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Wednesday - April 1, 2009

Press Conference: European Coatings Show 2009

“Steady course for growth in innovative markets”

Address by Dr. Joachim Wolff, Member of the Executive Committee, Head of the Coatings, Adhesives, Specialties Business Unit

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Ladies and gentlemen,

“A steady course for growth in innovative markets”:


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Is that a nonsensical claim in the current situation?

It all began in 2008, triggered by the Hedge Funds, with a little local difficulty in the property market and then in the banking sector. Many people hoped that it would all remain local and would be limited to these sectors.

We are now confronted with a crisis of global proportions. No industry has been spared. After the construction sector and the banks, the automotive and transport industries are now also suffering.

The crisis will certainly be more than just a brief economic slowdown. That this even applies globally is quite clear from the most recent expert predictions for future economic development.

Bayer MaterialScience too has been experiencing a significant drop in the number of incoming orders for several months. The crisis does not meet us unprepared, however. Every crisis offers well positioned companies opportunities as well. It is, however, necessary to respond correctly and adjust structures and processes to future demand. We evaluate the future in scenarios and thus lay the basis for the development of high-quality and market-oriented products and technologies.

For example, we are currently working on a creative project in which we are studying how the housing, life and working worlds of the year 2020 will be affected by climate change, logistic demands and demographic change. We are certain that our key products – polyurethanes and polycarbonates - will continue to play a vital role ten years from now.


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In this context megatrends such as dwindling resources, climate change, urbanization and a growing health consciousness define the framework for our activities, in particular with respect to investments and innovation.

How we derive success for us and our customers will become clear as I give a few concrete examples of our contributions. The examples on the right are appropriate for the European Coatings Show.

Highly reactive coating systems help to conserve energy. Efficient corrosion protection preserves structures and goods, helping to conserve raw materials. Nanomaterials create new perspectives for lightweight construction and surface protection. Functional surfaces that light up, react to touch, support wound healing or convert sunlight into energy, for example, open up an entirely new realm of possibilities. But more of that later.


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Investments are the key to generating sustainable growth from such megatrends. We realize this and plan accordingly. We should not start by economizing in this area, particularly in times of crisis.

We also have a solid foundation for growing our business. With 2,500 employees and _12 production sites in eight countries, the CAS business unit posted sales of nearly _1.6 billion euros in 2008.

Depending how the market develops, we plan to make capital expenditures of between 200 million and 300 million euros through 2012. We plan to spend an even larger sum, namely 450 million euros, on innovations. That is a lot of money, but I am confident that it will be money well spent.


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We have a global concept for investments in plants. In Germany, we are pursuing primarily highly innovative projects, such as the new pilot facility for the production of Baytubes® carbon nanotubes in Leverkusen, or the production in Dormagen of Makrofol® large format polycarbonate films and Baycusan® waterborne polyurethane dispersions for cosmetics and medical technology.

Late last year, we brought a new world-scale facility for the production of waterborne dispersions on stream at our integrated Shanghai site in the fast-growing Chinese market. We are also systematically developing local marketing, distribution and business development for Asia so that we can provide optimal support to our customers there.

Even given the current economic situation, Asia remains an attractive market in which to implement our growth strategy.


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This fact is underscored by the recent decision to invest in Ankleshwar, India. We will be erecting a production facility for aromatic and aliphatic polyisocyanates at an existing Bayer site there so that we can supply India and the adjacent region with high-quality coating raw materials. The capacities with an investment cost of roughly 20 million euros are scheduled to come on stream in 2011.

Together with our technical centers in all important growth regions, in particular Brazil, Russia, India and China, such production facilities are a further guarantor for future growth.

Ladies and gentlemen,
this short video clip shows all the things that can be made using our products: coatings for textiles and floors, adhesives, coatings for wood, metal and plastics, as well as luminescent films, high-strength polymer materials and more.


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Our expertise for surfaces goes well beyond traditional coating technology, as you can see.

Our film expertise in particular has recently been expanded significantly, and now includes thermoplastic polyurethane (TPU) films in addition to the polycarbonate Makrofol®. We have taken over this field from the former Thermoplastic Polyurethanes Business Unit, so that all of Bayer MaterialScience's film expertise is now bundled in our Functional Films unit. This improves efficiency not only for current business but also for its further technological and application development. There is thus dynamic growth potential – both innovative and market-ready – in Functional Films.

Competence centers like this will enable us to find intelligent responses to the megatrends that I mentioned previously. Let me go into this in greater detail now with reference to climate protection and resource conservation.


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In keeping with the motto “We help with solutions”, the Bayer Group has defined activities within its climate program to meet these challenges. This graphic shows some important aspects of these solutions for Bayer MaterialScience:

On the left is the development of concepts as the basis for our actions. This is how we address specific market requirements and customer needs, and it is also how we test our approaches to solutions in practice. The center block focuses on the climate compatibility of our own production. This includes resource conservation from the very beginning, logistical optimization and the energy-efficient production of intermediates and end products, but most of all the ecological compatibility of our products themselves. The main focus on the right is on the climate protection contributions that our products and solutions make in the hands of our customers and end consumers. Simple, environment-friendly application processes and better performance of the resulting end products are just two aspects in this context.

A few examples from the CAS business unit will help illustrate these contributions.


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Production efficiency:
Intermediates for aliphatic isocyanates are key components of coating polyurethanes. We have developed processes for their production that are vastly superior to conventional processes. A specific plant size that is approximately 55 percent smaller requires fewer resources during construction. Investment costs are thus roughly one-fourth lower than those for a conventional plant. Furthermore, a particularly energy-efficient manufacturing process reduces the specific energy requirement per ton of product by 60 percent, and the associated CO2 emissions by more than two-thirds, thanks to additional heat recovery.


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Renewable energies:
Our Baytubes® enable the construction of lighter, larger and thus more efficient rotors for wind turbines. Special adhesives and coatings formulated with our raw materials simplify rotor manufacturing, increase efficiency and extend service life. All these are indirect, but very effective, contributions to climate protection.


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Photovoltaics:
Functional films made of thermoplastics such as polycarbonate or TPU have been used for years in the production of photovoltaic cells. This is also true for modern thin film cells.

The frames of conventional solar modules are still mostly made of aluminum. But they can be produced more efficiently and cost-effectively using Bayer polyurethanes. This is already reality, but we are continuously improving the products and processes.


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Bayer materials could play an even more important role in the next generation of photovoltaics, which is still in development. These organic photovoltaic cells contain no silicon, which currently has to be manufactured using a large amount of energy. The role of the silicon will be assumed in the future by nanocrystals known as quantum dots, which BMS develops and markets under the BayDot® brand. The circuits for such cells could be printed with conductive inks such as BayInk®.

These solar cells could revolutionize power generation because they could be produced economically in large quantities.


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In my last example, I would like again to touch on coating raw materials, which Dr. Mirgel will report on in detail following this presentation. Climate protection is an important aspect here as well, and our solutions play their part.

Both highly reactive and radiation-curing coatings help save energy in the coating process. And high-solids and waterborne systems help to continuously reduce solvent emissions.


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Our products and technologies are thus at the beginning of multiple value-added chains in a variety of areas of application, all of which are committed from the outset to climate protection, the environment and mankind. With our green technologies and raw materials, we provide the basis for the manufacture of the green products that an increasing number of customers are demanding. And in so doing we demonstrate that efficiency and environmental compatibility are not contradictory – in fact the opposite is true!


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With this in mind, I would like to invite you to see for yourselves and visit our stand, the motto of which this year is: “Water is green – Driving green technologies”.

I am convinced that polyurethanes have a bright future. We will continue to enjoy above-market growth, even if the growth rates are more modest in this difficult environment. Now more than ever, the fact that we not only have outstanding products and innovative system solutions and technologies, but also offer comprehensive service, is a key to our success. This enables us to create value for our customers and also to meet our responsibilities to the climate and the environment.

Thank you for your attention. Dr. Mirgel will now describe some of our innovations in detail.


Forward-Looking Statements
This news release may contain forward-looking statements based on current assumptions and forecasts made by Bayer Group or subgroup management. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. These factors include those discussed in Bayer's public reports, which are available on the Bayer website at www.bayer.com. The company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments.