Bayer Sustainable Development Report 2005 Operations Overview

Operations Overview

Company structure

Strategic management in the Bayer Group is kept separate from everyday business activities. The subgroups and service companies operate independently under the leadership of the management holding company Bayer AG, which defines common values, goals and strategies for the entire enterprise and is headed by the four-member Group Management Board. The Corporate Center supports the Group Management Board in its tasks and also performs certain common functions for the subgroups.

Help for hemophiliacs: The new Kogenate® with Bio-Set®

Bayer HealthCare plays a major role in improving the health of people and animals by researching, developing, manufacturing and marketing innovative products for disease prevention, diagnosis and treatment. Following the merger of the Biological Products and Pharmaceuticals divisions to form a new organizational unit effective January 1, 2006, the activities of Bayer HealthCare are now organized in five divisions: Animal Health, Consumer Care, Diabetes Care, Diagnostics and Pharmaceuticals. The company’s Animal Health and Consumer Care divisions and its diagnostic systems hold leading positions on the world market.

Bayer HealthCare	2004	2005	Change
EUR million			%
Net external sales	8,058	9,429	17.0
Operating result [EBIT]	956	1,102	15.3
Gross cash flow	943	1,138	20.7
Net cash flow	1,053	1,351	28.3
Capital expenditures	301	330	9.6

EBITDA¹

¹ EBITDA: Operating result (EBIT) plus depreciation and amortization

A research focus: The canola plant.

Bayer CropScience is one of the world’s leading crop science companies in the fields of crop protection, non-agricultural pest control, seeds and plant biotechnology. The company offers an outstanding range of products and extensive ser-vice backup for modern agriculture and for non-agricultural applications. Bayer CropScience strives for leadership in technology and innovation and uses its research skills to develop innovative technologies which create added value for its customers and stakeholders. Bayer CropScience is committed to the principles of sustainable development and supports efforts to protect the environment and natural resources.

Bayer CropScience	2004	2005	Change
EUR million			%
Net external sales	5,946	5,896	–0.8
Operating result [EBIT]	492	690	40.2
Gross cash flow	893	964	8.0
Net cash flow	778	904	16.2
Capital expenditures	209	201	–3.8

EBITDA¹

¹ EBITDA: Operating result (EBIT) plus depreciation and amortization

Innovation in automotive engineering: The Makrolon® sunroof

Bayer MaterialScience is a renowned supplier of high-performance materials and innovative system solutions used in a wide range of products for everyday life. Products with leading positions on the world market account for a major share of sales. Principal customers are the automotive and construction industries, the electrical/electronics sector and manufacturers of sports and leisure articles, packaging and medical equipment. Operations comprise five business units: Coatings, Adhesives and Sealants; Polycarbonates; Polyurethanes; Thermoplastic Polyurethanes and Inorganic Basic Chemicals, along with two independent companies, H.C. Starck and Wolff Walsrode.

Bayer MaterialScience	2004	2005	Change
EUR million			%
Net external sales	8,597	10,695	24.4
Operating result [EBIT]	641	1,369	113.6
Gross cash flow	884	1,402	58.6
Net cash flow	498	1,388	178.7
Capital expenditures	332	715	115.4

EBITDA¹

¹ EBITDA: Operating result (EBIT) plus depreciation and amortization

Bayer Business Services is the Bayer Group’s international competence center for it-based services. The company’s objective is to contribute lastingly to its customers’ value creation with high-performance solutions and new ideas. Its product offering is focused on four core areas: it and telecommunications; procurement and logistics; human resources and executive personnel services; and finance and accounting. The service spectrum ranges from consultancy through the development and implementation of system solutions to the handling of entire business processes. For industry and public-sector customers, Bayer Business Services positions itself as a business process outsourcing partner; for Bayer, as a shared service center.

Bayer Technology Services, the technological backbone of the Bayer Group, is engaged in process development and in process and plant engineering, construction and optimization. This company also develops innovative technology platforms that contribute substantially to the efficiency of Bayer’s operating units. Bayer Technology Services offers integrated solutions throughout the life cycle of facilities, processes and products.

Currenta is the operator of Germany’s largest chemical park network, with sites in Leverkusen, Dormagen and Krefeld-Uerdingen. The company provides the foundation for the smooth operation of facilities at these sites, offering a customized service portfolio ranging from technology through environmental protection, waste management, utility supply, analytics, infrastructure, safety and security to vocational training and continuing education courses. Currenta also markets fully developed land and buildings to companies interested in setting up operations within the chemical parks.