Bayer: 1st Quarter of 2009

CropScience and Pharmaceuticals continue on path of growth – Slump in business at MaterialScience leaves a distinct mark

Group sales €7.9 billion (-7.5%)

EBITDA before special items €1.7 billion (-22.4%)

EBIT before special items €1.0 billion (-32.1%)

Net income €0.4 billion (-44.2%)

Net cash flow €0.7 billion (+31.3%)

Overview of Sales, Earnings and Financial Position

The performance of our subgroups in the first quarter of 2009 varied widely as expected. The slump in business at MaterialScience also significantly affected sales and earnings of the Bayer Group. By contrast, CropScience and Pharmaceuticals continued on a path of growth.

Group sales came in at €7,895 million, down 7.5% from the record level of €8,536 million registered in the prior-year quarter. After adjustment for currency and portfolio effects (Fx & portfolio adj.), sales receded by 9.7%. Sales of HealthCare grew by 3.0% (Fx & portfolio adj. +0.3%), while business at CropScience expanded by 7.2% (Fx adj. +7.4%). The negative effects of the global economic crisis were evident at MaterialScience, where sales fell by 34.9% (Fx & portfolio adj. -38.4%).

EBITDA before special items for the first quarter came in 22.4% below the prior-year period, at €1,695 million (Q1 2008: €2,185 million). HealthCare posted underlying EBITDA of €1,061 million (Q1 2008: €1,050 million). CropScience again improved on the very strong earnings of the prior-year quarter, with underlying EBITDA increasing by 3.4% to €737 million (Q1 2008: €713 million). At MaterialScience, EBITDA before special items came in at minus €116 million (Q1 2008: plus €407 million). Bayer Group EBITDA for the first quarter amounted to €1,661 million (-19.2%).

EBIT before special items declined by 32.1% in the first quarter of 2009, to €1,017 million (Q1 2008: €1,497 million). Special items totaled minus €44 million (Q1 2008: minus €154 million). Of this figure, the integration of Schering AG, Berlin, Germany, accounted for minus €18 million, while our restructuring programs at CropScience and MaterialScience accounted for minus €8 million and minus €18 million, respectively. EBIT shrank by 27.6% to €973 million (Q1 2008: €1,343 million).

After the non-operating result of minus €334 million (Q1 2008: minus €275 million), income before income taxes came in at €639 million (Q1 2008: €1,068 million). The non-operating result mainly comprised €179 million (Q1 2008: €189 million) in net interest expense, €102 million (Q1 2008: €72 million) in interest expense for pension and other provisions, and a €26 million (Q1 2008: €7 million) net exchange loss. After tax expense of €215 million (Q1 2008: €306 million) and accounting for a €1 million loss attributable to non-controlling interest, net income came in at €425 million (Q1 2008: €762 million). Earnings per share were €0.55 (Q1 2008: €0.96). Core earnings per share moved back to €0.91 (Q1 2008: €1.44). The calculation of core earnings per share is explained on Bayer-Stock.

Gross cash flow moved back by 26.8% year on year in the first quarter of 2009, to €1,209 million (Q1 2008: €1,651 million). By considerably reducing cash tied up in working capital, we succeeded in improving net cash flow by 31.3% to €693 million (Q1 2008: €528 million). This also enabled us to bring down the net financial debt as of March 31, 2009 to €14.0 billion despite adverse exchange rate effects (December 31, 2008: €14.2 billion). The net pension liability – the aggregate of pension obligations and plan assets – declined by €0.2 billion compared with December 31, 2008, to €5.8 billion, mainly because of higher long-term interest rates on the capital market.