May 10, 2004
Bayer reports on the first quarter of 2004

Sales and EBIT at high level of the previous year

- EUR 827 million EBIT before special items / - Strong volume growth / - Earnings improved in MaterialScience and Lanxess / - Full-year forecast confirmed


Leverkusen
- "Bayer got off to a good start in 2004. Our performance in the first quarter confirms that the company is on the right track," said Werner Wenning, Chairman of the Board of Management of Bayer AG, commenting on the company's performance. With first-quarter sales of EUR 7,362 million, Bayer matched the high level of the previous year (EUR 7,356 million) despite the substantial appreciation of the euro. Negative currency and portfolio changes were more than offset by a 10 percent increase in volumes. Adjusted for currency and portfolio effects, sales advanced by 8.6 percent, with growth driven primarily by the HealthCare and CropScience subgroups.

EBIT before special items, at EUR 827 million, also approximated to the previous year's high level of EUR 841 million. This was achieved mainly through earnings improvements in MaterialScience and Lanxess. EBIT after special items, at EUR 820 million, was below the prior-year figure of EUR 1,096 million. However, that number contained one-time gains of EUR 255 million, particularly from the divestiture of the household insecticides business and real estate holdings. After income taxes of EUR 257 million (2003: EUR 310 million), Group net income amounted to EUR 400 million (2003: EUR 586 million).

Bayer reconfirmed that it expects reported EBITDA and EBIT before special items to increase by more than 10 percent in 2004. Possible risks result from the economic situation, and especially the volatility of raw material prices.

Gross cash flow declined by 31 percent to EUR 984 million, mainly due to lower EBITDA, the positive special items in the previous year and contributions made to U.S. pension funds for Bayer employees at the beginning of 2004.

Net debt amounted to EUR 6.6 billion at the end of the first quarter. This was EUR 1.2 billion below the level of March 31, 2003, but EUR 0.6 billion higher than at December 31, 2003 due to a seasonal increase in working capital, mainly in CropScience.

Sales of the HealthCare subgroup edged up by 0.8 percent to EUR 2,124 million. Measured in local currencies, business expanded by 8.9 percent. Adjusted for the positive special items recognized in the first quarter of 2003 - including gains from the divestment of the household insecticides business - EBIT showed a year-on-year decline of EUR 11 million to EUR 277 million. This was due especially to the marketing costs for Levitra. This erectile dysfunction product introduced by the Pharmaceuticals Division in 2003 performed well in the market, achieving sales of EUR 66 million in the first quarter of 2004 alone.

Business development at Bayer CropScience confirmed the gratifying upward trend in the crop protection market, with sales of the subgroup up by 4.3 percent to EUR 1,732 million. Currency- and portfolio adjusted sales were up by 16.2 percent. EBIT declined to EUR 379 million (2003: EUR 447 million). However, when adjusted for more than EUR 120 million in earnings contributions and divestment gains in the first quarter of 2003 related to products divested to meet antitrust conditions, EBIT was well above the level of the same period last year.

An improvement was also registered in the industrial business. MaterialScience recorded sales of EUR 1,877 million (2003: EUR 1,867 million). Currency- and portfolio-adjusted sales grew by 8.2 percent. EBIT of this subgroup before special items improved by 21.6 percent to EUR 135 million. This pleasing performance was mainly driven by higher capacity utilization and improved margins in certain areas of the Polyurethanes business. Sales of Lanxess declined by 2.1 percent to EUR 1,478 million (2003: EUR 1,509 million), but increased by 2.2 percent in local currencies. EBIT before special items, however, improved by EUR 56 million to EUR 75 million. This was partly attributable to higher volumes in Chemical Intermediates and Performance Plastics, though mainly to savings achieved through the cost-containment projects.


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.









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