Sales and profit remain on track for new record highs at the end of the first nine months of 2007

9 Months 2007

During the third quarter of 2007, demand for steel and tubes products remained lively, not only in Germany, but also throughout the rest of Europe and in most overseas markets. Against this extremely positive economic background, the Salzgitter Group set new record highs in its sales and operating profit for a nine-month period.

All divisions, especially Steel and Trading, contributed to lifting consolidated external sales by € 1.29 billion to € 7.50 billion (nine months 2006: € 6.21 billion). Another contributing factor was the first-time consolidation of Klöckner-Werke and Vallourec Précision Etirage (VPE), which were acquired at the start of the third quarter. Earnings before tax of € 980.4 million, generated solely through operations, outperformed the previous year’s figure of € 661.5 million by 48% (EBT 9 months 2006 including proceeds of € 907 million from the sale of the Vallourec participation: € 1.57 billion). In the period under review, profit after tax came to € 594.9 million (9 months 2006: € 1.35 billion); earnings per share amounted to € 10.38 (9 months 2006: € 23.66). Return on capital employed (ROCE) posted 29.0 % (9 months 2006: 54.9%).

In the first three quarters of 2007, the combined shipments of rolled steel and processed products of the Steel Division exceeded the already outstanding level of the previous year’s period. The Division’s total sales marked a new record high at € 3.02 billion (9 months 2006: € 2.47 billion), as the average product selling prices were considerably higher year on year. Owing to the outstanding profit performance of all its companies, the pre-tax profit of the Steel Division, which came to € 569.5 million, surpassed the previous year’s figure by 89% (9 months 2006: € 301.3 million).

Total sales of the Tubes Division rose by 17% to € 1.87 billion (9 months 2006: € 1.60 billion) on the back of firmer prices and the first-time consolidation of VPE. The gratifying trend of selling prices resulted in a vigorous rise in profit in all product segments, especially large-diameter and stainless steel tubes. The pre-tax profit of the consolidated tubes companies almost doubled to € 210.2 million (comparable figure for 9 months 2006: € 111.3 million; the amount of € 184.3 million disclosed on September 30, 2006, still comprised a profit contribution of € 73.0 million from the Vallourec participation which was divested in the third quarter of 2006).

Robust domestic business and expanded trading activities lifted the total sales of the Trading Division by 16% to € 3.76 billion as against the previous year’s figure (9 months 2006: € 3.25 billion). Buoyed by the excellent situation of steel stockholding trade, above all in beams and plate, as well as the international project business, pre-tax profit stood at € 176.5 million, thereby considerably exceeding the record profit of the year-earlier period (9 months 2006: € 149.2 million).

Strong demand for raw materials and services, within the Salzgitter Group and also by external customers, boosted the total sales of the Services Division to € 900 million in the first three quarters of 2007 (9 months 2006: € 771 million). DEUMU Deutsche Erz- und Metallunion GmbH, a company trading in raw materials, was the main driver of this pleasing trend. The pre-tax result of the Division came to € 47.6 million per September 30, 2007 (9 months 2006: € 16.6 million). The sizeable hike was mainly attributable to a waiver of receivables worth € 25 million within the Group by Salzgitter Mannesmann GmbH in favor of Salzgitter Automotive Engineering GmbH & Co. KG.

The Group’s new Technology Division, which consists primarily of the majority holding in the Klöckner-Werke Group, recorded total sales of € 278 million in the third quarter of 2007 owing to the healthy order book. These sales were mainly generated by the filling and packaging technology segment. The pre-tax result of € -9.9 million disclosed in the consolidated financial statements of the Salzgitter Group comprises first-time consolidation effects of € -12.5 million due to purchase price allocation prescribed under IFRS reporting standards.

In the period under review, total sales of the Others segment generated by business in semi-finished goods with Group companies and external parties grew to € 325 million owing to higher shipments and sales prices (9 months 2006: € 225 million). The pre-tax result, which came to € -13.4 million, was charged with the amount of € 25 million owing to the aforementioned waiver of receivables. (The previous year’s result of € 917.0 million comprised € 907 million in proceeds from the sale of Vallourec SA in the third quarter of 2006.) The greater use of sales channels within the Group resulted in a notable increase of consolidated inter-group sales, which rose by € 554 million to € 2.66 billion (9 months 2006: € 2.10 billion).

The general environment in which the Salzgitter Group operates can currently be described as very satisfactory overall. For this reason, business as a whole should generally hold the level achieved. The prerequisite is, however, that economic growth in Germany and Europe remains stable on a sustained basis. New turmoil in the international financial markets or a steady appreciation of the euro might well put a damper on the economy.

In the Steel Division, European manufacturers’ restraint on production should have a positive impact in normalizing the situation of overstocked inventories of flat steel in the coming months. A necessary precondition is, however, that the situation concerning imports eases. The beams and plate business is likely to continue to develop well in future. The healthy demand for rolled steel and the rising price of raw materials should ensure that selling prices remain stable for the most part. Higher prices are also feasible for some products.

The favorable business climate for the Tubes Division is set to persist. High capacity utilization of the mills has been guaranteed by the level of orders up until the end of the year and, in the case of large-diameter tubes, way into 2008 – and, taking account of the awarded order for the Nord Stream pipeline, even beyond.

The advantageous situation in the Trading Division is basically likely to continue given the strong demand for steel in Germany and Europe and a booming international project business. Gross earnings will, however, steadily normalize owing to the increase in replacement costs. Moreover, the winter period might have a braking effect on the steel stockholding trade. Other risks remain inherent in the US economy weakening further, as well as the persistently high volume of steel imports into Europe and the possibility of political tensions escalating, especially in the Middle East.

The condition of the Services Division is set to remain robust, boosted by the stable demand of internal and external customers.

In spite of competitive pressure and a slight slowing of international economic activity, all operating companies of our new Technology Division anticipate that business will develop well in the remaining weeks of the year. For detailed information, please see the Interim Report of Klöckner-Werke AG of November 8, 2007.

All in all, based on current information and in view of expectations of the development of the procurement and sales markets, as well as of the general conditions, and taking account of the effects of the Profit Improvement Program, we expect the Salzgitter Group to generate an operating EBT of around € 1.2 billion in the current year. Express reference is made to the fact that opportunities and risks arising from currently unforeseeable trends in sales prices, input materials and capacity level developments, as well as changes in the currency parity, may affect performance in the course of the remaining financial year 2007. More information can be found in the new Interim Report.

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 unforeseeable 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 as expected in terms of their scope and timing. The company undertakes no obligation to update any forward-looking statements. This document is a translation of the original German-language press release. In case of ambiguity between this document and the German-language press release, the information provided in the latter shall prevail.