Preface by the Executive Board

Ladies and Gentlemen,

This is the year which we will remember for two particularly important events in the history and development of Salzgitter AG. One took place 150 years ago: in 1858, Counselor of Justice Carl Haarmann founded Ilseder Hütte as a stock corporation under German law. As one of Germany’s oldest corporations, it is not only the genesis under company law of our modern Salzgitter AG, but also the origin of the Peine steel mill location. After an at times turbulent past, the producer of the almost legendary Peiner Träger sections enjoys an excellent economic constitution and is currently in the process of making significant investments.

This is also an apt description of the whole Salzgitter Group, a fact which forges a link between this and the second event which occurred just ten years ago. In the midst of some turbulence, the then Preussag Stahl AG left the Preussag Group in 1998 to make its way as an independent, listed company. Although our profitability was already above average in a peer comparison in those days, the number of those who placed their confidence in us to achieve a modicum of success in the decade ahead was modest. Today, after ten years of independent Salzgitter AG, we can look back with satisfaction and a touch of pride on what we have achieved.

Not enough that we surpassed the € 10 billion sales threshold in 2007 – we capped this performance by achieving a pre-tax result of € 1.314 billion, which is the fourth record income from operations in a row. Decisive for understanding the significance of this performance is less the impressive absolute highs and more the position that we have achieved in terms of return on capital employed as against our competitors. This position – as in previous years – is nothing we need to be modest about.

Without any kind of capital injection, we have not only trebled sales but, at the same time, also raised the equity capital of the Group to € 4.25 billion, which is fourfold what it was, within a ten year period. This is an outstanding basis for future profitable growth in entrepreneurial independence.

The original ideas that drive our corporate philosophy remain the same. These ideas are anchored in our corporate guidelines and are reflected in our business policies and ethics. With this foundation, and reinforced by our decentrally oriented, but at the same time tightly orchestrated organization of tasks, responsibilities and competences, we do not have to instigate a flurry of activity in response to each putative demand requiring correct action. This not only engenders trust within the Group and outside, but also gives our executives the room they need to maneuver with regard to important decisions for the good of the company and its shareholders.

The financial year 2007 was another year of superlatives. And the current financial year 2008 also gives us reason to be satisfied, especially in view of the fact that it began better than originally expected by numerous participants in the financial markets. There is much, including the extremely high level of orders in the Tubes Division, among other factors, which underpins our customarily responsible and realistic, but at the same time confident, estimate of the year 2008 as a whole. Determinant factors will continue to be whether the widespread crisis in the financial sector and the ensuing recessionary tendencies in North America can be mastered in the near future without triggering any notable negative consequences for the real economies of other regions.

If anything, the way in which value is being wiped off the US real estate sector illustrates quite clearly that the consequences of entrepreneurial action geared to short-term goals and shortterm thinking can be fatal. We would like to assure you that our success in recent years has not blinded us, or gone to our heads. We will continue to consider the internal and external growth path ahead with diligence and with determination that the Salzgitter Group will not only flourish in a boom phase, but also make its way when normality returns one day with more balanced relations between demand and supply.

Although, with the aforementioned in mind, we reject company acquisitions when prices ride the peak of an economic cycle, we are by no means hesitant in seizing opportunities when they arise. We have recently delivered proof of this approach in our acquisition of SIG Beverages which has enabled us to add a strategic component to the product range of KHS, the largest subsidiary of Klöckner-Werke.

In our anniversary year 2008, we intend that Salzgitter shareholders should not only enjoy the long-standing increase in their investment – in addition to a repeated doubling of the basic dividend to two euros, we propose to pay another euro per share as a special bonus.

Steel is not only a companion in many things we use in our daily lives, but ranks as an essential material enabling large-scale projects of the most varied permutations. We all know this. But what is less known is what these projects, which include container ships, ski jumps or bridges spanning kilometers, actually mean for the people who live and work with them. We have documented this in a story book in this annual report, and we hope that you will find the new views on life and insights as interesting as we do.

People are at the core of all entrepreneurial activity, whether shareholders, customers, suppliers or employees. With this in mind, we would like to thank you as the shareholders and business partners of Salzgitter AG, also on behalf of our committed employees, for the trust that you vest in our company.