First-half of 2001: Salzgitter Group achieves solid profits

The Salzgitter Group has concluded the first half of the 2002 business year with solid profits. Once again, thanks to its extensive product portfolio, the steel and tubes corporation has been able to benefit from the various business cycles of the individual markets in which it is active. To date, however, the hesitant overall economic recovery has prevented a marked improvement of performance, especially by comparison with the excellent figures posted in the previous year.

During the first half of 2002, the Group posted consolidated external sales of € 2.4 billion. The sales growth of around 4 % (first half-year 2001: € 2.3 billion) is attributable to the extension of the Group consolidated entity over the past year. At € 50 million, profit before tax is not matching the level of the first six months of the record 2001 business year (€ 84 million), but has trended upwards in the second quarter of the year. Group income contains non-operating income elements of around € 7 million, the balance of which results from income from the sale of holdings, as well as the formation and liquidation of provisions. Recorded at € 49 million, profit after tax for the reporting period is 31 % lower than the previous year (past year: € 71 million). During the course of the first half-year an improvement of ROCE, representing the most important financial indicator of the financial success of the Group, was recorded. At 9.1%, however, the figure was still below the target value of 12 %. Contributing € 748 million to the Group's external sales, the Steel Division was only 3 % below performance recorded during the same period last year. Total sales of € 986 million were on par with last year's level and reflect the increased sales of steel products by the Group's own distribution channels. Price rises were asserted in the second quarter. Due to the effects of longer-term price agreements and throughput times involved, their effects on income will be recorded with some delay. During the first half of 2002 the Steel Division recorded losses of € 26 million (first half-year 2001: € 41 million). This figure includes non-operating expenditures of € 7.5 million as provisioning for currency risks, among others.

The Tubes Division reported business activities on satisfactory levels for the majority of products. Consolidated sales accounted to € 583 million. The marked increase by 19 % over the previous year is attributable to the addition of the stainless steel tubing manufacturer DMV Stainless and the pipe coatings company EUPEC to the consolidated entity. The Division's profit before tax of € 61 million exceeded the previous year's respectable performance of € 36 million by 67 %. Once again, the high earnings business with seamless tubes made a major contribution. The Division figures presented contain non-operating income of € 10.6 million as a balance from structure improving measures and positive follow-up effects from sales of holdings of the year 2000.The Trading Division also reported a slight increase in sales figures to € 865 million (previous year: € 842 million) due to the extension of the consolidated entity. At € 7 million, income had improved decidedly over the previous year (€ 4 million) and this was the result of restructuring international trading, among other factors.

The Services Division posted sales of € 118 million and profits before tax of € 7 million (first half-year 2001: € 8 million). During the first half of 2002 external sales of the Processing Division came in at € 53 million, marking a 9 % decline over the same period last year. Income before tax amounted to € -4.9 million. The desolate situation of the German construction sector prevented more positive developments at Hoesch Spundwand und Profil GmbH (HSP). At the end of 2002 a number of recently acquired corporations and companies that are emerging from their start-up phase will be added to the consolidated entity.

In the next months the course of income developments at the Salzgitter Group will depend on the extent of further economic recovery. In this respect, the current picture remains disparate: while the sentiment on capital markets in particular remains unstable, economic early indicators issued by a number of leading institutions and concrete figures from industrial sources indicate a gradual shift to stronger growth. The steel industry has been able to increase prices while taking in an increased order volume. Our tube business has experienced a slight increase in demand in several areas during the second quarter. Especially in the seamless tube area, a satisfactory course of business is also anticipated for the second half of the year.

In spite of the uncertain overall situation Salzgitter AG does not see any reason to correct the published forecast for Group profit before tax of around € 90 million and after-tax profit of € 75 million as well as earnings per share of € 1.20. Naturally, this statement applies under the precondition that there is no renewed economic downswing and/or depreciation of the specific market conditions to which Group division companies are subject, and that the foundations of planning and forecasting prove applicable in terms of their volume and time horizon.