Financial position

Analysis of cash flow statement

The amounts taken into account in the cash flow statement correspond to the balance sheet item "Cash and cash equivalents".

There was a cash inflow of €0.5 billion from operating activities in the reporting quarter compared with over €1.9 billion in the prior-year quarter. The roughly €1.5 billion decrease in operating cash flows was mainly due to the rise in working capital as a result of business expansion.

Cash outflow from investing activities increased by €0.4 billion to €1.5 billion, primarily due to an increase of €0.8 billion to €1.9 billion in capital expenditure on property, plant and equipment, mainly for the construction of the steel mill in Brazil. Proceeds from disposals of financial assets and property, plant and equipment increased by €0.3 billion compared with the prior-year period.

As a result of these developments, free cash flow, i.e. the sum of operating cash flows and cash flows from investing activities, decreased by €1.8 billion to €(1.0) billion.

Cash outflow from financing activities decreased by €0.3 billion to €0.7 billion. The higher cash outflow in the prior-year quarter was due to the repayment of a bond in the amount of €0.5 billion, partly offset by the proceeds from the sale of ThyssenKrupp AG treasury shares to the Alfried Krupp von Bohlen und Halbach Foundation in November 2005 in the amount of €0.3 billion.

Analysis of balance sheet structure

The following balance sheet analysis includes assets and liabilities held for sale which are reported separately in the Group's consolidated balance sheet.

Compared with September 30, 2006 the balance sheet total increased by €1,219 million to €36,949 million.

The increase in property, plant and equipment is mainly due to the progress in the construction of the steel mill in Brazil.

The €1,710 million increase in inventories to €9,120 million, mainly in the Stainless and Services segments, was primarily due to higher raw material prices, especially for nickel, and increased inventory levels caused by sales expansion. The significant decline in the nickel price since the beginning of June is only partly reflected in the inventory valuation.

The business expansion resulted in a significant increase in trade accounts receivable and payable in almost all areas. This effect was cushioned by the disposal of the North American body and chassis business. This disposal also led to a reduction in accrued pension and similar obligations.

The increase in sales tax liabilities caused by the high sales led to a rise in current other liabilities.

The roughly €480 million antitrust fine imposed by the EU Commission on ThyssenKrupp Elevator, included in this balance sheet item at March 31, 2007, was settled in the 3rd quarter.

The effects on operating cash flows of the above-mentioned increase in inventories and in trade accounts receivable were more than offset in particular by the Group's net income before depreciation, amortization and deferred taxes, resulting in a net cash inflow from operating activities. Investment in property, plant and equipment led to a cash outflow for capital expenditure. Overall this led to a decrease in cash and cash equivalents by €1,765 million to €2,682 million.

Total equity increased by €928 million to €9,855 million, mainly due to the net income in the first nine months of fiscal 2006/2007 and, running counter to this, the payment of the ThyssenKrupp AG dividend in the amount of €489 million.