up by 27.3 percent to EUR 1,218 million (H1 2009: EUR 957
million), while core earnings per share advanced 19.9 percent to EUR 2.35 (H1
2009: EUR 1.96).

Bayer remains optimistic for 2010

For the full year, Bayer anticipates a further recovery in the global economy,
although the pace of growth is expected to slow as the year progresses. "We
remain optimistic for 2010," Wenning emphasized. The strong recovery at
MaterialScience is compensating for the below-forecast business performance at
HealthCare and CropScience. Currency parities have also continued to trend
positively. Bayer continues to target currency- and portfolio-adjusted sales
growth of more than 5 percent. The company also still aims to increase EBITDA
before special items to more than EUR 7 billion. Core earnings per share are
expected to improve by more than 15 percent. The company's estimates are based
on the exchange rates prevailing at the end of the second quarter of 2010.

HealthCare is adjusting its sales forecast for 2010 overall following the
unexpected market entry of a generic competitor to YAZ® in the United States.
The subgroup now expects sales in the Pharmaceuticals segment to remain level
year on year on a currency- and portfolio-adjusted basis. Consumer Health,
however, is still expected to expand faster than the market. After adjusting
for currency and portfolio effects, HealthCare anticipates a slight increase in
sales (previously: about 3 percent). In part because of the situation
pertaining to YAZ®, the subgroup expects EBITDA before special items to at
least reach the prior-year level (previously: year-on-year increase).

Against the background of the unfavorable weather and market conditions in the
first half of the year, CropScience is lowering its sales and earnings forecast
for 2010. Provided market conditions return to normal in the second half of the
year, this subgroup anticipates that sales in 2010 overall will be slightly
lower than the prior-year level on a currency- and portfolio-adjusted basis
(previously: increase of between 2 and 3 percent). CropScience expects EBITDA
before special items to decline significantly in 2010 overall (previously:
level with the prior year).

MaterialScience remains optimistic for the second half and expects business to
continue trending positively. From today's viewpoint, the subgroup now
considers as conservative the previous targets of increasing full-year sales by
approximately 20 percent and more than doubling EBITDA before special items.
MaterialScience expects to exceed these forecasts. In the third quarter, the
subgroup anticipates that sales and EBITDA before special items will be in line
with those of the previous quarter.

Note:

The tables below contain the key data for the Bayer Group and its subgroups for
the
second quarter and first half of 2010.

The full report for the second quarter is available for online viewing and
download at
www.investor.bayer.com.

We are also offering the following Internet services at www.investor.bayer.com:
- Presentation charts for the Investor Conference Call at 12:00 noon CEST
- Live webcast of the Investor Conference Call starting at approx. 3:30 p.m.
CEST


Forward-looking statements

This release may contain forward-looking statements based on current
assumptions and forecasts made by Bayer Group or subgroup management. Various
known and unknown risks, uncertainties and other factors could lead to material
differences between the actual future results, financial situation, development
or performance of the company and the estimates given here. These factors
include those discussed in Bayer's public reports which are available on the
Bayer website at www.bayer.com. The company assumes no liability whatsoever to
update these forward-looking statements or to conform them to future events or
developments.