Tubes Division

1) Incl. sales in own segment (excluding intra-company sales in the DMV Group, EP Group and MFR Group) and to other corporate divisions

The international steel tubes market was in a very robust condition during the first half of 2007, as the high prices for oil and gas induced a persistently high demand for tubes from the energy sector for exploration and the transport and processing of crude oil and natural gas. Strong impetus was also generated by the world’s booming power plant construction business. At the same time, the machine building and plant construction sector, the automotive and the construction industries recorded brisk order activity. By contrast, steel stockholders’ inventories of standard tubes which can be sourced from the warehouse were partly too high owing to imports.

The companies of the Tubes Division, which operate mainly in the project business and in the higher grade product segment, benefited from the generally extremely satisfactory market situation in the form of healthy inflow of orders and selling prices which had an overall upward tendency. The individual divisions developed as follows:

Europipe GmbH and Salzgitter Großrohre GmbH, both companies producing large-diameter tubes, and pipe bends and plate supplier Mannesmannröhren Mülheim GmbH recorded a high order intake and a correspondingly good capacity utilization of their plants. The order books of all three companies cover the period through to the year 2008. Whereas shipments were marginally below the volume of the previous year’s period owing to projects and the reporting date as per June 30, 2007, aggregated sales rose. The earnings before tax of this product segment almost doubled.

In the medium-line pipes segment, favorable market conditions boosted the order intake and orders in hand of Mannesmann Fuchs Rohr GmbH as against the first two quarters of 2006. Due to a short downtime in production, sales were below the previous year’s figure (see the chapter Investments). Boosted by the increase in selling prices, sales - and to an even greater extent - EBT were higher year on year.

The precision tubes segment, with its companies MHP Mannesmann Präzisrohr GmbH and Mannesmann Robur B.V., also performed well in the first half year of financial 2007 owing to the generally upbeat economic environment. Both the automotive and the mechanical engineering sectors placed more orders in comparison with the first six months of 2006. The shipment volume, sales, and EBT in particular rose noticeably.

Despite the volatile price trend of a number of alloys, Mannesmann DMV Stainless GmbH, a company which manufactures stainless steel tubes, saw its order intake and order book grow in comparison to the previous year’s period, particularly in relation to orders placed by energy-related sectors. At nearly unchanged shipments, sales expanded strongly due to higher sales prices. Profit before tax more than doubled.

Despite the shipment volumes which were somewhat lower, the external sales of the Tubes Division rose 7 % to € 884 million due to firmer selling prices. Healthy earnings generated by all product segments, in particular by large-diameter and stainless steel tubes, led to the pre-tax result of the consolidated tubes companies doubling to € 138.9 million (comparable figure of first half of 2006: € 65.0 million; the overall result of € 138.0 million achieved by the Tubes Division in the first half of 2006 included an amount of € 73.0 million attributable to the Vallourec shareholding which was divested at a later date).

At € 1.16 billion, consolidated new orders of the division in the period under review were 22 % higher than in the first six months of 2006, which was mainly attributable to the large-diameter and stainless steel tubes segments. Orders on hand at the end of the reporting period came to € 1.69 billion and were thus 33 % higher than the level posted on June 30, 2006.