Subsequent events, opportunities and outlook

Subsequent events

No reportable events occurred.

Global economy to recover only slowly in 2010

Global GDP is expected to grow by only around 3% in 2010. A sustained global economic upturn is not yet in sight. As the numerous government stimulus programs come to an end, the risk of an economic setback remains. On the financial markets, too, there are latent risks of a correction due to the continuing need for writedowns at the banks.

The US economy will grow only moderately in 2010. Initially, private consumption will be unable to resume its role as the main driver of growth. The export-dependent Japanese economy is also not expected to see any major improvement in the coming months.

Most of the major emerging economies are likely to achieve strong growth in 2010. Boosted by monetary and fiscal policies, China will once again significantly expand its gross domestic product. The Indian economy will grow slightly faster than in 2009.

The euro zone is unlikely to experience a self-sustaining recovery in 2010. The German economy will grow only slightly. A temporary economic slowdown is likely in the course of 2010. The end of government stimulus measures such as the eco premium program, rising unemployment and higher inflation will have a negative impact on private consumption. Exports will increase moderately as the global situation gradually stabilizes. We therefore expect only slight growth of around 1.5% in 2010.

We anticipate the following developments on the markets of importance for ThyssenKrupp:

• The prospects on the global steel market remain subdued. In Europe, the NAFTA region and Japan, demand will be higher than in 2009 mainly due to restocking, but there will not yet be any return to the production and demand levels of previous years. Not least due to further capacity expansions worldwide, there is a renewed risk – above all in Europe – of rising imports from third countries. The inventory overhangs accumulated in China in 2009 could significantly dampen demand growth there. In the other emerging countries, steel consumption is expected to increase again slightly. According to the fall forecast of the World Steel Association, global steel demand will expand by 9% in 2010; that corresponds to a crude steel output of around 1.3 billion metric tons. Higher raw material prices will push up the cost of steel production, resulting in steel price increases.
• World demand for stainless flat products is forecast to grow by around 10% this year, bringing global demand back to just above the level of 2008. A positive trend can also be observed on the European market, though overall demand will still fall short of the level of previous years. In the NAFTA region, sales volumes are expected to pick up after a weak 2009. China and the other Asian countries will also profit from rising demand, although China in particular will be unable to maintain the growth pace of recent years.
• The international auto market will recover only slightly from the sharp decline in 2009. In 2010 we anticipate a 6% increase in production to just under 63 million cars and trucks. The USA and Japan are expected to achieve substantial growth rates, though not enough to offset the severe downturn in 2009. In China, now the world's biggest automobile market, the previously very high pace of growth will slow significantly as government impetus programs are scaled back. Production by Western European OEMs will increase only slightly. In Germany, demand for new cars will be weak, especially at the start of the year, now that the eco premium program has ended.
• The situation in the global shipbuilding industry will remain very tight in 2010. The existing overcapacities are depressing freight rates; further cancellations of new-build orders are likely. Given the dramatic fall in orders to date, production by the German shipyards will be substantially lower than in 2009.
• The only slow recovery of the world economy and the associated weak level of capital investment will continue to impact the international machinery sector in 2010. Following the slump last year, there will be only a moderate increase in machinery output in the industrialized countries. Growth in the USA and Germany will be 3% and 2% respectively. By contrast, the Chinese machinery sector will expand more strongly.
• In most industrialized countries there will again be no recovery in the construction sector in 2010. Further declines in construction output are expected in the USA and many Western European countries. Despite government stimulus packages, the German construction sector is unlikely to experience any substantial improvement. There will be moderate growth in most Central and Eastern European countries, while the Chinese and Indian construction sectors will continue to pick up strongly.

Outlook

Our expectations for the current fiscal year remain unchanged from the outlook published in the 2008/2009 Annual Report: With a view to the 2009/2010 fiscal year we regard the currently emerging economic recovery as still fragile.

We anticipate that sales will stabilize in fiscal 2009/2010. Earnings are expected to improve significantly and return to profit, thanks in large part to the cost-cutting programs we have introduced. Adjusted earnings before interest and taxes (EBIT adjusted for nonrecurring items) will probably be in the high three-digit million euro range. Adjusted earnings before taxes (EBT adjusted for nonrecurring items) are expected to be in the low three-digit million euro range. Adjusted EBT will be significantly impacted by startup losses in the Steel Americas business area in the mid three-digit million euro range.

Our expectations for the individual business areas are as follows:

• Steel Europe – Improvement in volumes and capacity utilization, average selling prices below prior-year level
• Steel Americas – Negative EBT contribution in mid three-digit million euro range due to startup losses for the steelmaking and processing facilities in Brazil and the USA
• Stainless Global – Stabilization of volumes with improved base prices
• Materials Services – Stabilization of volumes and selling prices
• Elevator Technology – Continued high earnings contributions thanks to strong order backlog and stable modernization and maintenance business
• Plant Technology – Good revenue and earnings visibility in project business due to order backlog with good earnings quality
• Components Technology – Continued difficult environment for construction machinery components; improvement in automotive components and continued positive earnings contribution from slewing bearings for the wind energy sector
• Marine Systems – Improved earnings quality through initiated consolidation of shipyard sites

In 2010/2011 we expect an improvement in the overall economic environment and further positive effects from our cost-cutting programs. This will have a corresponding influence on sales and earnings.

ThyssenKrupp PLuS successfully continued

We are continuing our Groupwide action program ThyssenKrupp PLuS to stabilize the successes we have achieved and expand on them where possible. The aims of the program are to achieve positive earnings and liquidity effects, lower costs and financing requirements and sustainably improve our performance. In addition to the measures we have already implemented to safeguard earnings, optimize net working capital and limit capital expenditures, we are pursuing new avenues and possibilities to further improve the Group's earnings and liquidity situation.