1999/2000 Increased Sales – Income Trebled

During the first nine months of the fiscal year 1999/2000, SALZGITTER AG achieved an income before tax of 67,3 million euros. Profit more than trebled as compared with the year-earlier period (22,0 million euros). Consolidated Group sales increased by 23 percent to reach a total of 2,423 million euros (1,978 million euros). Hoesch Spundwand und Profil GmbH (HSP) were included in the consolidation for the first time and made a positive contribution towards earnings.

SALZGITTER AG’s favorable business development is based on a healthy economic climate in most steel consuming industries and a strong steel demand with rising prices.

Some extraordinary effects prevented an even better result. This includes in particular the participation in the compensation fund of the German industry and the stoppage of both galvanizing lines caused by damage.

Value adjustments of own shares and non-recurrent expenditure to employees under current pay agreements were effected during the third quarter. Furthermore, prices for raw materials and energy carriers are on a high level, partly due to the strong dollar.

Crude steel production increased sharply from 3,434 million tonnes to 3,796 million tonnes (+ 11 percent). It is, therefore, likely that SALZGITTER AG will reach or exceed the 5 million tonne mark of annual production for the first time in 25 years. The Steel Trading Division succeeded in expanding sales by 26 percent to 1,364 million euros; this trend was supported by a vigorous demand, particularly in the international trading sector. Some large projects such as a transaction covering several 100,000 tonnes of semis for tube-making contributed to this performance. Sales of the Raw Materials and Services Divison increased substantially from 274 million euros to 380 million euros (+ 39 percent).

All Divisions achieved positive results. The largest contribution came from the Steel Production Divison, namely 50.3 million euros.

The number of employees of SALZGITTER AG on June 30, 2000, was 13,019 (+ 747 employees), the increase includes the HSP-workforce.

The subsidiaries and participations of all Group Divisions have sufficient or excellent order backlogs. The short and medium-term perspectives as to capacity utilisations are encouraging.

The upward phase in the Steel Production Division continued. Sales of 1,253 million euros exceeded the year-earlier number (1,160 million euros) by 8 percent. Significant price increases could be achieved.

The acquisition of all shares in Hoesch Spundwand und Profil GmbH and of 74,7 percent in K.F.Z.-Projektmanagement GmbH, now Salzgitter Automotive Engineering GmbH, are further milestones of the implementation of the growth strategy initiated last year.

The signing of the agreements for the take-over of Mannesmannröhren-Werke AG (MRW) at the end of May 2000, was the highlight. The MRW Group is among the leading steel pipe producers worldwide. The planned integration will add to the completion of the output chain of the Group. This partnership will contribute significantly towards SALZGITTER AG’s globalization. The approval of the European cartel authorities is expected within the next few weeks. MRW will be in the black as early as next year.

The large individual investments authorized by the Supervisory Board also within the framework of the growth strategy – expansion of Salzgitter Bauelemente GmbH, the second hot-dip galvanizing line, and the optimization of the hot strip mill – are progressing on schedule. Start-up of the second coil-coating line is proceeding successfully.

As to the fourth quarter of the current fiscal year, SALZGITTER AG feels confident to achieve another positive result which will be slightly above the average of the previous three quarters. A sustained favorable economic scenario leads the Company to expect a continuation of the positive steel market situation into next year, aside from some isolated consolidations.