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GENERAL ECONOMIC CONDITIONS

The world economy remained on growth track in 2006. According to current estimates, world GDP increased by 5.2%, compared with 4.9% a year earlier. Global economic growth was therefore slightly higher than we expected a year ago. The euro–US dollar exchange rate remained largely stable. By contrast, energy and raw material prices again rose sharply.

Strong economic growth in newly industrialized countries

Growth in 2006 was once again focused on the rapidly developing countries of Asia, Latin America, and Central and Eastern Europe. According to estimates, the Chinese economy grew by 10.6%, driven by high exports and a strong rise in investment. The other emerging economies of Southeast Asia and the countries of Latin America also achieved strong growth rates. The economic upswing in the new EU member states and Russia likewise continued unabated.

The general economic conditions also remained favorable in the developed industrial nations. In Japan, the moderate upward trend continued thanks to an increase in domestic demand. By contrast, the US economy slowed slightly over the course of the year. Consumer spending was hit by higher interest rates, rising gasoline prices and signs of weakening in the property sector.

Gross domestic product 2006* Real change versus previous year in %

* Estimate

In the euro zone, the economy recovered noticeably, with growth of 2.5% forecast for the full year. The German economy also expanded by just over 2% as domestic demand picked up. The strongest growth impetus came from capital investment, while the improvement in private consumption was less pronounced.

ECONOMIC CONDITIONS IN THE SECTORS

Economic activity picked up globally in all important customer sectors. This is true both of demand for carbon and stainless steel, which is at a high level, and for the auto, mechanical engineering and construction sectors. However, the scale of the upswing differed from region to region; once again the Asian countries accounted for a disproportionate share of growth.

Strong demand for carbon and stainless steel

The international steel markets were characterized by expanding volumes and rising prices for most products. According to estimates, world crude steel output was over 1.23 billion metric tons in 2006. A significant proportion of this 8% increase was attributable to China, where production grew by 18% to 415 million tons. As growth in domestic demand failed to keep pace, China for the first time became a net exporter of steel. Production growth was also extremely strong in India. In the European Union, crude steel output was up by around 5% in 2006. Above all the Eastern European countries, which in the previous year had made significant cutbacks, once again reported higher output. Initial estimates put German crude steel production at 46.5 million tons, an increase of 4%. Most mills were operating at full capacity.

In Western Europe, the cyclical increase in steel consumption and accompanying build-up of stocks resulted in a strong rise in demand for carbon steel flat products. Western European producers recorded significantly higher sales volumes through to the summer, and there was also a substantial increase in imports from non-EU countries. Despite this, with raw material prices rising it was possible to gradually increase prices for quarterly contracts and spot transactions as demand outstripped supply in many cases.

The trend on the North American steel market was similar to that in Europe, although here the steel cycle appeared to peak in early fall. This was shown by slower demand growth, an increase in supply and a slight softening of prices, although these were also the highest in the world. In Asia, prices started to weaken significantly around summertime due to the growing supply overhang. More and more surplus production was exported. Supplies from China in particular – mainly to North America and Europe – increased significantly both compared with the prior year and in the course of 2006.

The market for stainless steel flat products developed positively. Following a weak prior year, global demand picked up strongly. According to current forecasts, demand for stainless flat products grew by almost 10% in 2006 to 14.7 million metric tons worldwide. In addition to the favorable economy, this was also due to distributors and end users restocking inventories which had been severely depleted in the previous year. At the same time, however, prices for some of the raw materials used to make stainless steel increased drastically. Nickel prices in particular reached new record highs.

In Europe, the market for stainless steel flat products recovered noticeably following a decline the year before. Alongside the rise in demand, this was due to both temporary and permanent production cutbacks. The European producers recorded substantial improvements in order intake and were able to increase base prices on several occasions. All European stainless producers were operating at full capacity. There were temporary bottlenecks in supplies to customers, and delivery times increased steadily. Higher prices and supply shortages also resulted in a significant increase in imports, which had declined the year before. In North America, there was also a surge in demand for stainless steel flat products which allowed base prices to be raised on several occasions. The situation in Asia and China remained tight. High capacity overhangs and weak demand impacted prices.

The market for nickel alloys benefited from positive developments in the plant construction, oil, gas and aerospace sectors. According to current forecasts, global market volume in 2006 showed a further slight improvement from its high prior-year level. The strong demand and improving prices for titanium mill products were also pleasing.

Sales by customer group 2005/2006 in %

Automobile production growing in Asia

As expected, global auto demand continued to increase. According to estimates, global production grew by 2.5% in 2006 to 68.7 million cars and trucks. Roughly 80% of worldwide production growth was accounted for by the countries of Asia. China in particular strengthened its market position further and for the first time produced more vehicles than Germany. Initial forecasts put vehicle production in the Asian countries (excluding Japan) at around 15 million units, an increase of just under 10%.

At 16.2 million vehicles, production in the North American auto industry was slightly lower than a year earlier. In the face of sharply rising gasoline prices, the light truck segment – in particular large pick-ups and sport utility vehicles – suffered a significant reduction in sales. In Brazil, vehicle production rose by 4.5% in 2006 to 2.5 million units.

The auto markets in Central and Eastern Europe were in good shape, with production up by around 10% in 2006 according to forecasts. Vehicle production in Western Europe in 2006 was slightly lower than a year earlier at just under 17.4 million units. Initial estimates put Germany's vehicle production at 5.8 million units, a 1% improvement on the previous year. This was due in particular to high demand for trucks and car exports.

Expansion in mechanical engineering sector

Against a backdrop of a strong global economy and rising investment, the situation in the mechanical engineering sector improved. The USA, Japan and above all China achieved substantial production growth in 2006. The positive trend also continued in the German engineering industry. According to initial estimates, strong orders both from home and abroad resulted in a more than 5% increase in mechanical engineering output. Germany's plant engineering sector continued to enjoy lively demand.

Recovery in German construction sector

The highest growth in the construction sector was in Asia and Central and Eastern Europe. In the USA, growth in 2006 was roughly level with the prior year. By contrast, the prospects for the German construction industry brightened. Higher demand from industry and infrastructure renewal projects resulted in a significant increase in orders. Following years of recession, construction output recorded slight growth.

SUCCESSFUL BUSINESS PERFORMANCE BY THYSSENKRUPP

ThyssenKrupp in figures
All figures relate to continuing operations. * before taxes
			2004/2005		2005/2006
Order intake	million €		43,509		50,782
Sales	million €		42,927		47,125
EBITDA	million €		3,809		4,700
Income*	million €		1,677		2,623
Employees (Sept. 30)			185,932		187,586

In this generally positive economic environment, ThyssenKrupp performed successfully in 2005/2006, achieving its highest earnings to date. There were further improvements to our key financial indicators, as shown in the table above.

Strong increase in orders and sales

Order intake and sales rose sharply. Orders from continuing operations climbed to €50.8 billion, 17% higher than a year earlier. New orders therefore showed a greater improvement than we expected a year ago, with above all the materials business in the Steel, Stainless and Services segments performing better than predicted.

Sales from continuing operations rose by 10% to €47.1 billion. Strong demand and higher prices for carbon and stainless steel flat products increased sales at Steel and Stainless more sharply than planned. Services also clearly exceeded its targets thanks to the strong materials markets. The volume of business at Automotive, Technologies and Elevator was slightly higher than anticipated.

Sales by segment in million €			Download
			2004/2005		2005/2006
Steel			9,568		10,747
Stainless			5,572		6,437
Special Materials			389		-
Automotive			7,867		8,045
Technologies			5,765		6,012
Elevator			3,773		4,298
Services			12,678		14,204
Corporate			138		148
Segment sales			45,750		49,891
Inter-segment sales			(2,823)		(2,766)
Sales of continuing operations			42,927		47,125

Systematic continuation of portfolio optimization

ThyssenKrupp continued its portfolio optimization process. Major acquisitions in 2005/2006 included the purchase of a stake in Atlas Elektronik by the Technologies segment. Elevator strengthened its global market position through a number of smaller acquisitions. At Services, acquisitional growth was focused on Eastern Europe and North America. Automotive disposed of several non-core activities, including the European truck springs business, European and North American aluminum foundries and the US vehicle component plants. The other segments also disposed of marginal activities.

In the reporting year up to and including October 2006 we acquired companies with sales of €0.9 billion and disposed of companies with sales of €1.9 billion. Since the merger of Thyssen und Krupp we have now sold companies with sales of €8.9 billion and acquired others with sales of €7.9 billion.

Record earnings

In addition to our outstanding business performance and successful efficiency enhancement programs, the portfolio optimization improved the quality of the Group's earnings. Consolidated earnings were €2,623 million, €946 million or 56% higher than our good prior-year income.

Almost 1% increase in workforce

The number of employees increased. On September 30, 2006, the Group had a total of 187,586 employees, 1,654 or almost 1% more than a year earlier. Due to disposals, the headcount fell in particular at Automotive. Services recorded the largest increase as a result of acquisitions.

EXPECTATIONS EXCEEDED

Our excellent business performance significantly exceeded the expectations we had at the time of writing last year's annual report. Sales were 10% higher than our planned figure of €43 billion. This was due not only to the favorable economic situation but also to our successful marketing efforts. Furthermore, our efficiency enhancement programs unlocked substantial productivity reserves which improved profitability and increased the value of the company. As a result, we exceeded our original earnings target – €1.5 billion excluding nonrecurring effects – by €1.1 billion, an increase of almost 75%. At 17.9%, our ROCE was also considerably higher than expected at the start of the reporting year. Once these positive developments became sufficiently concrete in the course of the reporting period, we raised our expectations accordingly and communicated this.

KEY SALES MARKETS AND COMPETITIVE SITUATION

ThyssenKrupp operates worldwide. We generate 34% or €15.8 billion of our sales in Germany and 66% or €31.3 billion outside Germany. Our main foreign markets are the EU countries (28% of sales) and the NAFTA region (22%). ThyssenKrupp companies and products occupy leading positions on many international markets.

Worldwide marketing

ThyssenKrupp supports sales of its products and services worldwide through a large number of marketing measures, from product design, pricing policy and sales organization through to product-related communications and advertising. The companies in the individual segments operate independently on the markets and are responsible for their own marketing efforts, based on Groupwide corporate design guidelines. Given the broad spectrum of products and services within our Group and the highly differing markets on which we operate, this allows us to respond swiftly to market changes and customer requirements. In close contact with customers, our subsidiaries optimize their products and position them against competing products. Continuous innovations secure the quality and unique selling points of our range.

Sales by region 2005/2006 in %

INCOME AND DIVIDEND

Income by segment in million €			Download
* excl. non-recurring losses in connection with RAG investment
			2004/2005		2005/2006
Steel			1,094		1,417
Stainless			286		423
Special Materials			(69)		-
Automotive			118		(174)
Technologies			40		357
Elevator			355		391
Services			261		482
Corporate			(382)*		(230)
Consolidation			(26)		(43)
Income from continuing operations befor taxes			1,677		2,623

Profits increase significantly for third year in a row

In fiscal 2005/2006, ThyssenKrupp increased its pre-tax earnings from continuing operations by €946 million to €2,623 million. The company thus achieved a significant, nine-figure earnings increase for the third year in a row. Key factors in this were the high price levels and continued strong demand for carbon and stainless steel products. This benefited above all the Steel, Stainless and Services segments. The Technologies segment significantly improved its profits thanks in particular to strong demand for industrial plants and mechanical components. The Elevator segment increased its income at a high level, above all in North America. The Automotive segment returned a large loss due to heavy restructuring and impairment charges; operating earnings were positive overall despite margin pressure and negative exchange-rate effects.

Sales and cost of sales each rose by just under 10%, while the gross sales margin at 17% was level with a year earlier. Administrative and selling costs increased more slowly. Other operating income increased by €433 million: this was partly due to the receipt of a break-up fee from the terminated acquisition of Dofasco; it also includes insurance payments resulting from two major fires. The corresponding expense due to the property damage and business interruptions as well as the costs of loss minimization measures are included in cost of sales or sales. The €134 million increase in other operating expenses is largely due to restructuring expenses, in particular in the Automotive segment.

Interest income was higher due to higher average cash balances, while interest expense was lower due to the reduction of debt during the reporting period.

Income tax expenses amounted to €919 million, compared with €737 million in the previous year. The tax rate decreased from 44% to 35%. This is partly due to the fact that operating companies in countries with lower statutory tax rates generated a higher share of the taxable income. In addition, last year's losses on disposals without tax effect were replaced this year by slight gains on disposals without tax effect.

In the reporting year there was no expense or income from discontinued operations. The comparable prior-year figures included the disposal gains/losses and ordinary income from the residential real estate business and the MetalCutting business unit of the Technologies segment. Prior-year income was also reduced by an impairment charge on the investment in RAG.

Net income amounted to €1,704 million, compared with €1,079 million in the prior year.

Minority interest in net income rose to €61 million, compared with €41 million a year earlier. This was due to the improved earnings situation at companies with non-Group minority interests. After deducting minority interest, earnings per share rose from €2.08 in the prior year to €3.24 in the reporting year. The weighted average number of shares outstanding in the reporting year was 507,731,743 (prior year 498,628,610). This includes both the increase from the sale of treasury stock in November 2005 and the decrease from the repurchase of treasury stock in July and August 2006.

Income of ThyssenKrupp AG

The net income of ThyssenKrupp AG in the reporting year according to HGB (German GAAP) amounted to €1,118 million, compared with €920 million the year before. Income from investments decreased by €409 million to €1,131 million due to the significantly higher profit transfer in the prior year from ThyssenKrupp Real Estate GmbH, resulting from the disposal of the residential real estate business. The utilization of the accrued liability recognized at ThyssenKrupp AG in 2004/2005 for valuation risks from pension liabilities of subsidiaries increased profits by €531 million. The corresponding risks were recognized at the subsidiaries and reduced their profit transfers.

Other operating income decreased only slightly by €15 million. After deducting expenses for Group management activities, pension costs for former employees of ThyssenKrupp AG and its predecessor companies and net interest expense of €162 million, income from ordinary activities amounted to €1,179 million, compared with €1,578 million in the previous year.

Extraordinary income includes the receipt of a €153 million break-up fee from the terminated acquisition of Dofasco and costs of €40 million from the merger of ThyssenKrupp Materials & Services GmbH into ThyssenKrupp AG. In the prior year, the extraordinary loss included the impairment of the carrying value of the investment in RAG Aktiengesellschaft in the amount of €512 million.

Income tax expense amounted to €174 million; this amount is influenced by the utilization of tax loss carryforwards still existing at September 30, 2005.

Of the resultant net income of €1,118 million, €570 million was transferred to retained earnings. Included in this is the write-up on the shares of ThyssenKrupp Steel Beteiligungen GmbH in accordance with Art. 58 par. 2a AktG of €22 million net of tax.

The remaining unappropriated net income is €548 million. Subject to the approval of the Annual General Meeting, this amount is to be used to distribute a dividend of €489 million. An amount of €33 million is to be transferred to retained earnings to strengthen stockholders' equity. The balance of €26 million is to be carried forward.

€1.00 dividend per share

The legal basis for the dividend payment is the HGB unappropriated net income of ThyssenKrupp AG in the amount of €548 million (previous year €448 million). It comprises the HGB net income of ThyssenKrupp AG in the amount of €1,118 million (previous year €920 million) less €570 million which has already been transferred to retained earnings by the Management.

The Executive Board and Supervisory Board will propose to the Annual General Meeting the payment of a dividend of €1.00 per share (previous year €0.70 per share and a special dividend of €0.10 per share), the transfer of a further €33 million to retained earnings, and the carryforward of the balance of €26 million. Should the number of shares eligible for dividend distribution change before the date of the Annual General Meeting, the proposed dividend distribution will be adjusted accordingly. Therefore, of the €548 million unappropriated net income, a total of €489 million is to be used to pay a dividend on the 488,764,592 shares eligible for dividend payment as of September 30, 2006.

The financial statements of ThyssenKrupp AG are presented in abbreviated form in the following table:

Balance sheet of ThyssenKrupp AG (HGB) in million €
			2004/2005		2005/2006
Investments in non-consolidated subsidiaries			8,702		9,688
Other fixed assets			1,589		1,610
Fixed assets			10,291		11,298
Receivables from non-consolidated subsidiaries			9,297		6,943
Other operating assets			4,033		4,164
Operating assets			13,330		11,107
Assets			23,621		22,405
Stockholders' equity			5,649		6,355
Special item with reserve elements			57		58
Accrued liabilities			1,080		436
Liabilities to non-consolidated subsidiaries			14,637		13,261
Other liabilities			2,198		2,295
Liabilities			16,835		15,556
Stockholders' equity and liabilities			23,621		22,405

 

Statements of income of ThyssenKrupp AG (HGB) in million €
			2004/2005		2005/2006
Income from investments			1,540		1,131
Other operating income			664		649
Other expenses and income			(626)		(601)
Income from ordinary activities			1,578		1,179
Extraordinary income/loss			(512)		113
Income taxes			(146)		(174)
Net income			920		1,118
Allocation to retained earnings			(481)		(570)
Carryforward			9		0
Unappropriated net income			448		548

CAPITAL EXPENDITURES

Investment by segment in million €			Download
All figures relate to continuing operations. * before taxes
			2004/2005		2005/2006
Steel			537		515
Stainless			211		230
Special Materials			27		-
Automotive			480		448
Technologies			413		300
Elevator			121		164
Services			190		393
Corporate			71		30
Consolidation			(147)		(3)
Group			1,903		2,077

In 2005/2006, ThyssenKrupp made investments of €2.1 billion, 9% more than the previous year. €1,621 million was spent on property, plant and equipment and intangible assets, while the remaining €456 million was used for acquisitions. Capital expenditure was €0.7 billion higher than depreciation (€1.4 billion).

ThyssenKrupp invests strongly in its growth areas to ensure they remain competitive in the future. More than half of the investments made were to expand capacities and production. Other key areas include increasing the technical efficiency of existing equipment and integrating advanced technologies.

Further information can be found in the notes to the consolidated statements of cash flows in the section "Financial position".

PROCUREMENT: RAW MATERIAL PRICES STILL HIGH

Materials expense in the reporting year totaled €29.7 billion, up 11% from the prior year. As well as increased raw material prices, the rise reflects the higher volume of business. Although markets were tight in part, supplies were secured at all times.

Iron ore more expensive

Price trends on the international raw material markets varied. Due to continued high demand we had to accept a 19% rise in the price of fine iron ores. By contrast, we achieved a 3% reduction in the price of pellets. We purchase most of our ores and pellets from suppliers in Brazil, Australia and Canada.

Materials expense in billion €

The supply situation for coking coal eased significantly in the reporting year. This was partly due to an increase in output by international coal producers and partly to the fact that stocks at consumers worldwide were higher than in the past. Against this background, we were able to achieve price reductions of around 10% at the start of the new coal business year on April 01, 2006, and as much as 35% for PCI coal.

The clear easing of the China-dominated coke market has brought about a notable decrease in prices for internationally traded blast furnace coke since 2005. Although prices started to climb again slightly in spring 2006, they are still well below the peak levels of late 2004/early 2005.

By contrast, there were signs of supply shortages on the nickel market. During the reporting period, nickel prices rose from US$11,600 per ton in November 2005 to US$20,685 per ton in May 2006 and further to US$29,700 per ton in August 2006. The surcharge for immediate delivery was up to US$5,050 per ton.

World market prices for chromium dipped briefly before regaining their previous level from mid-2006. After brief spikes, prices for ferromolybdenum fell to around US$60 per kilogram. There was a similar trend in vanadium. By contrast, prices for aluminum and zinc rose in part drastically. Between October 2005 and May 2006, the price of zinc more than doubled, and at the end of the reporting period was 129% higher than at the start of the fiscal year.

Prices for unalloyed steel scrap moved in waves: at the start of the reporting year they fell to €180 per ton, rose as high as €236 per ton in July 2006 and then started to trend slightly downward again. Prices for alloyed scrap remained stable until early 2006, as sufficient quantities were available on the market. With the stainless steel market performing strongly, demand for alloyed scrap later increased significantly, which also drove up prices.

Pooling of orders and annual contracts improved purchasing position

We were able to counter many price increases by increasingly pooling our orders and concluding annual contracts. This was the case for example for purchased electrical, mechanical, pneumatic and hydraulic parts which are independent of metal prices. Although delivery periods for special and large-scale engineering parts were longer in the mechanical and plant engineering sectors due to very high workloads at supply companies, prices remained stable.

For other products as well as direct and indirect services, identifying new international suppliers helped us to maintain or even reduce price levels. Pooling purchasing volumes also strengthened our negotiating position. Further concrete cost advantages were achieved by our in-house sourcing project, under which production operations within the Group compete with established market players.

Purchasing activities in the Group are supported by newly introduced strategic tools for supplier management (analysis and development of strategic suppliers) and global sourcing (systematic analysis of sourcing categories and identification of new procurement sources).

Our global purchasing efforts are also facilitated by the ThyssenKrupp procurement platform. A Strategic Sourcing module accessible via the internet allows worldwide requests for quotes and auctions. In the reporting year we advertised purchases worth more than €500 million. Online requests for quotes are currently being used by Group companies in Germany, Liechtenstein, France, Italy, the United Kingdom and the USA. The number of auctions has also increased.

Our second program module – Catalog Ordering – has further established itself internationally. More than 3 million items from over 250 suppliers can now be purchased online. This significantly reduces the costs of purchasing transactions for both us and our suppliers.

We also launched a standard Groupwide supplier management system in the reporting year. Suppliers throughout the Group are assessed on the basis of standardized methods and criteria. All departments and employees working with the suppliers are involved in these assessments via an internet-based supplier management tool. This has also created a supplier database which our companies can access online.

Oil prices drive up logistics costs

Prices for outsourced road freight services were impacted by the high fuel costs, in particular in Western Europe. By contrast, we were able to achieve price reductions for road freight services to Eastern Europe. For general cargo we optimized our market position by concluding framework agreements. Full loads were increasingly tendered directly on the market via platforms. Rail freights within Germany are mainly secured by long-term agreements. Costs for international rail freights actually fell. In the area of air freights, we managed to achieve price reductions through framework agreements. However, this is being countered by costs for fuel surcharges and security procedures.

Ocean shipping rates for bulk goods, while still high, were lower than the previous year. Container freights to Asia were favorably priced, but rates for shipments from this region were high. Container freight capacities to the USA/Canada remain limited and are therefore susceptible to price increases. With container volumes on the rise, some ports are experiencing difficulties in loading freights efficiently and cost-effectively.

Energy prices in the reporting period were higher than a year earlier. As demand in Asia continued to rise, the cost of mineral oil and oil-based products rose dramatically, exacerbated by the production losses as a result of hurricanes Katrina and Rita. At the same time, prices for natural gas increased by 48%. Our suppliers claimed declining deposits in exporting countries and a revaluation of natural gas on the market as the reason for this price hike. We also had to accept higher prices for electricity. The extra costs resulting from the subsidization of renewable energies and combined heat and power plants as well as the electricity tax made this form of energy more expensive than ever.

The introduction of CO₂ emissions trading was another cause of rising electricity costs. It was not possible to compensate for the higher prices through the sale of allowances under the emissions trading system, which ThyssenKrupp joined for the first time in fiscal 2005/2006. Overall, our companies received allowances for the emission of 18.7 million metric tons of CO₂ per year for the first trading period (2005–2007). By reducing emissions from production operations and due to rules restricting the allocation of allowances to the first trading period, we had a surplus of allowances which could be sold in the emissions trading system. Emissions trading is performed by the Group holding company in order to utilize synergies and simplify risk management.

ENVIRONMENTAL PROTECTION: TARGETING SUSTAINABILITY

Ongoing expenditure on environmental protection in million €
			2001/2002		2002/2003		2003/2004		2004/2005		2005/2006
Air pollution control			105		101		124		141		141
Water protection			163		161		177		165		168
Noise control/landscape protection			11		13		12		15		16
Recycling			61		60		64		81		87
Total			340		335		377		402		412

Sustainability and resource conservation were the central elements of ThyssenKrupp's environmental protection efforts in the reporting year. In addition to the €412 million spent on operating pollution control equipment and the €30 million invested in environmental protection, all segments took numerous measures to reduce their consumption of energy and raw materials. As raw material and energy prices are high, these measures also helped improve profitability.

The Steel segment was honored with Volkswagen AG's Environmental Award. As well as our environment-friendly production operations, the award was mainly in recognition of our innovative solutions to help reduce emissions from cars. These include weight-optimized parts which reduce fuel consumption. ThyssenKrupp Steel was named as one of Volkswagen's Sustainability Partners and thus joined a circle of suppliers who have committed to the objectives of sustainability.

Sustainability and environmental protection were important aspects in the construction of a new blast furnace and the modernization of an existing one in Duisburg. New dust collection systems will further reduce dust and particulate emissions in the future, while a quiet-running cooling system will lower noise emissions.

Environmental experts and plant engineers in the Stainless segment introduced a new electrochemical process to recycle the used acids and metal-bearing sludges arising during the pickling of stainless steel. This electrodialysis system recovers acid and reduces the nitrate in the waste water by 35%. Further development work is aimed at creating a closed recycling process without any used acids or waste water.

For the production of modern injection valves used in car engines, a sleeve was developed using the material Pernifer 36Z which displays virtually no thermal expansion even at temperatures up to 200°C. This guarantees the functionality of the injection valves – which is key to low-emission engines – in all load and temperature ranges.

Resource conservation and energy savings were also to the fore at Automotive. In the future, production shops will be heated utilizing the waste heat from furnaces, which was previously unused. Heating oil consumption will also be lowered using a heat pump. Water consumption has been reduced in a hardening shop by redesigning the cooling circuits. A new forging technology introduced at ThyssenKrupp Metallurgica Campo Limpo in Brazil allowed a combination of improved production precision, compliance with strict emissions standards and weight reduction. The company also set up an "environment school" specially for students from schools in the area to raise their awareness of nature.

The Technologies segment built an EnviNOx® tail gas treatment facility for the Abu Qir Fertilizer Company in Egypt. This technology uses a catalyst to convert ecologically damaging laughing gas and nitrogen oxide into harmless nitrogen, oxygen and water. This one facility alone will provide a reduction in greenhouse gas emissions with the same impact on the environment as 1.4 million tons of CO₂. That is equivalent to the CO₂ emissions of roughly 350,000 cars being driven 20,000 km per year.

Another development involved a plant for the production of a compostable plastic from renewable raw materials such as maize or wheat. This plastic – a polylactic acid – can be used to replace the packaging materials PET and polystyrene. Further measures related to saving energy, for example in heat treatment furnaces.

Measures in the Elevator segment were also focused on improving energy efficiency in elevators and escalators. A series of gearless drives was developed for elevators which, in conjunction with innovative changes to the entire drive and suspension system, further reduce energy consumption. In the area of escalators, a new generation of equipment was launched offering significantly lower purchasing costs. One example is that the energy-saving "slow running" option for empty escalators can now be used on far more installations, reducing energy consumption for our customers.

Engineers and technicians from the Industrial Services unit of the Services segment installed a modern firing system in a waste-fed heating plant in Bremen which burns the waste more efficiently while at the same time reducing emissions. Controlled heat discharge and an optimized air supply improve incineration and increase efficiency, and in so doing reduce specific emissions and residues.

SUMMARIZED ASSESSMENT OF THE FISCAL YEAR

ThyssenKrupp performed very well in the past fiscal year. In addition to pre-tax earnings, other indicators also hit record levels. The Steel, Stainless, Technologies, Elevator and Services segments further improved their market positions, sales and earnings. The Automotive segment pressed ahead with its restructuring, particularly in the USA. In all segments, the focus was on higher performance and efficiency; the ThyssenKrupp best corporate program continued its success.

With the Group having largely completed its consolidation phase, our aim is now to achieve profitable and sustainable growth in our three main business areas of Steel, Capital Goods and Services. Through organic growth, targeted acquisitions and a stronger service focus, we will continuously increase our earning power and enterprise value. The results of the reporting year already indicate initial successes.