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 /  / Preface by the Executive Board

Preface by the Executive Board

Ladies and Gentlemen and our Shareholders, In a succession of eventful years, not least for our Group, 2016 is likely to be remembered - also in times to come - for marking a series of significant phases, if not turning points.

Many political events and decisions have called assumptions deemed certain, accepted views and much prized habits into question. The presidential election in the US and the referendum on whether the UK will stay in the European Union sparked huge media coverage.

For Salzgitter AG, however, the EU Commission's implementing of effective trade protection instruments for the very first time against the flood of dumped imports was of more immediate significance. These measures were urgently required, as the medium- to long-term survival of Europe's steel industry was meanwhile at stake.

A broad-based alliance comprising companies, trade unions and industry associations formed to ward of this threat to the industry's very existence. At a series of days run to campaign for steel, both at a national and European level, we demonstrated for the future of the steel industry. With its some 330,000 jobs spread across Europe, it is an industry that is intrinsically and consummately competitive on a global scale, as well as being indispensable for the value chain. And we succeeded! The introduction of the anti-dumping measures from February 2016 onward was a major factor in bringing about an end for now to the in effect total desolate steel price erosion in Europe that had prevailed for several years.

The challenges are nevertheless still great. Large swathes of the line pipe market and the heavy plate sector remain in a precarious state. The extent to which the political upheavals in Europe and America will influence the basically favorable economic outlook is not foreseeable. Consequently, we think it would be sheer negligence to solely rely on improved framework conditions in these uncertain times.

The extremely successful conclusion of the extensive "Salzgitter AG 2015" reorganization program, launched in 2012 with € 260 million realized in cost savings, which is around one third more than the original target, does not mean that we will rest on our laurels. Quite the opposite! The package of measures flanking "Salzgitter AG 2015" in selected companies continues under the heading of "FitStructure SZAG" and is supplemented where expedient and necessary.

Following this phase, when of necessity we concentrated our action on restructuring and lowering costs, we will now refocus on growth and innovation topics. With our "Salzgitter AG 2021" strategy approved in the autumn of 2016, we have now set about shaping the future of our Group. Alongside affordable investments and R&D expenditure, our aim is to generate an additional profit contribution of more than € 200 million a year from organic growth by 2021. We will therefore be charting the course of diversification that we have followed since 2000, with sound judgment but also with élan. Our aim is to develop the Group's de facto sales and value added portfolio in the direction of achieving a balance between steel-related activities and areas that are not closely related. This does not change the fact that Salzgitter AG's DNA originates in steel, which will remain the case in the future as well.

There is no contradiction in us changing and adjusting to new circumstances, as clearly illustrated - though at a more detailed level - by this Annual Report. In this more compact version, we concentrate on information that is important for understanding our performance, while other information has been made available on our website. We have deliberately opted for a contrast to the increasingly prevalent "disclosure overload". By this we mean demands that have become excessive, even for professional capital market participants, induced by regulations entailing an overkill of data drilldown that ultimately makes it more difficult rather than easier to understand what is relevant.

The Salzgitter Group achieved a great deal within the company in 2016 as well as externally. This is reflected in the 48 % increase in our share price. The prospects for the coming year are more favorable at present than they have been for a long time. Against this backdrop, we propose another increase in dividend and the distribution of € 0.30 per share for the financial year 2016.

We would like to thank you, also in the name of our dedicated employees, as the valued shareholders and business partners of Salzgitter AG for the trust you have placed in our company.

Sincerely,

Prof. Dr.-Ing. Heinz Jörg Fuhrmann

Burkhard Becker

Michael Kieckbusch

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