• Strong growth: sales increase 18 percent to EUR 27.4 billion
• EBIT before special items advances 56 percent to EUR 3.3 billion
• Group net income jumps from EUR 0.7 billion to EUR 1.6 billion
• Strong cash flow performance – return on capital at record level
• Growth continues unabated in the fourth quarter
• Dividend of EUR 0.95 per share proposed (+ 73 percent)
• Further performance improvement targeted for 2006

Overview of Sales, Earnings and Financial Position
Bayer had an extremely successful year in 2005. We made significant gains in our key indicators, including sales, earnings and cash flow performance. Our return on capital (CFROI) was at a record level. The strategic realignment toward innovation and growth has fundamentally improved the Group’s operating performance and earning power. Our cost-containment and efficiency programs have boosted profitability.

Sales of the Bayer Group rose by 17.6 percent year on year to EUR 27,383 million. Growth was chiefly attributable to the HealthCare and MaterialScience subgroups, where sales advanced by 17.0 percent and 24.4 percent, respectively. CropScience sales remained at the previous year’s level, largely because of difficult market conditions in Brazil. Adjusted for the effects of currency and portfolio changes, Group sales rose by 7.5 percent. The portfolio effects mainly relate to the consumer health business acquired from Roche and sales to LANXESS following its spin-off from Bayer.

Quarterly Sales by Subgroup in 2005

The positive business trend led to a considerable improvement in the operating result. EBIT before special items climbed by 55.9 percent to EUR 3,300 million (2004: EUR 2,117 million). All three subgroups contributed to this increase. The largest EBIT contributions came from MaterialScience (EUR 1,404 million) and HealthCare (EUR 1,319 million). While the exceptionally strong growth in EBIT at MaterialScience (+ 110.2 percent) resulted largely from selling price increases, the improvement at HealthCare (+ 26.9 percent) was driven primarily by the fast-growing pharmaceuticals business and a very strong performance by the newly acquired products of the Consumer Care Division. At CropScience, where EBIT advanced by 31.2 percent to EUR 685 million, the main positive effect came from the absence of goodwill amortization.

EBITDA before special items moved ahead by 24.9 percent to EUR 5,082 million (2004: EUR 4,069 million), yielding an underlying EBITDA margin of 18.6 percent in 2005 that fell only slightly short of the target for 2006.

There were, however, a number of special items that diminished EBIT by EUR 488 million on aggregate, compared with net special charges of EUR 242 million in the prior year. The special charges in 2005 included, in particular, EUR 336 million related to antitrust proceedings in the polymers field, EUR 105 million in litigation-related charges at Bayer HealthCare, EUR 106 million in expenses arising from the termination of the co-promotion agreement for Levitra® outside the United States, and EUR 71 million for the integration of the acquired consumer health business. Total charges of EUR 127 million were taken for restructuring measures in all subgroups. Chief among the positive special items that partially offset these charges was a one-time net gain of EUR 283 million from changes in our pension systems in the United States and Germany.

EBIT after special items improved in 2005 by 50.0 percent to EUR 2,812 million (2004: EUR 1,875 million). EBITDA rose by 21.2 percent year on year to EUR 4,647 million (2004: EUR 3,834 million).

After a non-operating result of minus EUR 613 million, pre-tax income climbed by 80.0 percent to EUR 2,199 million. After tax expense of EUR 641 million and minority stockholders’ interest, net income of the Bayer Group rose by EUR 912 million to EUR 1,597 million. Earnings per share thus improved from EUR 0.94 to EUR 2.19.

The growth in earnings in 2005 was also reflected in the gross cash flow, which advanced by 20.5 percent to EUR 3,477 million (2004: EUR 2,885 million). Net cash flow rose even more strongly, gaining 56.6 percent to EUR 3,542 million.

Thanks to the higher cash flow, the increase in net debt at the beginning of the year due to the acquisition of the Roche consumer health business had been largely offset by year end. Net debt from continuing operations came to EUR 5,494 million on December 31, 2005, exceeding the prior-year figure of EUR 4,891 million by EUR 603 million.

Cash flow return on investment (CFROI) – at 12.4 percent – was at a record level. We thus exceeded our internal hurdle for capital costs including reproduction by 2.7 percentage points, or EUR 823 million, creating substantial additional value for our stockholders.

Our success in 2005 as a whole was also bolstered by a continuing positive business trend in the fourth quarter, the strongest quarter of 2005 in terms of sales. Business expanded by 16.1 percent year on year to EUR 7,095 million thanks to major expansion in HealthCare (+ 24.0 percent) and continued dynamic growth in MaterialScience (+ 15.7 percent). CropScience sales dipped due to low business volumes in Brazil.

EBIT before special items climbed by 54.5 percent from the final quarter of 2004, to EUR 615 million, even after a significant increase in marketing expenditures, particularly at Bayer HealthCare, to support future growth. After special items, which mainly included EUR 322 million related to antitrust proceedings in the polymers field, EUR 26 million in litigation-related charges in HealthCare and EUR 20 million in integration costs for the consumer health business, EBIT fell by 44.3 percent to EUR 192 million. Net cash flow increased by 51.7 percent to EUR 1,315 million, partly as a result of a substantial decline in working capital in all subgroups, particularly MaterialScience.