September 4, 2008 Bayer CropScience

Setting the course after a very successful first half of 2008:
Bayer CropScience plans investment of EUR 3.4 billion in research and development through 2012　　　１Euro=1.4US$

Expansion of R&D program will strengthen basis for future growth /
Achievement of target EBITDA margin of around 25 percent already expected in 2008 /
Sales target of EUR 2 billion with new active ingredients now envisaged for 2009/
Launch of 10 new crop protection compounds with a peak sales potential of more than EUR 1 billion planned through 2012

説明会資料　http://www.bayercropscience.com/BCSWeb/CropProtection.nsf/id/EN_20080903

After an outstanding business development in the first six months in 2008, Bayer CropScience is now setting the course for the future. The company is launching an extensive research program to seize the long-term opportunities for growth on the agricultural markets. To this end, a total of EUR 3.4 billion will be invested into research and development of innovative crop protection products and new solutions in seeds and plant biotechnology between 2008 and 2012. During the same period the company is planning to bring 10 new crop protection active ingredients to market which will have a combined peak sales potential of more than EUR 1 billion. This new objective complements existing plans to achieve sales of EUR 2 billion with active ingredients launched since 2000. The gratifying development of business indicates that this target will be reached already in 2009 - two years earlier than expected. The company also anticipates achieving an underlying EBITDA margin of approx. 25 percent this year. This figure was originally planned for 2009.

Professor Friedrich Berschauer, Chairman of the Board of Management of Bayer CropScience AG, said at the company’s annual press conference in Monheim, “Bayer CropScience is an innovation leader in the agricultural industry; our three businesses - Crop Protection, Seeds & Traits and Plant Biotechnology - are extremely well positioned and provide farmers with intelligent and sustainable solutions to safeguard harvests and increase yields.” In view of the persistently high demand for agricultural raw materials, the limited amount of arable land available, and the impending climate change, Berschauer said that the agricultural industry is facing some major challenges.

Berschauer: “We need a second green revolution”

Bayer CropScience’s Board Chairman believes that advances in agricultural productivity in emerging economies, in particular, have slowed progressively in the past decades, while at the same time the global population continues to grow strongly. In addition, public funding for agricultural research is no longer such a high priority. Berschauer emphasized that agriculture needs to be put back at the center of international research and development policy, and investment in technology, innovation and agricultural infrastructure needs to be boosted. “We need intensive agricultural research if we are to meet the challenges associated with producing food and making the best possible use of the agricultural resources available to us,” Berschauer said. “What we need is nothing less than a second green revolution."

In view of the impending climate change, plant biotechnology will play an increasingly important role in making plants less susceptible to climatic and environmental stress. Targeted integrated management of all agricultural activities - irrigation, fertilization, crop protection and innovative seed technologies - will enable global harvests to be increased substantially. Classic crop protection products alone can help to increase yields of major crops by up to 70 percent when deployed optimally. Berschauer explained that modern hybrid seed and more intensive use of the opportunities inherent in plant biotechnology offer substantial further yield potential.

Investing in the future

As a global market leader in the agrochemical sector, Bayer will contribute to increasing this yield potential, Berschauer said. Bayer CropScience is planning to invest a total of EUR 3.4 billion in research and development between 2008 and 2012. Almost EUR 2.7 billion of this sum will be allocated to R&D into innovative crop protection active ingredients, and EUR 750 million to developing new seed and plant biotechnology products.

The company is also planning to gradually align its crop protection production capacities with demand from the market. In 2008 Bayer CropScience will be spending about EUR 280 million to modernize existing facilities and to construct new ones (2007: EUR 223 million). The largest single project is the construction of a new production plant for precursors of the herbicidal active ingredient glufosinate-ammonium (marketed under the brand names Liberty®, Ignite® and Basta®), which will be built in Knapsack near Cologne, Germany, at a cost of some EUR 60 million and is scheduled to come on stream in 2009.

Record sales and financial performance in the first six months of 2008

Strong demand for innovative crop protection and seed products enabled Bayer CropScience to expand its business substantially in the first half of 2008. Adjusted for exchange rate and portfolio effects, sales grew 19 percent in the first six months of the year to reach EUR 3.78 billion. The company was more than able to compensate for negative currency effects with substantially higher sales volumes and price increases. EBITDA before special items increased 24 percent to EUR 1.214 billion; underlying EBIT rose by as much as 34 percent to the record level of EUR 953 million.

The major driver behind this development was the crop protection business, which grew by 17 percent to achieve sales of EUR 3.15 billion (2007: EUR 2.7 billion). Adjusted for exchange rate and portfolio effects, this is equivalent to a 23 percent increase - an excellent result vis-à-vis the industry at large. All the business units grew, with the fungicides portfolio making a particularly strong contribution with currency-adjusted sales growth of 39 percent.

Bayer CropScience saw particularly high growth rates in sales of its portfolio of young, innovative active ingredients which have been launched in key markets since 2000. Sales of these products grew by 45 percent in the first six months of 2008 compared with 2007 to reach roughly EUR 1.15 billion. This performance underlines the company’s successful focus on research into and development of new crop protection products, and highlights its position as an innovation leader in the crop protection industry.

The seeds & traits business in the company’s BioScience unit also developed extremely well, increasing sales by 15 percent to EUR 304 million (+21 percent adjusted for exchange rate and portfolio effects). This performance was the result of the cotton seed business developing well in North America, Mexico and India and strong demand for hybrid rice varieties in Asia. Sales of the hybrid canola seed InVigor® in North America developed well, as did the global vegetable seed business. In Environmental Science, however, currency-adjusted sales in the first half of 2008 amounted to EUR 330 million, 10 percent lower than the previous year. The main reason for this was lower sales of professional products for landscape management in North America.

Positive outlook for the second half of 2008

Bayer CropScience has raised its forecast for the full year 2008 as a result of the good business development in the first six months. “We expect the market environment to remain positive in the second half of 2008 and are aiming to increase our currency-adjusted sales by well above 10 percent on a currency- and portfolio adjusted basis,” Berschauer said. “We also believe that we can improve the EBITDA margin before special items to about 25 percent. This would mean that our goal of an approximately 25 percent EBITDA margin before special items, originally targeted for 2009, would be achieved a year earlier than planned.” He also said that, as the prices of energy and raw materials continue to rise, the company is planning to adjust its prices again in the second half of 2008.

Seizing opportunities for growth with innovative products

The portfolio of young active ingredients will continue to drive the company’s sales and earnings development. Following the excellent performance of these compounds in the first half of the year, Bayer CropScience is now expecting to reach its sales target of EUR 2 billion by the end of 2009 instead of in 2011 as originally planned. The company also has a strong development pipeline and has set itself the new target of bringing to market in the period from 2008 to 2012 ten new active ingredients with a combined peak sales potential in excess of EUR 1 billion. “Given our product portfolio, strong pipeline and great innovative strength, we want to secure an above-average share of this market growth,” Berschauer commented.

In BioScience, Bayer CropScience is targeting sales of EUR 1 billion by 2015, with average growth of 12 percent annually, most of which is expected to be organic. The increasing resistance of weeds to glyphosate represents a particular opportunity for the company, which is developing new technological solutions for resistance management programs. “However, in the future we will also actively review any opportunities for cooperations and acquisitions that present themselves in order to specifically develop our seed and plant biotechnology business further,” Berschauer said.

About Bayer CropScience
Bayer AG is a global research-based and growth-oriented enterprise with core competencies in the fields of health care, nutrition and high-tech materials. Bayer CropScience AG, a subsidiary of Bayer AG with annual sales of about EUR 5.8 billion (2007), is one of the world’s leading innovative crop science companies in the areas of crop protection, non-agricultural pest control, seeds and plant biotechnology. The company offers an outstanding range of products and extensive service backup for modern, sustainable agriculture and for non-agricultural applications. Bayer CropScience has a global workforce of about 17,800 and is represented in more than 120 countries. This and further news is available at: www.newsroom.bayercropscience.com.