November 25, 2004
Fall Financial News Conference of Bayer AG:

Upward trend at Bayer continues in the third quarter

- Currency- and portfolio-adjusted sales rise by 7 percent / - EBIT before special items triples / - Increased full-year forecasts for sales and underlying EBIT


Leverkusen
- Bayer posted further growth in both sales and earnings in the third quarter of 2004. This is particularly encouraging as the company more than offset the effects of the drop in sales of the anti-infective Cipro®, the sharp rise in raw material costs and continuing adverse currency parities. Sales of the Bayer Group for the period July through September rose by 3.4 percent to EUR 7,065 million, or by 7.3 percent when adjusted for currency translations and portfolio changes. This growth was mainly attributable to price and volume increases in Bayer's industrial businesses. The operating result (EBIT) improved considerably in the third quarter, advancing by EUR 202 million to EUR 244 million. EBIT before special items tripled to EUR 383 million, from EUR 125 million in the same period last year.

"In light of the continuing uptrend in our business in the third quarter, we are increasing our full-year forecasts for sales and underlying EBIT," said Bayer Management Board Chairman Werner Wenning at the company's Fall Financial News Conference in Leverkusen. "We now expect sales for 2004 as a whole to grow by about the same percentage as in the first three quarters," predicted Wenning, adding that Bayer had already comfortably achieved its target of improving underlying EBIT by more than 10 percent compared with last year. "EBIT before special items for the first nine months of 2004, at EUR 1.87 billion, exceeded the full-year 2003 figure by 27.6 percent," the Bayer CEO explained, and expressed optimism for the fourth quarter: "Despite the continuing high level of raw material costs, we expect to report underlying EBIT well above the restated figure of EUR 42 million for the last quarter of 2003." He also reaffirmed the company's goal for the full year 2004 of improving earnings before interest, taxes, depreciation and amortization (EBITDA) by more than 10 percent compared with last year.

All four subgroups achieved significant increases in EBIT in the third quarter. EBIT of Bayer HealthCare rose by 18.8 percent to EUR 266 million, despite an 8.4 percent drop in sales to EUR 2,070 million. The decline in sales was due primarily to the expiration of Bayer's U.S. patent on Cipro®. In terms of earnings, however, this effect was more than offset by the favorable trends for Bayer's other pharmaceutical products, major cost savings and a good performance in the Biological Products Division.

Sales of the Bayer CropScience subgroup in the third quarter remained steady year on year at EUR 1,124 million. As expected, EBIT of CropScience was negative for seasonal reasons, but improved from minus EUR 130 million to minus EUR 96 million. The subgroup's top products continued to develop well in all areas.

The largest increase in sales was posted by Bayer MaterialScience, which saw business expand by 18.1 percent to EUR 2,228 million. EBIT also gained strongly, posting a 164.4 percent year-on-year increase to EUR 119 million. Wenning explained that this pleasing performance was largely due to good earnings from polycarbonates and polyurethanes.

Lanxess, too, made significant advances in the third quarter. Sales increased by 4.6 percent year on year to EUR 1,471 million, while EBIT improved by EUR 31 million to minus EUR 4 million. Before special items, EBIT grew by EUR 64 million to plus EUR 46 million. This turnaround was made possible not only by the economic upswing, but also in particular by cost-containment measures.

In regional terms, the Bayer Group's sales growth in the third quarter was founded mainly on gratifying improvements in Europe, Asia and Latin America. Although growth in Germany was restrained, at 2 percent, business expanded by 8 percent in Europe as a whole.

Earnings impacted by numerous special items

Third-quarter earnings were affected by numerous special items totaling minus EUR 139 million on aggregate (2003: minus EUR 83 million). Litigation-related expenses came to EUR 76 million, while a EUR 40 million charge was taken for establishing an environmental provision for Lanxess. Other items included a EUR 36 million charge for restructuring in the United States in connection with the strategic alliance with Schering-Plough, and EUR 18 million for the planned stock-market listing of Lanxess. One-time income of EUR 39 million arose from the sale of a license in HealthCare.

The litigation-related expenses include a further EUR 31 million charge taken in connection with Lipobay/Baycol. Wenning stressed that Bayer is currently aware of fewer than 100 pending cases in the United States that in the company'
s opinion hold a potential for settlement: "Considering that we have already reached settlements in 2,895 cases, this number shows just how far along we are in the settlement negotiations." However, Wenning said the company could not rule out the possibility that additional cases involving serious side effects might come to its attention.

EBITDA was also boosted by the strong operating performance in the third quarter, increasing by 4.5 percent year on year to EUR 809 million, and by 12.1 percent to EUR 928 million before special items. Group net income improved by EUR 157 million from minus EUR 123 million to EUR 34 million.

Wenning highlighted the decisive progress made on strategically realigning the Bayer Group. The decision to divest the conventional chemicals activities and parts of the polymers business was made only a year ago. Last week, the Extraordinary Stockholders' Meeting approved the spin-off of the new company Lanxess by an overwhelming majority. It is intended to place Lanxess on the stock market in early 2005. Wenning said this would allow Bayer to concentrate on the innovation and growth-driven health care, nutrition and high-tech materials businesses.

The Bayer CEO also said the company had made rapid advances with the realignment of Bayer HealthCare. In this connection he pointed to the acquisition of the Roche non-prescription medicines business, which was approved by the E.U. Commission just a few days ago. Wenning said the acquisition makes Bayer one of the world's top three suppliers of over-the-counter products. "We have set ourselves a clear goal: to become the global number one supplier of OTC medicines," he said. The Bayer Management Board Chairman also commented that the refocusing of the Pharmaceuticals Division is progressing well. He said Bayer's pharmaceutical alliance with Schering-Plough is an important step towards positioning the company as a medium-sized supplier in this sector. Over the medium term, Bayer aims for its pharmaceuticals business to achieve sales and returns comparable to those of similarly sized competitors.

"We are on the right track, both strategically and operationally," Wenning emphasized, adding that the realignment of the portfolio would allow the Bayer Group to optimally exploit its value creation potential. "And we intend to prove that in the coming quarters."


Forward-looking statements<br/>
This news release contains forward-looking statements based on current assumptions and forecasts made by the managements of Bayer AG and LANXESS AG. 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 Bayer AG or LANXESS AG and the estimates given here. These factors include those discussed in Bayer AG's annual and interim reports to the Frankfurt Stock Exchange and in its reports filed with the U.S. Securities and Exchange Commission (including its Form 20-F). Bayer AG and LANXESS AG assume no liability whatsoever to update these forward-looking statements or to conform them to future events or developments.









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