Discussion with stockholders’ representatives at the Bayer Annual Stockholders’ Meeting

Praise for Bayer’s strategy

Düsseldorf. "Congratulations: 2008 was operationally the most successful year in Bayer’s history," said one stockholders’ representative, praising the company for its business performance and thanking management and the employees for their dedication. Speaking during the discussion at the 57th Annual Stockholders’ Meeting of Bayer AG, which was attended by some 4,000 people, the representative recalled the company’s strategic decisions and the reorganization that had taken place in recent years. "Bayer is now a healthy enterprise again," he concluded.

At the discussion with stockholders (from right): Klaus Kühn, Werner Wenning and Dr. Manfred Schneider.

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At the discussion with stockholders (from right): Klaus Kühn, Werner Wenning and Dr. Manfred Schneider.

Following the welcome address by Supervisory Board Chairman Dr. Manfred Schneider and the report by Management Board Chairman Werner Wenning, members of both boards fielded questions from the attendees. A major topic of discussion was the company’s business situation against the background of the current financial and economic crisis. "The results would have been perfect, were it not for the slump in business at MaterialScience,” remarked one stockholder, describing the company’s three-pillared strategy as the right one for mastering the current crisis, but nevertheless enquiring as to the future of Bayer MaterialScience (BMS).

“That subgroup is an undisputed pillar of the Bayer Group,” Wenning stressed, explaining that Bayer’s business model and corporate strategy have proven highly effective in recent years. He said this still applies in times of economic crisis. Wenning pointed out that BMS makes valuable contributions to improving the quality of life and to sustainable development, as do Bayer HealthCare and Bayer CropScience (BCS).

“We are convinced that global trends such as scarcity of resources, climate change, increasing mobility and growing prosperity are important growth drivers for BMS. With our product portfolio we can provide solutions to some of the most pressing problems, such as dwindling resources,” said Wenning. This subgroup’s products, he went on, undoubtedly have positive long-term growth perspectives – even if the company will face particular challenges in the coming quarters due to the crisis.

Marc Tüngler of the German private investors’ association DSW praised the company’s strategy.

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Marc Tüngler of the German private investors’ association DSW praised the company’s strategy.

Although sales stabilized at a low level in the first three months of 2009 and the first signs of a modest recovery are appearing, it is too early to speak of a sustained improvement, Wenning remarked. He said there are currently no plans to introduce short-time working, although this remains an option for the future depending on how business develops.

Schering acquisition was strategically the right decision
A number of stockholders described the acquisition of Schering as the right strategic decision and inquired about the status of its integration. Wenning replied that the integration has been successful and is very largely complete. “We had announced an annual synergy potential of over EUR 800 million, and we will have achieved that by the end of this year.” Furthermore, the planned headcount reductions will be completed by the end of 2009, he said, adding: “We have kept the promises we made at the time of the acquisition.”

One stockholder wanted to know if the integration of Schering makes Bayer large enough to survive by itself in the world market. “Our pharmaceuticals business now has a competitive size, with sales of roughly EUR 10 billion,” Wenning responded. Bayer Schering Pharma, he pointed out, is the largest pharmaceutical company in Germany, the 13th largest worldwide if the announced consolidations in the health care industry are taken into account, and the global number six in specialty therapeutics. “That means we are well positioned,” Wenning said, reiterating that Bayer has one of the best pipelines in the industry, with more than 40 projects in the advanced clinical development phases II and III.

Works council member Gudrun Kiesler wanted to know about vocational training opportunities for young people.

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Works council member Gudrun Kiesler wanted to know about vocational training opportunities for young people.

Potential of plant biotechnology
The discussion also focused on plant biotechnology. A shareholder wanted to know what role plant biotechnology plays in safeguarding basic nutrition and what kind of sales potential it will offer approximately ten years from now. Wenning’s reply was that BCS uses plant biotechnology and modern breeding methods to help increase yields and raise the quality of food and feed products and fibers. “This benefits not just farmers and consumers, but also the environment.”

In the BioScience business unit, the company is developing innovative solutions to enhance performance and productivity in canola, cotton and rice crops. “We offer traits such as herbicide tolerance and insect resistance, and are developing new traits to increase crop yields – including increased resistance to climatic influences such as drought or low temperatures,” Wenning reported. He said BCS aims to further expand BioScience’s share of the total subgroup portfolio and achieve approximately EUR 1 billion in sales in 2015. “This is therefore an area where we can expect significant contributions to sales in the future.” According to the Bayer CEO, plant biotechnology is a technology of the future and has an important role to play in safeguarding the nutritional needs of a growing world population.

Investment in research and development Also mentioned during the discussion was the company’s investment in research and development. Wenning explained that Bayer aims to set standards as an inventor company even in difficult economic times and therefore plans to increase its research and development expenditures to EUR 2.9 billion in 2009. Some 12,300 people are employed in Bayer’s R&D units worldwide.

Harald Petersen of the stockholders’ association SdK asking a question during the discussion.

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Harald Petersen of the stockholders’ association SdK asking a question during the discussion..

The Bayer Group is also maintaining its commitment to vocational training for young people in 2009, Wenning said in response to a question posed by a works council member. In Germany alone, Bayer provides training for another 800 young people each year in some 20 occupations. “We have always been committed to high-quality vocational training for young people, and for many years have trained far more young people than we require for our own operations.” According to Wenning, Bayer lives up to this special commitment even in tough economic times, maintaining trainee numbers at a consistently high level.

During the discussion with the shareholders, Bayer CEO also spoke in detail about the construction of the carbon monoxide pipeline from Dormagen to Krefeld-Uerdingen. “We understand why those affected are voicing their opinions and critically examining both our plans and our decisions. We are proactively addressing this criticism.” According to the Bayer Chairman, however, the company is convinced that it has broad political and social backing for the construction and commissioning of the pipeline in view of the state parliament’s vote, the approval given by the authorities, and with respect to current and pending judicial proceedings. “Let us not forget that we had no difficulty in reaching agreement with the overwhelming majority of people living along the route of the pipeline.” He said the CO pipeline is safe and that it is very important for ensuring the reliability of supplies to the facilities for plastics production at the Krefeld-Uerdingen site.

Further topics addressed during the discussion included Bayer’s stock performance, corporate compliance, product and plant safety, bee losses in the southern German state of Baden-Württemberg and the remuneration of the members of the Supervisory Board and the Board of Management. Bayer CEO Wenning and Supervisory Board Chairman Schneider dealt with all discussion topics in detail. In the subsequent vote, the stockholders approved the proposals of the Supervisory Board and the Board of Management – including the switch from bearer shares to registered shares – by large majorities.