General Statement on the Economic Situation

The performance of the Salzgitter Group was exceptional in the financial year 2005. This assessment is valid not only in a year-on-year comparison but also in the light of the forecast for the year under review and actual results.

In 2005, the sales of the Salzgitter Group totaled € 7.152 billion, up 20% (€ 1.210 billion) on the previous year's figure (€ 5.942 billion). All divisions, with the exception of the Services Division which recorded sales virtually unchanged, profited from the high price level of rolled steel and steel tube products induced by a drastic increase in the cost of raw materials and energy.

The Tubes Division achieved the highest relative growth in external sales which posted € 391 million (+38%), followed by Trading with the highest absolute increase of € 602 million (+23%) and Steel with € 231 million (+12%).

The Salzgitter Group closed the financial year 2005, as mentioned above, with a pre-tax profit of € 941 million. Accordingly, it almost tripled (+€ 618 million, +191%) the already outstanding result of 2004 (€ 323 million).

The divisions' contributions to this performance were as follows: Steel +€ 257 million, Tubes +€ 323 million (including € 163 million from the sale of shares of VLR), Trading −€ 11 million, Services −€ 4 million. Other items and consolidation effects: +€ 53 million.

At this point it should be noted that, on balance, the consolidated result in 2004 was negatively impacted by extraordinary expenses (€ 63 million) whereas the consolidated result in 2005 was boosted by extraordinary income (€ 142 million).

The latter figure comprises income from the sale of shares in VLR (€ 163 million) and the abolition of the Lifo method (€ 90 million), as well as € 24 million in expenses arising from the sale of shares in V&M, the relining of Blast Furnace A (€ 57 million) and precautionary measures (€ 30 million).

In addition to the favorable market conditions, the groupwide Profitability Improvement Program also enhanced profitability.