Asset and Capital Structure

Bayer Group Summary Balance Sheets	Dec. 31, 2006	Dec. 31, 2007	Change
	€ million	€ million	in %
Noncurrent assets	35,897	34,712	-3.3
Current assets	17,069	16,582	-2.9
Assets held for sale and discontinued operations	2,925	84	-97.1
Total current assets	19,994	16,666	-16.6
Total assets	55,891	51,378	-8.1

Stockholders’ equity	12,851	16,821	+30.9
Noncurrent liabilities	27,525	23,945	-13.0
Current liabilities	14,667	10,436	-28.8
Liabilities directly related to assets held for sale and discontinued operations	848	176	-79.2
Total current liabilities	15,515	10,612	-31.6
Liabilities	43,040	34,557	-19.7
Total stockholders’ equity and liabilities	55,891	51,378	-8.1

Total assets declined by €4.5 billion compared with December 31, 2006, to €51.4 billion. This was mainly due to the divestitures of H.C. Starck, Wolff Walsrode and the diagnostics business, which as of December 31, 2006 were already no longer reflected in the individual balance sheet items, but instead were recognized under “Assets held for sale and discontinued operations” and the corresponding liability item.

Noncurrent assets declined by €1.2 billion to €34.7 billion. They include goodwill of €8.2 billion resulting primarily from the Schering AG acquisition. Current assets of continuing operations declined by €0.5 billion from the previous year, to €16.6 billion.

Stockholders’ equity expanded by €4.0 billion to €16.8 billion. The increase was mainly due to the Group net income of €4.7 billion, of which discontinued operations (primarily divestment gains) accounted for €2.4 billion. Stockholders’ equity was diminished by the dividend payment of €0.8 billion made in 2007, among other factors. Negative currency effects of €0.8 billion were offset, mainly because of a decline in pension obligations that did not affect earnings. Our equity ratio (equity coverage of total assets), which had dropped to 23.0 percent by the end of 2006 as a result of the Schering acquisition, increased again considerably to 32.7 percent in 2007.

Liabilities decreased by €8.5 billion compared with December 31, 2006, to €34.6 billion. Current and noncurrent financial liabilities once again fell considerably following the sharp increase in the previous year as a result of the Schering acquisition, declining by €5.6 billion to €14.2 billion. Provisions for pensions were down by €1.0 billion to €5.5 billion compared with December 31, 2006, mainly as a result of actuarial changes recognized directly in stockholders’ equity.

Balance Sheet and Financial Ratios		2006	2007
Cost of sales ratio (%)	Cost of goods sold	52.8	50.5
	Net sales
R&D expense ratio (%)	Research and development expenses	7.9	8.0
	Net sales
Inventory turnover	Cost of goods sold	2.5	2.6
	Inventories
Receivables turnover	Net sales	5.0	5.6
	Trade accounts receivable
EBIT margin before special items (%)	EBIT before special items	12.0	13.2
	Net sales
EBITDA margin before special items (%)	EBITDA before special items	19.3	20.9
	Net sales
Asset intensity (%)	Property, plant and equipment + intangible assets	62.1	61.6
	Total assets (continuing operations)¹
D&A/capex ratio (%)	Depreciation and amortization³	100.1	128.3
	Capital expenditures³
Liability structure² (%)	Current liabilities	36.0	30.7
	Liabilities
Gearing (%)	Net debt + pension provisions	1.9	1.1
	Stockholders’ equity
Equity ratio² (%)	Stockholders’ equity	23.0	32.7
	Total assets
Return on stockholders’ equity² (%)	Income after taxes	14.1	31.8
	Average stockholders’ equity
Return on assets (%)	Income before taxes and interest expense	7.7	6.9
	Average total assets for the year as per segment table

1 Total assets (continuing operations) = noncurrent and current assets minus the balance sheet item “Assets held for sale and discontinued operations”
2 Ratio refers to the total of continuing and discontinued operations
3 Property, plant, equipment and intangible assets