Bayer AG - Stockholders' Newsletter Second Quarter 2006

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Bayer Group Key Data

	2nd Quarter 2005	2nd Quarter 2006	Change	1st Half 2005	1st Half 2006	Change	Full Year 2005
EUR million

Net Sales	6,686	7,072	+5.8%	13,072	14,188	+8.5%	25,950

Change in sales
Volume	0%	+4%		+1%	+4%		0%
Price	+11%	0%		+9%	+1%		+8%
Currency	-1%	0%		-1%	+3%		+1%
Portfolio	+10%	+2%		+9%	+1%		+9%

EBITDA¹	1,101	1,308	+18.8%	2,483	2,790	+12.4%	4,315
Special items	(106)	(34)		(244)	(162)		(472)
EBITDA before special items	1,207	1,342	+11.2%	2,727	2,952	+8.3%	4,787

EBITDA margin before special items	18.1%	19.0%		20.9%	20.8%		18.4%

EBIT²	707	878	+24.2%	1,693	1,955	+15.5%	2,633
Special items	(106)	(50)		(244)	(178)		(525)
EBIT before special items	813	928	+14.1%	1,937	2,133	+10.1%	3,158

EBIT margin before special items	12.2%	13.1%		14.8%	15.0%		12.2%

Non-operating result	(129)	(232)	-79.8%	(260)	(447)	-71.9%	(615)

Net income	406	452	+11.3%	1,058	1,052	-0.6%	1,597
Earnings per share (EUR)³	0.56	0.60		1.45	1.41		2.19

Gross cash flow⁴	867	964	+11.2%	1,927	2,090	+8.5%	3,262

Net cash flow⁵	980	895	-8.7%	709	959	+35.3%	3,278

Capital expenditures (total)	271	340	+25.5%	452	759	+67.9%	1,389

Research and development expenses	453	448	-1.1%	846	871	+3.0%	1,766

Depreciation and amortization	394	430	+9.1%	790	835	+5.7%	1,682

Number of employees at end of period⁶				86,500	110,200	+27.4%	87,100
Personnel expenses	1,483	1,559	+5.1%	2,904	3,113	+7.2%	5,539


2005 figures restated
1	EBITDA = EBIT plus amortization of intangible assets and depreciation of property, plant and equipment. EBITDA, EBITDA before special items and EBITDA margin are not defined in the International Financial Reporting Standards and should therefore be regarded only as supplementary information. The company considers underlying EBITDA to be a more suitable indicator of operating performance since it is not affected by depreciation, amortization, write-downs/writebacks or special items. The company also believes that this indicator gives readers a clearer picture of the results of operations and ensures greater comparability of data over time. The underlying EBITDA margin is calculated by dividing underlying EBITDA by sales.

2	EBIT as shown in the income statement

3	Earnings per share as defined in IAS 33. For details see Notes to the Interim Report.

4	Gross cash flow = EBIT plus depreciation, amortization and write-downs/write-backs, minus income taxes, minus gains/plus losses on retirements of noncurrent assets, plus/minus changes in pension provisions. The latter item includes the elimination of non-cash components of the operating result. It also contains benefit payments during the period.

5	Net cash flow = cash flow from operating activities according to IAS 7

6	Number of employees in full-time equivalents (including trainees)