May 10, 2005
Bayer Group interim report:

Sales and earnings advance strongly in first quarter

- 2005 guidance for Bayer HealthCare increased / - Full-year Group forecast confirmed


Leverkusen
- The Bayer Group enjoyed a strong first quarter, with substantial advances in both sales and earnings. All subgroups contributed to this positive development, as the company announced in its first-quarter interim report, issued Tuesday. In view of the very pleasing business trend, Group Management Board Chairman Werner Wenning once again confirmed the full-year forecast for 2005. Bayer is targeting an increase of more than 5 percent in currency- and portfolio-adjusted sales, to over EUR 25 billion, and expects EBIT before special items to improve by about 20 percent. "We are optimistic about future developments," said Wenning.

The outlook for Bayer HealthCare has improved significantly since the beginning of the year, with business benefiting from a strong flu season in the first quarter. In addition, savings in the Pharmaceuticals Division and synergies in Consumer Care were achieved more quickly than originally planned. "We are therefore raising our full-year 2005 guidance for the HealthCare business and now expect underlying HealthCare EBIT to be above the 2004 level," explained the Bayer CEO.

Wenning remains optimistic about the prospects for Bayer MaterialScience, upholding the forecast of significant growth in EBIT before special items, even though he said it remains to be seen how the economy and raw material prices will develop. Bayer CropScience also expects a considerable improvement in underlying EBIT.

The sales increase in the first three months was due not only to volume growth, but also in particular to higher selling prices and portfolio changes. Group sales advanced by 15.7 percent to EUR 6,704 million. Adjusted for currency and portfolio changes, sales moved ahead by 9.3 percent. Underlying earnings before interest, taxes, depreciation and amortization (EBITDA) climbed by 27.3 percent to EUR 1,575 million, while underlying operating profit (EBIT) was up by 50.1 percent to EUR 1,142 million.

Negative special items of EUR 138 million (Q1 2004: EUR 7 million) included one-time charges of EUR 94 million arising from the termination of the co-promotion agreement with GlaxoSmithKline for Levitra® and expenses of EUR 21 million for the integration of the consumer health business acquired from Roche. After special items, EBITDA moved ahead by 16.8 percent to EUR 1,437 million and EBIT by 33.2 percent to EUR 1,004 million. Net income, which also included EUR 52 million in after-tax income from discontinued operations, expanded by 55.6 percent to EUR 652 million. Gross cash flow climbed by 27.0 percent to EUR 1,101 million. Net debt increased to EUR 7,115 million, mainly as a result of the Roche OTC acquisition.

Sales of the Bayer HealthCare subgroup grew by 5.1 percent in the first quarter of 2005, to EUR 2,135 million, thanks to the acquisition of the Roche consumer health business. Currency- and portfolio-adjusted sales declined as expected by 5.1 percent, mainly because of the expiration of the patent on the antibiotic Cipro® in the United States. Underlying EBIT improved by 8.6 percent to EUR 302 million. This was chiefly attributable to the positive performance of the Pharmaceuticals, Biological Products segment, where underlying EBIT rose as a result of the marketing and distribution alliance with Schering-Plough in the United States, savings in research and development, and other factors. The Animal Health and Diabetes Care, Diagnostics segments also turned in a strong earnings performance. In Consumer Care, however, underlying EBIT showed a slight decline due to the inventory step-up for the first-time consolidation of the Roche business.

Sales of the Bayer CropScience subgroup edged forward by 0.7 percent year on year to EUR 1,744 million. In the Crop Protection segment, sales were down in the Insecticides business unit but expanded in Seed Treatment and Fungicides, holding steady year on year in Herbicides. In the Environmental Science, BioScience segment, sales were up due to the positive performance of BioScience. Underlying EBIT of Bayer CropScience rose by 11.6 percent to EUR 423 million, due in part to the absence of goodwill amortization.

Bayer MaterialScience performed particularly well in the first quarter, posting by far the largest increase in sales. Business expanded by 35.5 percent to EUR 2,544 million, the main growth drivers being Makrolon® polycarbonate, the polyurethane raw material MDI and the business of H.C. Starck. Each of these businesses succeeded not only in boosting volumes, but also in implementing price increases. EBIT tripled to EUR 406 million.

From the geographical viewpoint, the biggest increase in sales was achieved in Europe, where revenues rose by 23.6 percent to EUR 3,109 million due especially to business expansion in Bayer MaterialScience and the acquisition of the Roche OTC business. Group sales in Germany advanced by 31.0 percent to EUR 1,030 million, though this was partly because sales to LANXESS are reported as external as of the date of the spin-off. Without this effect or the additional sales volume acquired from Roche, the increase in Germany amounted to about 10 percent.

Currency-adjusted sales in North America grew by 8.1 percent to EUR 1,783 million, the decline in sales of Cipro® being offset by continued strong demand for industrial products and brisk business with crop protection products in the United States. In the Asia-Pacific region, MaterialScience recorded substantial growth, including a more than 60 percent improvement in China. The HealthCare subgroup also posted a pleasing performance, especially in Japan, while CropScience sales were down. Group sales in Asia-Pacific as a whole climbed by 18.9 percent in local currencies, to EUR 1,038 million. In Latin America/Africa/Middle East, currency-adjusted sales increased by 15.1 percent to EUR 774 million thanks to a positive market trend, especially in the industrial sector.

The Bayer Group had 93,300 employees on March 31, 2005, compared to 92,500 on the same date in 2004. Headcount increased by 1,600 compared to December 31, 2004, with workforce reductions - primarily in the United States in connection with the Schering-Plough alliance - offset mainly by the transfer of employees from Roche.

The presentation of the financial statements in 2005 differs from prior years in a number of ways due to changes in the Group portfolio and the application of new International Financial Reporting Standards (IFRS). Details are provided in the notes to the first-quarter interim report, which is published in the Stockholders' Newsletter. One important change is that reporting is based primarily on continuing operations. In the income statement, discontinued operations are reflected only in after-tax income. Thus all commentaries and

Forward-looking statements<br/>relate exclusively to continuing operations, except where specific reference is made to discontinued operations.


Forward-looking statements
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 annual and interim reports to the Frankfurt Stock Exchange and in our reports filed 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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