August 31, 2004
Bayer’s Interim Report for the Second Quarter of 2004:

EBIT before special items increases by 44 percent

Currency- and portfolio-adjusted sales up 8 percent / Bayer CropScience, Bayer MaterialScience and Lanxess improve significantly / Substantial increase expected in second-half EBIT before special items

- Bayer made gratifying operating gains in the second quarter of 2004, posting substantial year-on-year growth in both sales and operating result (EBIT). EBIT before special items increased by 44.1 percent to EUR 660 million (2003: EUR 458 million), while sales climbed 4.5 percent to EUR 7.583 billion (EUR 7.256 billion). When adjusted for currency and portfolio effects, sales grew by 7.9 percent.

Bayer CEO Werner Wenning expressed satisfaction with the company's performance: "The second quarter has shown that our new strategic alignment and the associated measures are bearing fruit." In addition, the pick-up in demand for industrial products from Bayer MaterialScience and Lanxess has provided new impetus. Bayer CropScience turned in a pleasing performance, whereas Bayer HealthCare showed a decline as expected.

After special items of minus EUR 136 million, EBIT improved by 10.3 percent to EUR 524 million, compared with EUR 475 million in the same period of 2003. In contrast, the non-operating result declined to minus EUR 278 million (minus EUR 197 million). As a consequence, income before income taxes decreased to EUR 246 million (EUR 278 million). However, owing to a lower tax rate, net income remained stable at EUR 128 million.

Gross cash flow declined by 8.0 percent to EUR 831 million compared with the same period last year. By contrast, net cash flow advanced by 22.3 percent to EUR 1.146 billion. Compared with the first quarter, Bayer was able to reduce net debt by EUR 0.5 billion to EUR 6.1 billion.

Bayer CropScience contributed in particular to the second-quarter improvement in operating result, substantially growing its EBIT to EUR 159 million (EUR 37 million). This development was due to the 4.8 percent increase in sales to EUR 1.642 billion and the achievement of further synergies from the integration of Aventis CropScience.

The Bayer MaterialScience subgroup also developed very satisfactorily, increasing EBIT by 131.2 percent to EUR 215 million (EUR 93 million). Alongside the 12.8 percent growth in sales to EUR 2.091 billion, this was due to improved capacity utilization and the effects of cost-containment programs.

The Lanxess subgroup grew EBIT year on year by EUR 67 million to EUR 20 million. It also boosted sales by 9.7 percent to EUR 1.592 billion. Preparations for the stock-market listing are proceeding on schedule. Lanxess is to be separated from the Bayer Group by way of a spin-off to the company's stockholders in early 2005. An Extraordinary Stockholders' Meeting on November 17, 2004 will vote on this course of action.

As expected, both sales and earnings of the HealthCare subgroup declined in the second quarter. Sales dipped by 4.4 percent to EUR 2.108 billion and EBIT by 43.8 percent to EUR 217 million (EUR 386 million). Whereas last year's result was positively influenced by special gains from the divestiture of the household insecticides business, this year's result was impacted above all by the high launch costs for Levitra® and the competition from generics faced by Cipro® in the United States. Bayer also expects the HealthCare subgroup to receive a tangible boost in the future from the planned acquisition of the Roche consumer health business. Pending the approval of the antitrust authorities, the combined OTC business will generate total sales of EUR 2.4 billion, placing it among the world's top three leading suppliers.

Looking at the first half of the year, operating performance was gratifying. EBIT before special items improved by 14.5 percent to EUR 1.487 billion (EUR 1.299 billion). Reported EBIT amounted to EUR 1.344 billion. "Our business performance in the first six months was encouraging, and we expect this trend to continue in the second half. Despite the sharp rise in raw material costs, we expect adjusted EBIT in the second half to increase significantly over the same period of the previous year. Our performance in July gives us good grounds for this assumption. We also reaffirm our expectation of growing full-year EBITDA by more than 10 percent," said Wenning.

Forward-looking statements<br/>
This news release contains forward-looking statements based on current assumptions and forecasts made by Bayer Group 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 our public reports filed with the Frankfurt Stock Exchange and with the U.S. Securities and Exchange Commission (including our Form 20-F). The company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments.