SALZGITTER AG – Key figures of the 2002 business year

Profits in excess of € 70 million in spite of difficult markets

Salzgitter AG has concluded the 2002 business year with a result that can be regarded as generally satisfactory considering the persisting difficult situation of domestic and foreign markets.

With the fourth quarter weighing in slightly above expectations, the Salzgitter Group, based in Lower Saxony, Germany, achieved consolidated external sales of € 4.7 billion and pre-tax profit of € 72.5 million (EBT). While these figures do not mark a continuation of last year's record performance (€ 160.3 million EBT), they come very close to reflecting the average annual results of the past ten business years of € 74 million – in spite of the present difficult market conditions. After-tax profit came in at € 65.9 million (previous year: € 144.3 million).

Sales growth of 3 % over the 2001 business year (Group sales of € 4.6 billion) is due to an extended scope of consolidation. Return on capital employed (ROCE) was recorded at 7.3 %.

Progressing from a highly unsatisfactory situation in the first half of 2002 with the lowest market prices for flat steel since 20 years, the performance of the Steel Division ameliorated over the following months. As the profits generated in the second half of the year could not offset the losses incurred in the first six months of the business year, the overall pre-tax result for 2002 came in at € - 23.5 million (previous year: € + 30.1 million). Total sales of € 1.9 billion, as well as the Steel Division's contribution of € 1.4 billion to the Group's external sales were on par with last year's level.

In spite of the decided decline in demand for large-diameter pipes and seamless oil field tubes, the Tubes Division delivered an excellent result once again with pre-tax profits of € 76.8 million (previous year: € 101.9 million). Due to changes of the scope of consolidation, consolidated external sales rose by € 136 million to € 1.1 billion.

In 2002 the domestic business and in part the international business activities of the Trading Division experienced relatively weak demand. External sales dipped from € 1.9 billion last year to € 1.7 billion in the year under report. In spite of this, the Division generated pre-tax profits of € 8.2 million (previous year: € 18.5 million) – primarily thanks to the successful streamlining of international trading.

The Services Division posted external sales of € 232 million, representing a 7 % increase over the past year. Pre-tax profits came in at € 8.3 million (previous year: € 12.8 million).

The Processing Division reported an increase of external sales to € 229 million (previous year: € 118 million). This sales growth is attributable to the first-time addition of the companies Salzgitter Europlatinen GmbH, Salzgitter Automotive Engineering GmbH & Co. KG and Salzgitter Bauelemente GmbH to the consolidated group. The pre-tax result of € 8.0 million in the 2002 business year is not comparable with the previous year's losses of € 2.3 million. This is due to the fact that the 2002 annual financial statements include expenditures in excess of € 20 million for structural measures at Hoesch Spundwand and Profil GmbH, as well as launch costs for two start-up companies (Salzgitter Bauelemente GmbH und Salzgitter Antriebstechnik GmbH & Co. KG), that are offset, however, by profits in a similar range resulting from reduced interest in the US steel company Steel Dynamics Inc. In advancing the realignment of the Division the interest in Oswald Hydroforming GmbH & Co. KG, a profitable and innovative tube processing company, was increased to 100% at the beginning of 2003. The year-end financial statements will be submitted to the Supervisory Board for approval at the next meeting and the complete statements will be issued on April 15, 2003.

Given the worldwide mood of uncertainty fueled by the Middle East crisis and the situation of the markets in most European countries, it is rather difficult to venture any forecasts concerning the course of business in the first six months of 2003.

Assuming that the Iraq crisis is peacefully resolved in the next months or by a campaign of limited duration without destabilizing effects for the region, the Salzgitter Group expects to post a positive pre-tax result in the first half year of 2003.

Thanks to a comparably satisfactory revenue and demand situation for flat steel, the Steel Division is assuming an additional stabilization of results over the coming months, although the weak construction sector and high scrap prices for beams and other construction industry products are weighing down the earnings position. A substantial upswing in demand and employment in the energy industry dependent areas of the Tubes Division should set in after the Iraq crisis is brought to an end. The business developments of other tube and pipe products are likely to run a steadier, and thereby satisfactory course. No major fluctuations are anticipated in the remaining Group Divisions. The realization of the profitability improvement program implemented throughout the Group is taking high priority. In addition, targeted initiatives are being undertaken to advance the Group's leading technology position. The latter are reflected by the recent agreement inked with the South Korean company POSCO on the processing of steel for the automotive industry.

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.