5.2 CropScience

The CropScience subgroup registered a solid performance in the third quarter of 2010, with sales advancing by 17.6% to €1,341 million (Q3 2009: €1,140 million). Business expanded by 8.3% on a currency- and portfolio-adjusted basis. This was mainly the result of a far more favorable market environment with increased demand, due partly to significantly lower inventories in the distribution channels and higher prices for agricultural raw materials. We maintained approximately the price level of the prior-year quarter.

EBITDA before special items of the CropScience subgroup advanced by 16.7% in the third quarter of 2010 to €126 million (Q3 2009: €108 million), due especially to the growth in business at Crop Protection and also to positive currency effects. Higher research and development expenses in the BioScience business unit were more than offset, mainly by volume increases for our crop protection products. EBIT before special items came in at minus €4 million (Q3 2009: minus €16 million). Special items amounted to minus €386 million (Q3 2009: minus €43 million). They related mainly to an intended settlement program in connection with litigations concerning genetically modified rice (LL RICE) in the United States. EBIT dropped by €331 million to minus €390 million (Q3 2009: minus €59 million).

Sales in the Crop Protection segment climbed by a gratifying 16.1% in the third quarter of 2010, to €1,130 million (Q3 2009: €973 million). After adjusting for currency effects, sales rose by 7.4%. Sales of our fungicides, insecticides and herbicides achieved good growth rates in a favorable market environment. By contrast, sales of our seed treatment products receded.

In the Europe region, sales declined by 2.0% to €298 million (Q3 2009: €304 million). Adjusted for currency effects, sales were 3.1% lower. This was attributable to the sharp decline in business with seed treatment products, particularly in France and Germany. On the other hand, sales of fungicides and insecticides were level year on year. Our herbicides, especially those for cereals, saw an extremely positive start to the fall season.

Sales in North America rose by a substantial 65.2% to €152 million (Q3 2009: €92 million). On a currency-adjusted basis, business improved by 49.1%. This considerable increase compared to the unusually weak prior-year quarter was attributable to the good performance in all business units in the United States. Lower inventories in the distribution channels, coupled with increased demand, contributed to strong growth for our fungicides, especially Stratego®. Sales of our herbicides, especially the growth regulator Finish®, also rose markedly. Increased infestation pressure from insects led to higher sales of our young insecticides Envidor® and Oberon® for citrus and corn. Our seed treatment application technology business also developed particularly well.

Sales of our crop protection products in the Asia/Pacific region rose by a healthy 21.9% to €239 million (Q3 2009: €196 million). Adjusted for currency effects, sales were up by 5.2%. Sales gains for insecticides and fungicides more than offset the decline for herbicides. In India, we recorded substantial growth in some areas for weather-related reasons. Here we increased our market share particularly with the insecticides Confidor® and Fame®. By contrast, we saw significant declines in Australia due mainly to weak sales of herbicides.

In the Latin America/Africa/Middle East region, sales moved ahead by 15.7% to €441 million (Q3 2009: €381 million). Adjusted for currency changes, business improved by 6.8%. In Latin America in particular, we considerably improved sales of our fungicides and herbicides thanks to the recovery in the crop protection market. The expansion in Mexico, Argentina and Brazil was especially encouraging. The key growth driver was our fungicide Sphere® Max in Brazil, which benefited mainly from a rise in soybean prices. Herbicide sales in Brazil, especially those of Soberan® for corn, posted strong increases.

EBITDA before special items of the Crop Protection segment advanced by 20.3% in the third quarter of 2010, to €142 million (Q3 2009: €118 million). Significantly higher volumes and positive currency effects contributed to the improvement in earnings. EBIT before special items moved forward by €21 million to €33 million (Q3 2009: €12 million). EBIT rose substantially to €33 million (Q3 2009: minus €28 million) compared with the prior-year quarter, when earnings were diminished by special items of minus €40 million.

Despite the good third-quarter performance, sales in the Crop Protection segment in the first nine months of 2010 came in at €4,126 million, down 2.8% against the high prior-year figure (€4,247 million). Adjusted for currency effects, business declined by 8.1%. This was attributable to the weak first-half performance, which resulted mainly from the difficult market environment and unfavorable weather conditions. Our nine-month sales in Europe were down primarily because of the low first-quarter sales and the continuing weakness of the business in France. In North America, the good third-quarter performance did not fully offset the drop in sales in the first six months. Sales in the Latin America/Africa/Middle East and Asia/Pacific regions for the first nine months of 2010 showed a slight improvement. EBITDA before special items fell by 29.1% to €817 million (9M 2009: €1,152 million). EBIT before special items came in at €498 million, down 40.2% against the prior-year level of €833 million. There were no special charges in the Crop Protection segment in the first three quarters of 2010 (9M 2009: €78 million). EBIT was down by 34.0% year on year.

Sales of the Environmental Science, BioScience segment posted a healthy 26.3% gain in the third quarter of 2010 to €211 million (Q3 2009: €167 million). Adjusted for currency and portfolio effects, business was up by 13.5%.

Sales of the Environmental Science business unit rose by 7.8% to €125 million (Q3 2009: €116 million). After adjusting for currency effects, however, business was down by 3.5%. Sales of products for private consumers were weaker, due especially to adverse weather conditions in the United States. Business with non-agricultural products for professional users also showed a slight decline.

Sales of the BioScience business unit came in at €86 million, up significantly over the prior-year figure of €51 million. On a currency- and portfolio-adjusted basis, sales moved ahead by 52.7%. In a positive market environment we registered strong gains for vegetable seeds. Significantly higher sales in cotton and sales increases in canola and rice contributed substantially to business growth in BioScience.

EBITDA before special items in the Environmental Science, BioScience segment dropped by €6 million in the third quarter of 2010 to minus €16 million (Q3 2009: minus €10 million). This was due to the continued expansion of our research and development activities in BioScience. EBIT before special items was minus €37 million, below the prior-year figure of minus €28 million. The special items of minus €386 million (Q3 2009: minus €3 million) arose in connection with litigations concerning genetically modified rice in the United States. EBIT fell to minus €423 million (Q3 2009: minus €31 million).

Sales in the Environmental Science, BioScience segment climbed by 21.5% in the first three quarters of 2010, to €1,051 million (9M 2009: €865 million). Adjusted for currency and portfolio effects, sales rose by 14.4%, with both business units contributing to this performance. In the BioScience business unit, we registered double-digit sales growth in each of our main crops: cotton, canola, rice and vegetables. We increased our market share for cotton in all major growing regions (United States, Latin America, India and Europe). At Environmental Science, business with products for professional and private users developed positively. EBITDA before special items climbed by 38.9% to €264 million (9M 2009: €190 million). EBIT before special items grew by 43.0% to €203 million (9M 2009: €142 million). After special charges totaling €500 million (9M 2009: €43 million), EBIT fell to minus €297 million (9M 2009: €99 million).