Bayer CropScience

Key Data – CropScience	2007	2008	Change
	€ million	€ million	%
Sales	5,826	6,382	+9.5
Crop Protection	4,781	5,339	+11.7
Environmental Science, BioScience	1,045	1,043	-0.2
Sales by Region
Europe	2,383	2,625	+10.2
North America	1,332	1,396	+4.8
Asia/Pacific	913	964	+5.6
Latin America/Africa/Middle East	1,198	1,397	+16.6
EBITDA*	1,204	1,450	+20.4
Special items	(120)	(153)
EBITDA before special items*	1,324	1,603	+21.1
EBITDA margin before special items	22.7%	25.1%
EBIT *	656	918	+39.9
Special items	(130)	(166)
EBIT before special items*	786	1,084	+37.9
Gross cash flow**	961	1,192	+24.0
Net cash flow**	1,040	736	-29.2
* for definition see “Calculation of EBIT(DA) Before Special Items” ** for definition see “Liquidity and Capital Resources”

Sales of CropScience rose by a substantial 9.5% in 2008 to a record €6,382 million (2007: €5,826 million). Adjusted for currency and portfolio effects, business expanded by 13.9%. Conditions on the world’s agricultural markets as a whole were highly favorable. Against the background of a steadily expanding global population with increasing nutritional requirements, combined with low inventories worldwide and heightened demand for plants as alternative energy sources, very high prices for major agricultural products – particularly in the first half of the year – led to higher investment by farmers in high-quality seed and innovative crop protection products. We not only increased volumes significantly but also succeeded in raising prices, especially in the Crop Protection business.

EBITDA before special items advanced by 21.1% to €1,603 million (2007: €1,324 million). With an EBITDA margin before special items of 25.1%, we achieved our 2009 target a year early. The significant improvement in profitability was the result of the gratifying business trend. Earnings were held back by negative currency effects. EBIT before special items climbed by 37.9% to €1,084 million (2007: €786 million). Special charges of €166 million were taken in connection with the cost structure program initiated in 2006. EBIT jumped by 39.9% to €918 million (2007: €656 million).

Net cash flow fell by 29.2% to €736 million, mainly because of a much greater inventory build-up than in the previous year in anticipation of high sales levels in the coming spring season, coupled with an increase in receivables due to the strong sales performance.

Best-Selling Bayer CropScience Products*	2007	2008	Change	Currency- adjusted change
	€ million	€ million	%	%
Confidor®/Gaucho®/Admire®/Merit® (Insecticides/Seed Treatment/Environmental Science)	556	599	+7.7	+13.0
Flint®/Stratego®/Sphere®/Nativo® (Fungicides)	243	365	+50.2	+58.0
Proline®/Input®/Prosaro® (Fungicides)	175	246	+40.6	+46.8
Atlantis® (Herbicides)	207	244	+17.9	+21.1
Folicur® / Raxil® (Fungicides / Seed Treatment)	235	242	+3.0	+6.7
Basta®/Liberty®/Rely® (Herbicides)	241	235	-2.5	+1.9
Poncho® (Seed Treatment)	237	223	-5.9	+0.5
Puma® (Herbicides)	187	203	+8.6	+13.5
Decis®/K-Othrine® (Insecticides / Environmental Science)	178	175	-1.7	+3.5
Fandango® (Fungicides)	80	132	+65.0	+68.2
Total	2,339	2,664	+13.9	+19.1
Proportion of Bayer CropScience sales	40%	42%
* Figures are based on active ingredient class. For the sake of clarity, only the principal brands and business units are listed.

Crop Protection

Key Data – Crop Protection	2007	2008	Change
	€ million	€ million	%
Sales	4,781	5,339	+11.7
Herbicides	1,725	1,856	+7.6
Fungicides	1,270	1,565	+23.2
Insecticides	1,181	1,275	+8.0
Seed Treatment	605	643	+6.3
Sales by Region
Europe	2,035	2,277	+11.9
North America	912	979	+7.3
Asia/Pacific	769	818	+6.4
Latin America/Africa/Middle East	1,065	1,265	+18.8
EBITDA*	1,008	1,252	+24.2
Special items	(85)	(145)
EBITDA before special items*	1,093	1,397	+27.8
EBITDA margin before special items	22.9%	26.2%
EBIT *	537	804	+49.7
Special items	(95)	(158)
EBIT before special items*	632	962	+52.2
Gross cash flow**	799	1,026	+28.4
Net cash flow**	881	653	-25.9
* for definition see “Calculation of EBIT(DA) Before Special Items” ** for definition see “Liquidity and Capital Resources”

Sales of the Crop Protection segment rose significantly in 2008 to €5,339 million, exceeding the prior-year figure of €4,781 million by 11.7%. Adjusted for currency effects, business moved ahead by a gratifying 16.4%. In a positive market environment with generally more favorable weather patterns than in the previous year, sales of all business units improved significantly. Our Fungicides business unit posted particularly strong increases.

Key growth drivers were our young products based on active ingredients introduced to core markets since 2000. Currency-adjusted sales of these products climbed by approximately 36% to €1.8 billion.

Sales in the Europe region advanced by 11.9% to €2,277 million (2007: €2,035 million). On a currency-adjusted basis, business expanded by 13.3%. The suspension of fallowing practices in the European Union led to an increase in land under cultivation. This particularly benefited our products for cereal crops, such as the young fungicides info

Fandango® and info

Proline® and the herbicides info

Atlantis®, info

Hussar® and info

Puma®. From a geographical perspective, the strongest sales growth was recorded in the core markets of western Europe – France, Germany and the United Kingdom – as well as in eastern Europe.

Sales in North America advanced by 7.3% to €979 million (2007: €912 million). The currency-adjusted increase was 15.1%. Our fungicides info

Stratego®, Proline® and info

Folicur® for use in important field crops such as soybeans, corn, cereals and canola posted particularly strong gains. The new herbicides info

Laudis® and info

Huskie®/

Infinity®, introduced in 2008, were very successful in the market. We expanded our insecticides business thanks to strong performances by young products such as info

Oberon®,

Movento® and info

Belt®.

In the Asia/Pacific region, sales of the Crop Protection business unit grew by 6.4% to €818 million (2007: €769 million). On a currency-adjusted basis, the increase amounted to 12.2%. Our insecticides and fungicides developed particularly well. Our business made good headway in India, Southeast Asia and China. In Australia, the recovery of the agricultural industry following two years of extreme drought led to a tangible recovery in business with fungicides, herbicides and seed treatment products.

Sales in the Latin America/Africa/Middle East region rose by 18.8% to €1,265 million (2007: €1,065 million). Business was up by a substantial 26.3% after adjusting for shifts in exchange rates. Sales declined in Africa and the Middle East but advanced significantly in Latin America. Supported by the outstanding performance in Brazil, where Crop Protection sales climbed by a currency-adjusted 47.0%, we registered double-digit growth rates in all business units. Our young products based on new active ingredients and innovative mixtures, such as info

Nativo®,

Sphere®,

Soberan®,

Connect® and info

CropStar®, played a key role in this growth.

EBITDA before special items advanced by 27.8% to €1,397 million (2007: €1,093 million). This pleasing earnings improvement came mainly from higher volumes and also from selling-price increases and higher margin contributions by our new products. The impact of higher raw material and energy prices was more than offset by savings from the cost structure program initiated in 2006. However, adverse currency effects and higher marketing expenses to support the business expansion had a negative impact. EBIT before special items advanced by 52.2% to €962 million (2007: €632 million). Special charges for our cost structure program amounted to €158 million. EBIT improved by €267 million, or 49.7%, to €804 million (2007: €537 million).

Environmental Science, BioScience

Key Data – Environmental Science, BioScience	2007	2008	Change
	€ million	€ million	%
Sales	1,045	1,043	-0.2
Environmental Science	663	591	-10.9
BioScience	382	452	+18.3
Sales by Region
Europe	348	348	+0.0
North America	420	417	-0.7
Asia/Pacific	144	146	+1.4
Latin America/Africa/Middle East	133	132	-0.8
EBITDA*	196	198	+1.0
Special items	(35)	(8)
EBITDA before special items*	231	206	-10.8
EBITDA margin before special items	22.1%	19.8%
EBIT*	119	114	-4.2
Special items	(35)	(8)
EBIT before special items*	154	122	-20.8
Gross cash flow**	162	166	+2.5
Net cash flow**	159	83	-47.8
* for definition see “Calculation of EBIT(DA) Before Special Items” ** for definition see “Liquidity and Capital Resources”

Sales in the Environmental Science, BioScience segment came to €1,043 million in 2008 (2007: €1,045 million). Adjusted for currency and portfolio effects, sales rose by 2.4%.

Sales of the Environmental Science business unit fell by 10.9% to €591 million. Business shrank by 7.0% on a currency-adjusted basis. The main impact came from lower sales of products for professional users in the North American green industry due to adverse market conditions and heightened generic competition. We also registered lower sales of specialty active ingredients for the processing industry. Business with products for consumers, marketed under the umbrella brands Bayer Garden in Europe and Bayer Advanced in North America, remained level with the previous year.

BioScience increased sales by a substantial 18.3% to €452 million (2007: €382 million). After adjusting for exchange-rate and portfolio effects, sales rose by 18.8%. We successfully raised sales in our three core agricultural crops – canola and cotton, predominantly in North America, and rice in Asia. Vegetable seeds posted very encouraging gains, particularly in Asia, the Middle East and eastern Europe.

EBITDA before special items of the Environmental Science, BioScience segment came in at €206 million, down €25 million year on year. We raised research and development expenditures at BioScience to strengthen the innovative capability and future growth of our seed business. The decline in sales of our Environmental Science business in North America and unfavorable currency effects also had an adverse impact on earnings. EBIT before special items fell by 20.8% to €122 million (2007: €154 million). After special charges of €8 million for restructuring at Environmental Science, EBIT came in at €114 million (2007: €119 million).