Subsequent events, opportunities and outlook

Subsequent events between the balance sheet date (June 30, 2007) and the date of authorization for issue (August 06, 2007) are presented in Note 13 to the interim financial statements.

Global growth remains very robust. We continue to expect world GDP to expand by 4.9% in 2007.

The economy in the euro zone and Germany is performing better than anticipated a few months ago, driven in particular by increased capital spending. In Germany, private consumption is also expected to recover in the further course of the year and will contribute to economic growth. Following a weak start to the year, the US economy will pick up slightly. Economic expansion will remain strong in most of the emerging markets.

The main risks to global economic growth are from increasing raw material and oil prices as well as slower-than-expected growth in the USA.

We expect the following developments and opportunities for ThyssenKrupp on the major markets:

  • Given the positive overall economic picture, the global steel market is expected to expand further this year. Crude steel output is forecast to increase by at least 6% worldwide. The German steel industry should clearly exceed the 48 million ton mark. Demand for steel will increase disproportionately in China and India. Following oversupply last year, a slight decline in demand is expected in the NAFTA region. The EU market will be more settled in the remaining months of 2007. Following the strong increase in market supply in the first half, demand is expected to weaken over the rest of the year for inventory-cycle and seasonal reasons. There are no signs of any short-term easing of the situation regarding third-country imports. With production by steel users continuing to grow strongly, steel consumption will increase further.
  • In the coming months, the stainless market will be strongly influenced by the development of the nickel price. As the price of nickel declines, distributors have recently been making efforts to run down their stocks quickly, and these efforts will continue in the short term. In the markets which apply alloy surcharges, such as Europe and the USA, the defined calculation methods mean that there will be a two to three month time lag before the lower nickel price impacts stainless prices. As a result of this and continuing high stainless imports to Europe, replenishment purchases by distributors are expected to remain at a low level in the next few months and will necessitate further production adjustments. The underlying industrial demand for stainless steel flat products is stable. The market for high-performance nickel alloy and titanium materials will remain positive.
  • The global automotive industry remains on an upward trend. World auto production is expected to increase by around 2% to over 71 million vehicles in 2007. High growth rates are once again expected in China. In the USA, vehicle production will be lower. By contrast, in Western Europe volumes are expected to rise slightly. Despite lower domestic demand, German auto production will expand as a result of booming exports and the relocation of production activities back to Germany.
  • With the economy still robust and capital expenditure high, the situation in the global mechanical engineering sector will remain favorable. After China, the highest growth rates are forecast for Germany. Thanks to very strong orders, German mechanical engineering output is expected to grow by 9% in 2007. Germany's large-scale plant construction sector will also continue to perform positively.
  • In the construction sector, the countries of Asia and Central and Eastern Europe will continue to report the highest production growth. In the USA, construction output will be down this year due to the weakness of the real estate sector. By contrast, construction activity in Germany remains on an upward curve; however, growth will be lower than last year due to the subdued demand for housing and public-sector construction.

We expect the overall positive performance to continue in the further course of the year. For fiscal year 2006/2007 we anticipate an increase in sales to over €50 billion. Based on our better-than-expected earnings performance in the first three quarters of fiscal 2006/2007, we currently forecast full-year earnings before taxes and major nonrecurring items of around €3.6 billion, including nonrecurring items €3.2 billion.

Our mid-term and longer-term targets remain unchanged. By 2010 the aim is to achieve sustainable earnings before taxes and major nonrecurring items of €4 billion on sales of around €60 billion. In the longer term, particularly after the completion of our major investment projects in North America, we expect sales in the region of €65 billion and earnings before taxes and major nonrecurring items of €4.5 to 5.0 billion.