Bayer AG - Stockholders' Newsletter Third Quarter 2006

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Management Report

Performance by Region

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The sales gains in the regions in the third quarter of 2006 were primarily attributable to the inclusion of Schering. Sales of the Bayer Group worldwide including the Schering business rose by 26.0 percent, or €1,606 million, to €7,783 million. On a currency-adjusted basis, sales advanced by 28.6 percent. The largest increases were in Europe, where business expanded by 29.5 percent, or €764 million, of which the acquired Schering business accounted for €584 million. Without Schering, the increase in Europe would have been 6.9 percent. Sales in Germany climbed by 22.1 percent to €1,254 million, or by 7.6 percent if the Schering business is disregarded. In the North America region, we improved third-quarter sales by 25.3 percent to €2,039 million. Here, business excluding Schering declined by 2.4 percent, Pharmaceuticals sales being held back by the discussion surrounding Trasylol®. Currency-adjusted sales of our Crop Protection business dropped by 21.2 percent as a result of the ongoing drought and the increasing cultivation of genetically modified crops. In the Asia/Pacific and Latin America/Africa/Middle East regions, sales rose by 20.2 and 24.2 percent, respectively, or by 3.7 and 1.7 percent without Schering. Sales of the Bayer CropScience subgroup receded, mainly due to the difficult market conditions in Brazil. In both regions, the MaterialScience subgroup posted significant growth due to strong sales of Polyurethanes.