Bayer's second quarter results

Bayer made significant operating gains in the second quarter of 2004, posting substantial year-on-year growth in both sales and operating result (EBIT). EBIT before special items increased by 44.1% to €660 million (2003: €458 million), while sales climbed 4.5% to €7.6 billion (€7.3 billion). When adjusted for currency and portfolio effects, sales grew by 7.9%. Bayer ceo Werner Wenning expressed satisfaction with the company's performance: 'The second quarter has shown that our new strategic alignment and the associated measures are bearing fruit.' In addition, the increase in demand for industrial products from Bayer MaterialScience and Lanxess has provided new impetus. With special items of minus €136 million, underlying EBIT improved by 10.3% to €524 million, compared with €475 million in the same period of 2003. In contrast, the non-operating result declined to minus €278 million (minus €197 million). As a consequence, income before income taxes decreased to €246 million (€278 million). However, owing to a lower rate of taxation, net income remained stable at €128 million. Gross cash flow declined by 8% to €831 million compared with the same period last year. By contrast, net cash flow advanced by 22.3% to €1.1 billion. Compared with the first quarter, Bayer were able to reduce net debt by €500 million to €6.1 billion. The Lanxess subgroup grew EBIT year-on-year by €67 million to €20million. It also boosted sales by 9.7% to €1.6 billion. Preparations for the stock-market listing are proceeding on schedule. Lanxess are to be separated from the Bayer Group by way of a spin-off to the company's stockholders in early 2005. An extraordinary stockholders' meeting on November 17, 2004, will vote on this course of action. Looking at the first half of the year, operating performance was satisfying. EBIT before special items improved by 14.5% to €1.5 billion (€1.3 billion). Underlying EBIT amounted to €1.3 billion. 'Our business performance in the first six months was encouraging, and we expect this trend to continue in the second half. Despite the sharp rise in raw material costs, we expect adjusted EBIT in the second half to increase significantly over the same period of the previous year. Our performance in July gives us good grounds for this assumption. We also reaffirm our expectation of improving full-year EBITDA by more than 10%', said Wenning.