Back on an upward trend with over € 40 million profit

Key data for financial year 2003

The Salzgitter Group ended the financial year 2003 with a generally satisfactory result in spite of the widely varying and in some cases highly adverse conditions with which it was faced.

Consolidated external sales were up 2% over the preceding year to € 4.8 billion (2002: € 4.7 billion), due mainly to an expansion in the number of consolidated companies at the Trading Division. Earnings before taxes (EBT) again increased in the fourth quarter, bringing the full year total to € 42.5 million. However, this result cannot compare with the previous year's performance (EBT € 72.5 million), especially due to the adverse effect of detrimental market conditions and exchange rate factors on international business at the Tubes Division.

In addition, the present consolidated financial statements take account of some substantial balance sheet support at the Processing Division, the benefits of which will continue be felt in future periods. The effects on results amounted to some € 25 million. The one-off pro rata charge of € 24 million resulting from the closure of a plant operated by 50%-owned subsidiary Europipe, the world market leader in large-diameter line pipes, was mainly offset by drawing on reserves set aside by Mannesmannröhren-Werke AG to cover such risks.

The proportion of net annual income accrued to Salzgitter AG shareholders amounts to € 31.8 million (previous year: € 64.4 million). The return on capital employed (ROCE) came in at 4.6% (2002: 7.3%).

The Steel Division made a virtually unchanged contribution of € 1.4 billion to external Group sales. Total Steel Division sales, including business conducted with the Group's own trading units, grew by 4% to € 2.0 billion (2002: € 1.9 billion). Pre-tax profits continued to develop in the fourth quarter with the result that EBT for the financial year 2003 as a whole came in at € 46.9 million. This result represents a swing of € 70 million in comparison with the year before (2002: € -23.5 million) and includes a profit of € 14 million from the reduction in the stake in US steel company Steel Dynamics Inc. While the situation regarding flat rolled products and plate improved consistently over the course of the year, record high prices for scrap prevented a return to profitability in the beams business. There was insufficient time for the moves introduced in November 2003 to pass on purchase price peaks to consumers to generate an adequate counter effect during the reporting period.

External sales at the Tubes Division slipped to € 0.9 billion (2002: € 1.1 billion), reflecting the negative effects of the general economic weakness and investment slump which prevailed for large parts of 2003, as well as the crises in the Middle East and the impact of the steadily weakening US dollar. The principal companies in the Division recorded signs of a mild recovery in the second half. Nevertheless the pre-tax profit of € 2.6 million failed to match the previous year's excellent result (2002: € 76.8 million).

An expansion in international trading and the inclusion of Salzgitter International Inc., Houston (USA), within the group of consolidated companies were essentially responsible for the increase of almost € 300 million in Trading Division sales which rose to € 2.0 billion (2002: € 1.7 billion). The Division posted earnings of € 13.1 million before taxes, some 60% up on the year before (2002: € 8.2 million).

The Services Division generated external sales valued at € 241 million to non-Group companies, up by 4% on financial year 2002. Pre-tax profits were increased 66% in comparison with the year before to € 13.7 million (2002: € 8.3 million).

External sales at the Processing Division at € 221 million were comparable with the year before and with the support of a waiver of trade receivables by the group, the Division returned a break-even result (2002: € 8.0 million). Besides balancing out operating losses in financial year 2003, these measures will yield benefits in future periods and afford the Group operational and strategic room for maneuver against the background of the desolate situation of the German construction industry.

The loss from consolidation and other items amounted to € -34.0 million (2002: € -5.3 million) and was mainly caused by the waiver of trade receivables against Hoesch Spundwand und Profil GmbH and Salzgitter Bauelemente GmbH. The annual financial statements will be presented to the Supervisory Board for approval at its next meeting and the full version will be published on April 15, 2004.

The outlook for the coming months in the current financial year appears comparatively positive, even though some of the negative external factors which impaired performance last year are still in existence. The price increases announced for flat rolled products and plate as a result of the significant rises in raw material and energy costs were successfully implemented in the first and by now also for the second quarter of 2004. Thanks to the strong order intake, the production facilities are booked up through to the end of the second quarter. In the beams segment, a "scrap surcharge" has been introduced that will enable peaks in the price of the input material scrap to be passed on to consumers. Besides this measure, there are also plans to put through an increase in basic prices. In light of the global shortage of steel, further price rises for all rolled steel products cannot be ruled out in the second half of the year. Planned maintenance work to Blast Furnace B in Salzgitter will lead to a temporary decline in volumes in all three product segments in the middle of the year.

In the Tubes business, too, the recovery is continuing. Demand in the second half of last year had already begun to head back toward normal level and with some significant orders for large-diameter tubes booked at the end of the year, a positive trend in sales prices is now also apparent. This is a welcome development insofar as the weak US Dollar continues to adversely affect the results achieved by companies selling European manufactured products into the global market. It is also necessary to compensate for the mounting pressure on costs resulting from the purchase of input stock and raw materials.

At the Trading Division, the situation is divided: While the domestic stockholding business is experiencing a modest recovery at best, international demand has reached an advanced level. On the other hand, the opportunities to buy in material from external sources to support the trading business are limited due to the worldwide shortage of steel.

Business at the Services Division can be expected to remain consistently positive. With the automotive and construction industries both being in stagnation, the Processing Division companies do not anticipate any notable stimulus in the coming months.

The realization of the profit improvement program with over 200 measures is proceeding as scheduled. The implementation of this year’s main items – the commissioning of Blast Furnace C and Continuous Casting Line 3 – is progressing rapidly.

The smooth migration from existing commercial EDP-systems (SAP R/2) and various other individual sales and production logistics solutions at the steel companies to modern SAP structures may be described as one of the particular success of the new 2004 financial year. Following methodical preparations carried out at some considerable cost from 2003 onwards, these highly complex systems were switched over at the beginning of March 2004 to the new software in a single stage.

"This press release was also issued as ad-hoc press release."

Disclaimer:

Some of the statements made in this document possess the character of forecasts or may be interpreted as such. They are made upon the best of information and belief and by their nature are subject to the proviso that no further deterioration occurs in the economy or in the specific market situation pertaining to the Division companies, but rather that the underlying bases of plans and outlooks prove to be accurate in terms of their scope and timing.