RNS Number:3766O
Bayer AG
06 August 2003

Bayer AG

Interim Report for the First Half 2003



Second-quarter EBIT up 80 percent to Euro454 million



EBIT up 40 percent to Euro1,529 million in the first half

Negative currency effects on sales largely neutralized



Bayer ended the first half of 2003 with a 40 percent increase in the operating
result (EBIT) despite the continuing weakness of the global economy. Earnings
growth was driven mainly by the performances of the Pharmaceuticals/Biological
Products, CropScience and Polyurethanes/Coatings/Fibers segments and by the
efficiency programs implemented in all parts of the company.

However, any stimulus to our business from the economic upswing anticipated
after the end of the Iraq war has so far failed to materialize. With oil prices
stable, financial markets showing a modest recovery and many countries adopting
an expansionary monetary and fiscal policy, the conditions for economic recovery
have been created. However, neither consumer nor corporate confidence is yet
well enough entrenched to trigger a recovery in industrial demand.

Bayer Group sales declined by 3.3 percent, or Euro248 million, year-on-year in the
second quarter of 2003, to Euro7,256 million, due mainly to the effects of currency
translation. In local currencies, sales expanded by 7.3 percent, driven by
increases in both prices and volumes. First-half sales dipped by 0.8 percent
after translation, but grew by 9.8 percent in local currencies.

EBIT jumped by 80.2 percent to Euro454 million in the second quarter. Before
special items, EBIT improved by Euro101 million or 30.1 percent, with the
Pharmaceuticals/Biological Products and Polyurethanes/Coatings/Fibers segments
making particularly strong contributions. EBIT for the first half of 2003 rose
by Euro437 million to Euro1,529 million.

There was also an encouraging improvement in gross cash flow, which grew 43.1
percent in the second quarter, to Euro1,089 million, and 56.2 percent in the first
half, to Euro2,491 million.

Second-quarter net income fell by 56.3 percent compared with the same period of
2002, to Euro128 million, though it should be borne in mind that the previous
year's figure was boosted by a Euro269 million tax-free gain from the sale of
Bayer's remaining interest in Agfa-Gevaert. Net income in the first half of 2003
was down by 12.5 percent to Euro714 million.


Performance by business area



Our business activities are grouped together in the HealthCare, CropScience,
Polymers and Chemicals business areas, comprising the following reporting
segments:



Business Area                    Segments

HealthCare                       Pharmaceuticals, Biological Products;
                                 Consumer Care, Diagnostics;
                                 Animal Health

CropScience                      CropScience

Polymers                         Plastics, Rubber; Polyurethanes, Coatings, Fibers

Chemicals                       Chemicals


HealthCare

Sales of the Pharmaceuticals and Biological Products segment in the second
quarter of 2003 were 2.0 percent above the same period of last year, at Euro1,190
million. In local currencies, sales grew by 15.2 percent. This increase was due
particularly to first shipments of ciprofloxacin to Barr Laboratories in the
United States. In addition, sales of the Factor VIII drug Kogenate(R) grew
significantly, thanks largely to improved product availability. Sales of our
plasma products in the United States were hampered chiefly by pressure on
prices. Although sales of the anti-infective Avalox(R)/Avelox(R) showed a
year-on-year decline in the second quarter, this was mainly attributable to
inventory management effects and seasonal factors. In the first half overall,
Avalox(R)/Avelox(R) posted strong growth from the previous year.

EBIT increased in the second quarter by 43.1 percent to Euro146 million, mainly due
to higher sales of Ciprobay(R)/Cipro(R) and Kogenate(R) and improved cost
structures.

The Euro378 million drop in net cash flow, to minus Euro152 million, was attributable
largely to disbursements of Euro231 million following the settlement reached with
U.S. authorities in the context of an investigation into pharmaceutical product
prices.

The market introduction of our new erectile dysfunction drug Levitra(R) is
proceeding on schedule. In Europe, Levitra(R) is already on the market in 16
countries, three months after its registration. We expect to receive marketing
authorization for the product in the United States in the third quarter of 2003.


Following the first two successfully concluded Baycol(R) trials in Texas and
Mississippi in March and April of this year, the number of rhabdomyolysis cases
resolved by settlement increased substantially. As of August 1, 2003, 1,211
cases had been settled for payments totaling Euro378 million (US$ 432 million).
Moreover, Bayer is in settlement negotiations with several hundred further
plaintiffs. Bayer remains willing to settle those cases in which plaintiffs
suffered serious side-effects due to our product. As of August 1, 2003
approximately 10,100 cases remain pending. Where facts have been developed in
the course of the litigation it so far appears that the vast majority of
plaintiffs did not suffer serious side-effects.

Should the U.S. plaintiffs in the Baycol(R) litigation or in the
phenylpropanolamine (PPA) product liability litigation substantially prevail
despite the existing meritorious defenses, it is possible that Bayer could face
payments that exceed its insurance coverage. The same is true should an
unexpectedly sharp increase in settlement cases occur in the Baycol(R)
litigation. PPA, which was widely used as an active ingredient in appetite
suppressants and cough-and-cold medications by many manufacturers, was
voluntarily replaced by Bayer and other producers in the U.S. in 2000 after a
recommendation by the U.S. Food and Drug Administration.


Business in the Consumer Care and Diagnostics segment decreased by 17.6 percent
in the second quarter to Euro800 million, though in local currencies there was only
a 4.2 percent decline. Sales were diminished by the divestiture of the household
insecticides business. Adjusted for the effect of this divestiture, sales in
local currencies posted an increase. Business with the ADVIA(R) Centaur and DCA
2000(R) laboratory diagnostic systems was encouraging. Sales of Rapidpoint(R)
400 systems, which offer innovative diagnostic techniques for the lung disease
SARS, also expanded considerably. Business in products for self-testing was
unsatisfactory as a result of intense competitive pressure. We believe we can
regain market share in this area through new product introductions. Volumes were
up markedly in the Consumer Care Division, with growth in sales of the recently
launched One-A-Day Weight Smart(R) in the United States along with increases for
Alka-Seltzer Plus(R) effervescent tablets.

Second-quarter EBIT improved by Euro85 million to Euro188 million, thanks to Euro122
million in proceeds from the divestiture of further parts of the household
insecticides business. Earnings in Diagnostics were sharply down due to the
weakness of the self-testing business and the cost of integrating the Visible
Genetics acquisition.



Sales of the Animal Health segment rose by 0.9 percent in the second quarter to
Euro214 million. In local currencies, sales grew by 15.1 percent, helped by the
successful U.S. launch of our anti-parasitic treatment Advantix(R).

EBIT for the second quarter, at Euro45 million, slightly exceeded the already high
level of the previous year.



CropScience

Sales of the CropScience subgroup grew by 44.7 percent, or Euro484 million, in the
second quarter to Euro1,567 million due to the acquisition of Aventis CropScience
(ACS). As in the first three months, sales in the second quarter were hampered
considerably by negative currency effects. Total first-half sales rose by 65.6
percent, or Euro1,279 million, to Euro3,228 million. Our market position held up well
during the integration of ACS, which continues to proceed on schedule.


Business in the United States benefited from sales gains in local currency for
corn herbicides and insecticides. Sales in Japan and South Korea were below
expectations. In South America we were encouraged by continuing indications that
the economy is stabilizing. In Europe we gained market share despite a difficult
business environment caused by the continuing drought conditions and lower
demand for fungicides.

EBIT increased by Euro11 million in the second quarter of 2003, to Euro33 million.
While earnings in the first quarter had been boosted by seasonal business in
high-margin products and special gains from product divestments made to comply
with antitrust conditions, second-quarter earnings were hampered by sales
declines, special charges totaling Euro49 million and further substantial
integration charges. Despite a comparatively weak second quarter, earnings
remain on target, with EBIT at Euro476 million for the first half and EBITDA at
Euro869 million, giving an EBITDA margin of 26.9 percent.

Gross cash flow for the second quarter was Euro203 million, with net cash flow
rising to Euro734 million thanks to a Euro531 million reduction in working capital.



Polymers

In the Plastics and Rubber segment, second-quarter sales dropped by 13.5 percent
to Euro1,188 million, with a 5.0 percent decline before currency translations.
Styrenics sales in Europe decreased due to lower demand and growing competition
from Asian producers. By contrast, polycarbonate volumes remained steady despite
excess capacities in the market. Sales of certain technical rubber products
receded in Europe.

The pressure on margins already evident in the first three months intensified in
the second quarter, with raw material costs remaining very high and only limited
opportunities arising for passing them along to customers. Against this
background, EBIT fell to Euro6 million after a Euro30 million gain from the sale of
PolymerLatex.



Business in the Polyurethanes, Coatings and Fibers segment dipped by 2.1 percent
to Euro1,263 million. Sales in local currencies improved by 7.8 percent, leading to
high capacity utilization, particularly in the MDI product segment. Pressure on
prices has intensified again in recent months, especially in Asia.

EBIT improved by Euro70 million in the second quarter to Euro63 million, chiefly as a
result of optimized cost structures. This figure contains charges totaling Euro49
million for termination of the joint venture Bayer-Shell Isocyanates N.V. (BSI)
and personnel adjustments.



Chemicals

Sales of the Chemicals segment fell by 26.6 percent in the second quarter to
Euro871 million. Measured in local currencies, sales decreased by 19.6 percent. The
decline was attributable to the divestiture of Haarmann & Reimer on September
30, 2002 and other portfolio effects. The Functional Chemicals product segment
achieved gratifying growth in volumes, while business in Process Chemicals was
down. Sales of H.C. Starck also declined, particularly due to the weak economy
in the electronics sector. EBIT for the -second quarter fell to Euro2 million.


Performance by Region



The economy of the euro zone remains weak, with the E.U. performing less well
than any other region. The economies of central and eastern Europe continue to
expand but are being held back by the slow pace of growth in western Europe.
Sales of our European companies fell by 2.1 percent or Euro73 million in the second
quarter of 2003, to Euro3,443 million. EBIT dropped by 34.3 percent to Euro157
million, or by 17.9 percent if special items are disregarded.

Business developed well in the other regions, with substantial local-currency
sales growth in some cases. Our companies in North America saw sales rise 16.7
percent in the second quarter despite the sluggishness of the U.S. economy in
the wake of its -surprisingly rapid expansion at the beginning of the year.
Confidence was dampened by higher raw material costs and the price of natural
gas, which was more than twice that of the previous year. Industry remained
reluctant to invest despite a marked improvement in corporate earnings.
Translated into euros, sales dipped 1.5 percent to Euro2,317 million. EBIT rose
strongly to Euro130 million thanks to higher earnings in HealthCare.

Business of our companies in the Asia/Pacific region increased by 4.8 percent in
local currencies, even though the previous year's sales still included the
household insecticides business and despite the slower growth in most Asian
economies throughout the first half of 2003. After translation, sales fell by
10.6 percent to Euro965 million. Our growth driver in the Far East continues to be
China, where we achieved double-digit growth rates in local currencies in the
first half of 2003 after adjusting for the divestment of the household
insecticides. Second-quarter EBIT in Asia/Pacific improved by 9.3 percent to Euro94
million.

In the Latin America/Africa/Middle East region, too, economic development has so
far fallen short of expectations. However, second-quarter sales of our companies
in the region advanced by 19.0 percent in local currencies. Measured in euros,
sales moved back 4.7 percent to Euro531 million. EBIT rose by Euro104 million to Euro135
million.



Liquidity and Capital Resources



The consolidated financial statements for the first half of 2003 have been
prepared as for the year 2002 according to the rules issued by the International
Accounting Standards Board (IASB), London. Reference should be made as
appropriate to the notes to the 2002 statements.

Gross cash flow increased by Euro328 million, or 43.1 percent, in the second
quarter of 2003 compared to the same period of the previous year, due mainly to
the Euro202 million growth in EBIT. The Euro126 million decline in net cash flow to
Euro967 million resulted largely from an increase in working capital and from
disbursements of Euro231 million following the settlement reached with U.S.
authorities in the context of an investigation into pharmaceutical product
prices. Provisions for these payments had been established in 2002.

Net cash used in investing activities came to only Euro40 million. Here, cash
outflows of Euro324 million were largely offset by inflows from sales of property,
plant, equipment and investments in affiliated companies. The latter included,
in particular, the divestiture of PolymerLatex (Euro107 million). Interest and
other financial receipts amounted to Euro177 million.

Financing activities resulted in net cash outflows of Euro1,349 million, including
Euro664 million in dividend payments, Euro250 million in net loan repayments and Euro435
million in interest paid after taxes. The Euro69 million, or 18.9 percent, increase
in interest expense was chiefly attributable to the financing of the Aventis
CropScience acquisition.

Cash and cash equivalents decreased in the second quarter by Euro437 million to
Euro1,728 million. Including marketable securities and other instruments, the Group
had liquid assets of Euro1,758 million on June 30, 2003.


Earnings Performance



EBIT increased by 80.2 percent in the second quarter to Euro454 million, or by 30.1
percent if special items are disregarded. The special items in the second
quarter of 2003 mainly comprise Euro122 million in gains from the sale of further
parts of the household insecticides business and a Euro30 million gain from the
divestiture of PolymerLatex, along with Euro135 million in non-recurring charges,
primarily for restructuring. EBIT for the same period of 2002 contained Euro76
million in gains from the sale of the generics business.

The non-operating result declined by Euro44 million in the second quarter to minus
Euro176 million, mainly because the previous year's figure contained a Euro269 million
gain from the sale of our interest in Agfa-Gevaert N.V. Income tax expense for
the second -quarter of 2003 amounted to Euro149 million, causing net income to fall
by 56.3 percent to Euro128 million. The effective tax rate, at 54 percent, was well
above the theoretical Group tax rate of 39 percent, mainly due to one-time
taxation effects.



Asset and Capital Structure



Total assets decreased by Euro1.1 billion compared with December 31, 2002, to Euro40.6
billion.

Intangible assets shrank by Euro0.5 billion to Euro8.4 billion. Property, plant and
equipment decreased by Euro1.0 billion overall, with Euro0.6 billion in capital
spending offset by Euro0.8 billion in depreciation and Euro0.2 billion in retirements.
Negative currency effects diminished noncurrent assets by Euro0.4 billion.

Current assets rose by Euro0.4 billion, or 2.1 percent, from the beginning of the
year, to Euro18.6 billion. Inventories grew by 3.0 percent to Euro6.5 billion, while
trade accounts receivable increased by 5.7 percent to Euro5.9 billion. The
divestitures made in connection with the acquisition of the Aventis CropScience
group led to a 21.3 percent decline in other receivables, to Euro3.3 billion, since
the assets earmarked for divestment were included in this item at the end of
2002. Liquid assets grew by Euro1.0 billion to Euro1.8 billion.

Stockholders' equity dropped by Euro0.2 billion to Euro15.1 billion. While Euro0.7
billion was allocated out of net income, stockholders' equity was diminished by
Euro0.7 billion due to payment in the second quarter of the dividend for 2002. The
reduction in stockholders' equity not recognized in net income amounted to Euro0.3
billion.

Equity coverage of total assets rose by 0.4 percentage points compared to the
end of 2002, to 37.2 percent.

Liabilities fell by Euro0.9 billion to Euro25.4 billion, chiefly due to a decline in
trade accounts payable and to the disbursements made following the settlement
reached with U.S. authorities in the context of an investigation into
pharmaceutical product prices. Gross financial liabilities dropped by Euro0.1
billion to Euro9.5 billion.

Net debt declined by Euro1.1 billion in the first half of 2003, to Euro7.8 billion.



Capital Expenditures


In the second quarter of 2003 we spent Euro324 million for intangible assets,
property, plant and equipment. This was considerably less than in the same
period of 2002, when capital expenditures totaled Euro486 million. Total capital
spending in the first half of 2003 amounted to Euro800 million, down 21.3 percent
from the first half of 2002. At 59.9 percent of our Euro1,336 million scheduled
depreciation and amortization, the level of capital expenditures was in line
with our strategic objectives. Europe accounted for capital spending of Euro517
million, 56.3 percent of which went for our sites in Germany.

The Group's capital expenditure budget for the full year 2003 is Euro2.0 billion.



Employees


On June 30, 2003, the Bayer Group had 117,500 employees, 5,100 fewer than at the
start of the year. Headcount was reduced by 2,500 in Europe, 1,000 in North
America, 1,100 in Asia/Pacific and 500 in Latin America/Africa/Middle East.

Personnel expenses in the first half of 2003 were down by Euro8 million, or 0.2
percent, compared to the same period of 2002, to Euro3,958 million.



Outlook


We do not anticipate a meaningful recovery in economic demand in the second half
of 2003. For that reason we will probably have only limited scope to increase
selling prices. At the same time, the continuing weakness of the U.S. dollar and
the high levels of raw material and energy costs - even if these have declined a
little - are likely to hold back earnings, particularly in our industrial
business. These effects should be mitigated by our programs aimed at improving
operating efficiency and long-term profitability, which are going to plan so
far.

We expect CropScience sales to weaken further in the second half, primarily for
-seasonal reasons, with earnings of this business area also being hampered by
integration-related charges. In HealthCare, earnings are likely to be restrained
by launch costs for Levitra(R) and competitive pressure from generics in the
United States. Here too, however, our efficiency programs should ease the
situation.

Provided there is no further deterioration in the economy as a whole, we
continue to expect full-year EBIT before special items to increase by a
double-digit percentage over 2002.

     Bayer Group Highlights                                                                                    
                                                                                                                 
       euro million                                     2nd Quarter                         1st Half             
                                                                                                                 
                                                     2002     2003      Change       2002       2003      Change 
                                                                                                                 
       Sales                                         7,504    7,256     - 3.3%      14,737     14,612     - 0.8% 

       of which discontinuing operations               233        0                    456          0            

       Change in sales                                                                                           

       Volume                                         - 2%     + 4%                   - 2%       + 4%            

       Price                                          - 4%     + 3%                   - 4%       + 1%            

       Currency                                       - 4%    - 11%                   - 2%      - 11%            

       Portfolio changes                              + 3%     + 1%                     0%       + 5%            
                                                                                                                 
       EBITDA1                                       1,034    1,100     + 6.4%       2,522      2,882    + 14.3% 

       Operating result (EBIT)                         252      454    + 80.2%       1,092      1,529    + 40.0% 

       of which discontinuing operations                21        0                     43          0            

       of which special items                         (84)       17                    273        272            

       Return on sales                                3.4%     6.3%                   7.4%      10.5%            
                                                                                                                 
       Net income                                      293      128    - 56.3%         816        714    - 12.5% 

       Earnings per share (euro)                      0.40     0.18                   1.12       0.98            
                                                                                                                 
       Gross cash flow2                                761    1,089    + 43.1%       1,595      2,491    + 56.2% 

       Gross cash flow per share (euro)               1.04     1.49                   2.18       3.41            
                                                                                                                 
       Net cash flow3                                1,093      967    - 11.5%       1,333      1,130    - 15.2% 
                                                                                                                 
       Capital expenditures                            486      324    - 33.3%       1,016        800    - 21.3% 
                                                                                                                 
       Depreciation and amortization                   782      646    - 17.4%       1,430      1,353     - 5.4% 

       Number of employees (as of June 30)                                         127,800    117,500     - 8.1% 

       Personnel expenses                            2,018    2,033     + 0.7%       3,966      3,958     - 0.2% 
 

     1 EBITDA = operating result (EBIT) plus depreciation and amortization 

     2 2 Gross cash flow = operating result (EBIT) plus depreciation and amortization, less gains on retirements of
       noncurrent assets, less income taxes, and adjusted for changes in long-term provisions 

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

                                                                                                      
                  Balance Sheet Structure                                                             
                                                                                                      
                                                                                                      
                  euro million                        June 30, 2002    June 30, 2003    Dec. 31, 2002 
                                                                                                      
                  Noncurrent assets                          25,728           22,064           23,513 

                  Current assets                             18,969           18,564           18,179 

                  Stockholders' equity                       15,648           15,123           15,335 

                  Minority stockholders' interest               149              129              120 

                  Liabilities                                28,900           25,376           26,237 

                  Total assets                               44,697           40,628           41,692 
                                                                                                                      
  Bayer Group Consolidated Statements of Changes in Stockholders' Equity (Summary)                                    
                                                                                                                      
                                                                                                                      
  euro million                                  Capital stock    Retained       Net       Currency   Miscel-    Total 
                                                and reserves    earnings    income     translation   laneous          
                                                                                      adjustment      items           
                                                                                                                      
  December 31, 2001                                    4,812       9,841       965            759       545    16,922 

  Dividend payment                                                           (657)                              (657) 

  Allocation to retained earnings                                    310     (308)                                  2 

  Exchange differences                                                                      (965)               (965) 

  Other changes in stockholders' equity                                                               (470)     (470) 

  Net income                                                                   816                                816 
                                                                                                                      
  June 30, 2002                                        4,812      10,151       816          (206)        75    15,648 
                                                                                                                      
  December 31, 2002                                    4,812      10,076     1,060          (593)      (20)    15,335 

  Dividend payment                                                           (657)                              (657) 

  Allocation to retained earnings                                    404     (403)                                  1 

  Exchange differences                                                                      (388)               (388) 

  Other changes in stockholders' equity                                                                 118       118 

  Net income                                                                   714                                714 
                                                                                                                      
  June 30, 2003                                        4,812      10,480       714          (981)        98    15,123 
                                                                                                           

              Bayer Group Consolidated Balance Sheets (Summary)                                            

              euro million                                                   June 30,   June 30,   Dec. 31,
                                                                                2002       2003       2002 
                                                                                                           
              Assets                                                                                       
                                                                                                           
              Noncurrent assets                                                                            

              Intangible assets                                               10,514      8,366      8,879 

              Property, plant and equipment                                   13,068     11,437     12,436 

              Investments                                                      2,146      2,261      2,198 

                                                                              25,728     22,064     23,513 

              Current assets                                                                               

              Inventories                                                      6,727      6,534      6,342 

              Receivables and other assets                                                                 

              Trade accounts receivable                                        7,008      5,860      5,542 

              Other receivables and other assets                               3,100      3,313      4,210 

                                                                              10,108      9,173      9,752 

              Liquid assets                                                      872      1,758        796 

                                                                              17,707     17,465     16,890 

              Deferred taxes                                                     907        742        967 

              Deferred charges                                                   355        357        322 

                                                                              44,697     40,628     41,692 
                                                                                                           
              of which discontinuing operations                                  778          0          0 
                                                                                                           
                                                                                                           
              Stockholders' Equity and Liabilities                                                         
                                                                                                           
              Stockholders' equity                                                                         

              Capital stock and reserves                                       4,812      4,812      4,812 

              Retained earnings                                               10,151     10,480     10,076 

              Net income                                                         816        714      1,060 

              Other comprehensive income                                                                   

              Currency translation adjustment                                  (206)      (981)      (593) 

              Miscellaneous items                                                 75         98       (20) 

                                                                              15,648     15,123     15,335 
                                                                                                           
              Minority stockholders' interest                                    149        129        120 

              Liabilities                                                                                  

              Long-term liabilities                                                                        

              Long-term financial liabilities                                  7,176      7,044      7,318 

              Miscellaneous long-term liabilities                                139         83         92 

              Provisions for pensions and other post-employment benefits       4,693      4,992      4,925 

              Other long-term provisions                                       1,324      1,249      1,215 

                                                                              13,332     13,368     13,550 
                                                                                                           
              Short-term liabilities                                                                       

              Short-term financial liabilities                                 6,166      2,992      2,841 

              Trade accounts payable                                           2,477      1,983      2,534 

              Miscellaneous short-term liabilities                             2,168      1,950      2,138 

              Short-term provisions                                            1,643      2,424      2,257 

                                                                              12,454      9,349      9,770 

                                                                              25,786     22,717     23,320 
                                                                                                           
              of which discontinuing operations                                  224          0          0 
                                                                                                           
              Deferred taxes                                                   2,748      2,194      2,453 

              Deferred income                                                    366        465        464 

                                                                              44,697     40,628     41,692 

              The half-year statements are unaudited.                                                      
                                                                                                               
         Earnings                                                                                              
                                                                                                              
                                                                                                               
         euro million                                   2nd Quarter                        1st Half            
                                                     2002     2003      Change       2002     2003      Change 
                                                                                                               
         Operating result (EBIT)                       252      454    + 80.2%       1,092    1,529    + 40.0% 

         of which discontinuing operations              21        0                     43        0            

         of which special items                       (84)       17                    273      272            

         Non-operating result                           44    (176)          *       (113)    (348)          * 

         Income before income taxes                    296      278     - 6.1%         979    1,181    + 20.6% 

         Net income                                    293      128    - 56.3%         816      714    - 12.5% 

       Bayer Group Consolidated Statements of Income (Summary)                                                   
                                                                                                                 
                                                                                                                 
       euro million                                                     2nd Quarter               1st Half       
                                                                          2002       2003        2002       2003 
                                                                                                                 
       Net sales                                                         7,504      7,256      14,737     14,612 

       of which discontinuing operations                                   233          0         456          0 

       Cost of goods sold                                              (4,418)    (4,151)     (8,584)    (8,130) 

       Gross profit                                                      3,086      3,105       6,153      6,482 

       Selling expenses                                                (1,663)    (1,626)     (3,291)    (3,191) 

       Research and development expenses                                 (633)      (607)     (1,202)    (1,127) 

       General administration expenses                                   (374)      (389)       (672)      (770) 

       Other operating income                                              168        296         738        717 

       Other operating expenses                                          (332)      (325)       (634)      (582) 

       Operating result (EBIT)                                             252        454       1,092      1,529 

       of which discontinuing operations                                    21          0          43          0 

                                                                                                                 
       Non-operating result                                                 44      (176)       (113)      (348) 
                                                                                                                 
       Income before income taxes                                          296        278         979      1,181 
                                                                                                                 
       Income taxes                                                          0      (149)       (159)      (459) 
                                                                                                                 
       Income after taxes                                                  296        129         820        722 
                                                                                                                 
       Minority stockholders' interest                                     (3)        (1)         (4)        (8) 
                                                                                                                 
       Net income                                                          293        128         816        714 
                                                                                                                 
       Earnings per share (euro)                                          0.40       0.18        1.12       0.98 
                                                                                                                 
                                                                                                               
        Bayer Group Summary Cash Flow Statements                                                               
                                                                                                               
                                                                                                               
        euro million                                                 2nd Quarter               1st Half        
                                                                      2002        2003        2002       2003  
                                                                                                               

        Gross operating cash flow                                       761      1,089        1,595      2,491 

        Changes in working capital                                      332      (122)        (262)    (1,361) 

        Net cash provided by operating activities                     1,093        967        1,333      1,130 

        of which discontinuing operations                                16          0           38          0 

        Net cash provided by (used in) investing activities         (4,289)       (40)      (4,406)        949 

        of which discontinuing operations                               (6)          0         (34)          0 

        Net cash provided by (used in) financing activities           2,955    (1,349)        3,204    (1,102) 

        of which discontinuing operations                                 0          0            5          0 

        Changes in cash and cash equivalents                                                                   

        due to business activities                                    (241)      (422)          131        977 

        Cash and cash equivalents at beginning of period              1,092      2,165          719        767 

        Change due to exchange rate movements                                                                  

        and to changes in scope of consolidation                       (11)       (15)         (10)       (16) 

        Cash and cash equivalents at end of first half                  840      1,728          840      1,728 

        Marketable securities and other instruments                      32         30           32         30 

        Liquid assets as per balance sheets                             872      1,758          872      1,758 


                      This information is provided by RNS
            The company news service from the London Stock Exchange
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