Bayer AG - Stockholders' Newsletter Second Quarter 2007 - Performance by Subgroup and Segment

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Management Report

Performance by Subgroup and Segment

Changes in corporate structure

Our business activities are grouped into the HealthCare, CropScience and MaterialScience subgroups.

As of June 30, 2007, our interest in the voting capital of Bayer Schering Pharma AG, Berlin, Germany, amounted to 96.3 percent. The acquired business of Schering, Berlin, Germany, is included in the Pharmaceuticals segment of the HealthCare subgroup as of June 23, 2006.

The names “Bayer Schering Pharma” or “Schering” as used in this report always refer to Bayer Schering Pharma AG, Berlin, Germany, or its predecessor, Schering AG, Berlin, Germany, respectively. The reference to Bayer Schering Pharma AG or Schering AG also includes business conducted by affiliated entities in countries outside Germany. Bayer Schering Pharma AG and Schering-Plough Corporation, New Jersey, United States, are unaffiliated companies that have been totally independent of each other for many years.

The commentaries in this report relate exclusively to continuing operations, except where specific reference is made to discontinued operations or to a total value (total). The divested activities of the Diagnostics Division, H.C. Starck and Wolff Walsrode are reported as discontinued operations. The prior-year data have been restated accordingly.

Sales by Segment in Percent, 1st Half 2007

Key Data by Subgroup and Segment

	Sales		EBIT before special items*		EBITDA before special items*		EBITDA margin before special items*
€ million	2nd Quarter 2006	2nd Quarter 2007	2nd Quarter 2006	2nd Quarter 2007	2nd Quarter 2006	2nd Quarter 2007	2nd Quarter 2006	2nd Quarter 2007
HealthCare	2,257	3,717	371	640	470	969	20.8%	26.1%
Pharmaceuticals	1,188	2,583	173	416	237	711	19.9%	27.5%
Consumer Health	1,069	1,134	198	224	233	258	21.8%	22.8%

CropScience	1,578	1,562	230	262	368	396	23.3%	25.4%
Crop Protection	1,269	1,262	159	196	277	310	21.8%	24.6%
Environmental Science, BioScience	309	300	71	66	91	86	29.4%	28.7%

MaterialScience	2,547	2,623	336	290	450	409	17.7%	15.6%
Materials	723	757	101	29	139	71	19.2%	9.4%
Systems	1,824	1,866	235	261	311	338	17.1%	18.1%

Reconciliation	354	315	(26)	(7)	15	32	4.2%	10.2%

Continuing operations	6,736	8,217	911	1,185	1,303	1,806	19.3%	22.0%

2006 figures restated
* for definition see Bayer Group Key Data, also Calculation of EBIT(DA) Before Special Items

	Sales		EBIT before special items*		EBITDA before special items*		EBITDA margin before special items*
€ million	1st Half 2006	1st Half 2007	1st Half 2006	1st Half 2007	1st Half 2006	1st Half 2007	1st Half 2006	1st Half 2007
HealthCare	4,460	7,327	756	1,264	935	1,917	21.0%	26.2%
Pharmaceuticals	2,336	5,078	380	836	483	1,422	20.7%	28.0%
Consumer Health	2,124	2,249	376	428	452	495	21.3%	22.0%

CropScience	3,349	3,348	638	709	919	980	27.4%	29.3%
Crop Protection	2,682	2,696	444	539	683	771	25.5%	28.6%
Environmental Science, BioScience	667	652	194	170	236	209	35.4%	32.1%

MaterialScience	5,033	5,231	759	581	989	818	19.7%	15.6%
Materials	1,433	1,496	233	67	309	151	21.6%	10.1%
Systems	3,600	3,735	526	514	680	667	18.9%	17.9%

Reconciliation	685	646	(65)	6	24	81	3.5%	12.5%

Continuing operations	13,527	16,552	2,088	2,560	2,867	3,796	21.2%	22.9%