(42) Notes on Segment Reporting

Primary Segmentation

The segmentation of the Salzgitter Group into four (2004: five) corporate divisions accords with the Group's internal controlling and reporting functions. The previous year's figures were adjusted to the changed segment classification.

In the segment report, the business activities of the Salzgitter Group are assigned to the Steel, Tubes, Trading and Services Divisions in accordance with the Group structure. The companies formerly in the Processing Division were assigned to the Steel or the Services Divisions. Salzgitter AG as the holding company is included under the heading Other/Consolidation.

The operating steel companies Salzgitter Flachstahl GmbH, Peiner Träger GmbH and Ilsenburger Grobblech GmbH belong to the Steel Division via the intermediate holding company Salzgitter Stahl GmbH. HSP Hoesch Spundwand und Profil GmbH, Salzgitter Bauelemente GmbH and Salzgitter Europlatinen GmbH were assigned to this division for the first time. ThyssenKrupp GfT Bautechnik GmbH (previously in the Processing Division), which is valued at equity, is now assigned to this division.

The Tubes Division includes the fully consolidated units Salzgitter Mannesmann GmbH, Mannesmannröhren-Werke GmbH, Mannesmannröhren Mülheim GmbH, MHP Mannesmann Präzisrohr GmbH, Mannesmann Line Pipe GmbH, Mannesmann Robur B.V., Röhrenwerk Gebr. Fuchs GmbH and the DMV Group. Salzgitter Großrohre GmbH (2004: Steel Division) is reported in this division for the first time.

In addition, the Group includes the joint venture Europipe GmbH (including the subsidiaries Europipe France S.A., EB Pipe Coating Corporation, Berg Steel Pipe Corporation, Eupec PipeCoatings GmbH and Eupec PipeCoatings France S.A.) and Mannesmannröhren 1. Verwaltungsgesellschaft mbH, which are also included proportionately in the consolidated financial statements. Vallourec S.A. and Hüttenwerk Krupp Mannesmann GmbH are likewise assigned to this business segment as associated companies in accordance with the equity method. In the previous year, the shares in Vallourec & Mannesmann Tubes S.A., Boulogne-Billancourt, and Vallourec & Mannesmann Tubes Corporation, Houston, which had been sold at the end of June 2005 were still included in this segment.

The Trading Division consists of four domestic and five foreign companies in the Salzgitter Mannesmann Handel Group, Universal Eisen und Stahl GmbH and Hövelmann & Lueg GmbH; Robert S.A.S., as a proportionately integrated joint venture, is assigned to the Trading Division.

The companies Le Feuillard S.A.S. and Tolcolor S.A.S., which belong to the Robert Group, are assigned to the Trading Division as associated companies in accordance with the equity method. This segment also includes the non-consolidated companies in the Salzgitter Mannesmann Handel Group and the Universal Handel Group.

The Services Division includes DEUMU Deutsche Erz- und Metall-Union GmbH, SZST Salzgitter Service und Technik GmbH, SIT Salzgitter Information und Telekommunikation GmbH, the TELCAT Group, GESIS Gesellschaft für Informationssysteme mbH, Hansaport Hafenbetriebsgesellschaft mbH, “Glückauf” Wohnungsgesellschaft mbH, Verkehrsbetriebe Peine-Salzgitter GmbH, Salzgitter Mannesmann Forschung GmbH and also the net income from shareholdings assigned to this segment. From this reporting year onwards, Salzgitter Automotive Engineering Beteiligungsgesellschaft mbH, Salzgitter Automotive Engineering GmbH & Co. KG and Salzgitter Automotive Engineering Immobilien GmbH & Co. KG will be reported in this division, having been assigned to the Processing Division in the previous year. This segment also includes the non-consolidated companies Salzgitter Magnesium-Technologie GmbH and Oswald Hydroforming GmbH & Co. KG (previously in the Processing Division).

The companies in this division are engaged primarily in providing services to the Group. It is intended, however, that their expertise and existing infrastructure should be made increasingly available to companies outside of the Group. The services offered include data processing, telecommunications services, scrap metal dealing, the handling and storage of bulk cargo, transport and other services. The newly allocated companies Salzgitter Magnesium-Technologie GmbH, Oswald Hydroforming GmbH & Co. KG as well as Salzgitter Automotive Engineering Beteiligungsgesellschaft (including subsidiaries) mainly produce or provide services and products for the automotive industry.

Sales in the various segments are additionally subdivided according to the customers' principal place of business. Inter-segment sales are basically conducted on standard market terms such as also apply to transactions with third parties.

Depreciation and amortization refer solely to the fixed assets of the respective segments.

Segmental operating assets and liabilities comprise the assets and borrowed funds required for operational purposes − excluding both interest-bearing debt and income tax receivables and liabilities.

The investments relate to additions to tangible fixed assets and intangible assets, excluding goodwill resulting from the acquisition of shares.

Secondary Segmentation

Secondary segmentation subdivides the commercial activity by region. External sales classified by performance recipient subdivide Group sales to non-Group entities according to the customers' principal place of business. Group external sales are also subdivided according to the principal place of business of the consolidated supplier company.

The transitions of the segmental assets to Group assets and the total segmental debts to Group debts are shown in the following overview:

in T€	31/12/2005	31/12/2004
Segment operating assets	5,238,973	4,355,574
Goodwill	1,224	–131,338
Income tax refund claims	82,373	8,242
Deferred income tax claims	88,712	996
Deferred expenses	2,253	2,131
Balance sheet total	5,413,535	4,235,605
Segment operating liabilities	3,151,662	3,002,343
Tax liabilitiesn	207,455	101,381
Financial lease liabilities	42,149	9,889
Group equity	2,011,628	1,120,637
Deferred income	641	1,355
Balance sheet total	5,413,535	4,235,605