Forecast, Opportunities and Risk Report

There is still no sign of a major economic recovery in the Eurozone. Accordingly, the general environment in which the Salzgitter Group conducts its business is unlikely to improve in the months ahead. For this reason, we have given priority to focusing on implementing the projects that are geared to safeguarding the medium- to long-term competitiveness of the Group under the "Salzgitter AG 2015" program.

Over the short to medium term, a recovery of building activities in southern Europe or an upswing of any note in the EU's automotive markets are not anticipated. Consequently, the divide between the northern and southern European steel markets in terms of market supply and demand is likely to persist, meaning that fierce competition and the resulting price pressure are set to continue unabated. As raw material costs are unlikely to ease the situation to any great extent, the Steel Division anticipates a downturn in sales and a clearly negative result before tax in 2013 as a whole.

The Trading Division predicts a return to normal levels of the recently very brisk project business in international trading in the coming months, as opposed to the stockholding steel trade where earnings opportunities arising from a possible cyclical recovery in demand, accompanied by more stable prices are perceived. With sales in a slight downtrend, profit in the double-digit million range continues to appear achievable.

The considerable capacity underutilization prevailing in the European large-diameter pipe business of the Tubes Division since the beginning of the second quarter will continue throughout the remainder of the year. Consequently, short-time work is likely to extend until the end of the year. A significant increase in the order volume for HFI-welded tubes and in the precision tubes segment is also unlikely. By contrast, the seamless stainless steel tubes business is expected to perform well, as before. Stable sales at best and a pre-tax loss in the mid to upper double-digit million euro range are anticipated overall for the financial year 2013.

The Services Division expects sales to remain at the year-earlier level, accompanied by lower earnings before tax compared with 2012.

In view of the continued good capacity utilization, the Technology Division expects the positive sales and profit trend to hold steady. The KHS Group's "Fit4Future" program, initiated in 2011 and systematically implemented since then, will provide support here.

The reporting-date related negative valuation effects in the result of Aurubis AG as per June 30, 2013 harbor the risk that the company's contribution to the Salzgitter Group's result may not be in the range originally anticipated for the financial year as a whole. The market price trends for copper and other metals will be the determining factor. Negative influences on the result in the accounts of the first half of 2013 and the development of operations anticipated necessitated an adjustment of guidance for the results. With regard to the 2013 financial year, the Salzgitter Group now anticipates slightly lower sales in a year-on-year comparison and a negative pre-tax result of around € 400 million. As already announced, additional special, initially burdening, non-recurrent effects may still arise as a consequence of implementing the "Salzgitter AG 2015" Group project.

We make reference to the fact that opportunities and risks from currently unforeseeable trends in selling prices, input material prices and capacity level developments, as well as changes in the currency - parity, may considerably affect performance in the second half of the financial year 2013. The resulting fluctuation in the consolidated pre-tax result may be within a considerable range, either to the positive or to the negative. The dimensions of this range become clear if one considers that, with around 6 million tons of steel products sold by the Steel, Trading and Tubes divisions over the remainder of the financial year, an average € 20 contraction in the margin per ton is sufficient to cause a variation in the annual result of more than € 120 million. Moreover, the accuracy of the company's planning is restricted by the volatilities and shorter contractual durations, both on the procurement and on the sales side.