Group Structure and Operations

The Salzgitter Group comprises more than 200 subsidiaries and associated companies organized into five divisions and combined under Salzgitter AG as the holding company. With an annual crude steel capacity of around 7 million tons, external sales of around € 8 billion and a workforce of some 23,500 employees in 2009, the Salzgitter Group ranks among Europe’s top steel technology groups. Salzgitter AG is a member of the DAX index of Deutsche Börse AG.

Our core competencies reside in the production of rolled steel and tubes products, their processing, trading in these products and the construction of special machinery and plant engineering.

All important companies of the Salzgitter Group are combined under Salzgitter Mannesmann GmbH (SMG) as an interim holding. This structure, among other things, enables the centralized operation of the Group’s financial management. As the management holding, Salzgitter AG manages SMG as well as all associated companies. The Executive Board of Salzgitter AG is composed of the same persons as the management board of SMG. The management and control of the Group is therefore carried out by the executive bodies responsible for Salzgitter AG (Executive Board, Supervisory Board). The specific responsibilities associated with the entrepreneurial management of the divisions have been combined under the respective divisions of Steel, Trading, Tubes, Services and Technology within the holding.

The structure of the Salzgitter Group is shown in the following chart.

Our divisions are composed of independently operating companies which enjoy a high degree of decision-making freedom and are thus able to engage in business activities regarding markets, locations and products under their own responsibility.

With their high-quality branded and special steels, the companies of the Steel Division constitute the core competence of our Group. They develop and produce a broad range of steel products (flat steel and sections, plate, sheet piling, corrugated sheets and tailored blanks) for constantly evolving new areas. We focus our product program on the segment of high-quality steel grades for sophisticated applications. The German automobile industry is, for instance, a major customer sector whose service and quality requirements are particularly demanding. Thanks to intensive research and development and strong customer orientation, we are set to continue developing market potential for creative and innovative products on an ongoing basis.

Given normal market conditions, more than five million tons of crude steel are melted in the integrated mill of Salzgitter and in the Peine electric steel plant. Due to their highly sophisticated and complex plant and process technology, the three large rolled steel mills of Salzgitter, Peine and Ilsenburg rank among the most modern of their type. The division works in close cooperation with our trading organization which is not only our most important sales channel, but also operates in the sourcing of semifinished products on a case-by-case basis.

The Trading Division comprises a tight European sales network, as well as trading companies and agencies worldwide. This combination underpins the successful market presence of the Salzgitter Group with blanket coverage supporting the optimal marketing of its products and services. In this way, we ensure that we reach not only major customers but also smaller and medium-sized end customers.

The following companies, operating under the management company Salzgitter Mannesmann Handel GmbH (SMHD), have been assigned to the Trading Division: Salzgitter Mannesmann Handel Group, the plate specialist Universal Eisen und Stahl GmbH (UES), as well as the steel service center Hövelmann & Lueg GmbH (HLG).

The SMHD Group operates three companies in Germany from thirteen distribution centers, eleven of which are warehouses. Seven companies engage in steel trading in European countries, with an additional four active agencies. International trading is mainly handled by nine independent companies and five representative offices located abroad.

The plate specialist UES conducts its trading and processing business mainly in Germany, but also has representative offices in other European countries and in the USA. With its customized flat steel products, the steel service center HLG rounds up the product and service range of the Trading Division.

The companies and holdings of the Tubes Division, headed by Mannesmannröhren-Werke GmbH (MRW), offer their customers a wide range of steel tubes. The scope of products comprises in particular longitudinally and spiral-welded large-diameter tubes, HFI (high-frequency inductive) welded line pipes, seamless and welded precision tubes, as well as seamless stainless steel tubes. With its high-quality products of international standing, these companies generally occupy leading positions in their markets and are global leaders in a number of segments.

The Tubes Division has secured its own supply of input materials in the form of a 30-percent stake held in Hüttenwerke Krupp Mannesmann GmbH (HKM), through its own cutting-edge plate mill and through the production of semi-finished products for the manufacturing of seamless tubes.

This division also makes intensive use of our trading organization, both for the sale of its products and the sourcing of semi-finished products.

The activities of the Service Division are primarily focused on requirements within the Group. Beyond that, the services of the companies operating under this division are also offered to external customers to generate additional contributions to the profit of the Group. This serves to ensure that the performance and the know-how of the companies are constantly measured against the requirements of the market. On this basis our Group companies conceive and realize attractive service offerings within a wide spectrum, ranging from the supply of raw materials, logistics and plant technology through to developing materials and complete IT solutions. This is supplemented by services and products for the automotive industry.

The product and services range of the Technology Division comprises plant and machinery for the filling and packaging of beverages in particular. The activities of this division are concentrated in Dortmund-based KHS AG. With its production facilities and more than 60 service and sales outlets, KHS is present on all continents. In 2008, the product mix was supplemented by the acquisition of the former SIG Beverages Group with its competence in PET technology. The filling and packaging business makes up around 90 % of the division’s sales.

Other companies belonging to the Klöckner Group produce special machinery for companies in the plastic processing and shoe manufacturing industries.

Through its products and services portfolio, Salzgitter AG is present in all the relevant markets:

The structure of the Salzgitter Group has proven its competitive ability over the economic cycle. Along with the operational flexibility of each individual division, which is geared to the market and our customers, this structure, with its decentralized competences and responsibilities, serves to promote the development of the respective companies. Moreover, the management structure is flexible with regard to requirements for change and adjustment and compatible with the growth strategy, as new tiers in the value chain or divisions can be integrated into this structure relatively smoothly.

Apart from the general legal requirements placed on a listed company, the Salzgitter Group is not subject to legal factors depending on conditions specific to the Group. The business of the individual division is also not affected by any particular or special legal provisions.

The material participations are listed in the Notes to the Financial Statements on page 174.