Performance Report

In our last 2004 Annual Report we predicted a triple-digit million pre-tax profit − albeit lower in a year-on-year comparison (actual 2004 figure: € 323 million) − for the Group in 2005. At the same time, however, we made explicit reference to the fact that the Group result could also fluctuate within the triple-digit million range due to the risks and opportunities inherent in the costs, revenue, capacity and currency trends, unforeseeable at the time.

The result of our generally outstanding performance is that we have generated a consolidated profit before tax of € 941 million, which is in the upper range of a triple-digit million figure. We communicated the trend, which became discernible over the course of the year, with adjusted forecast figures, in the respective quarterly reports.

Given the starting point, the positive variance between actual and projected result is considerable. This is primarily attributable to the results of the Steel, Tubes and Trading Divisions being way above target. Instead of cyclical trends, known in the past for their pronounced swings and for the fact that they generally occur with a time lag, 2005 also saw a convergence of this cyclicality which made for a generally healthy market situation for flat carbon steel and plate as well as for tubes.

Owing especially to an exceptionally positive development in the first half of the year, the Steel Division generated a pre-tax profit which was far in excess of the targeted figure. All in all, the increases in the cost of raw materials and energy, which ran contrary to planning, were more than offset by the increase in revenue.

This also applies to the Tubes Division. Bolstered by notable increases in volume, the division achieved a result which was much higher than budget.

Despite a decline in volume, mainly on the domestic market, pre-tax earnings of the Trading Division were impacted by higher-than-planned specific gross earnings, and also clearly exceed the projected result.

Owing to the unfavorable performance of SZAE newly assigned to it, the Services Division did not quite meet the targeted figure although the result was otherwise satisfactory.

Consolidated earnings were considerably impacted by one-off income, such as, for instance, from the sale of the Vallourec shares and changes in the values stated for inventories which were not or, as in the case of the latter, not fully included in the planning.