The past fiscal year was the most successful in the history of your Company. ThyssenKrupp delivered another outstanding performance, with all key performance indicators at a new record high. Compared with the very good figures of the previous year, sales increased by 10% to €51.7 billion and pre-tax income by 27% to €3.3 billion, while ThyssenKrupp Value Added was 40% higher at €2.1 billion. We want you, the Company's stockholders, to share appropriately in this success: In January 2008, the Executive Board and Supervisory Board will propose to the Annual General Meeting the payment of a dividend of €1.30 per share. That represents a 30% increase compared with last year.
Review of record year 2006 / 2007
It is said that success has many fathers, and that is certainly true at ThyssenKrupp. Steel, Stainless, Technologies and Services all reported their highest ever earnings in 2006 / 2007. Elevator delivered a good operating performance but had to pay a fine of €480 million imposed by the EU Commission in February 2007 for alleged anti-competitive behavior in the market for elevators and escalators. As well as making the most of the favorable market situation in their key regions, the segments reaped the benefits of internal programs to enhance performance, productivity and efficiency, especially the Groupwide value enhancement program ThyssenKrupp best. All five segments improved their global market positions, in part significantly, and expanded their business in the year under review. The basis for this is the wide range of products and services which have three things in common – they offer high quality and advanced technology and are tailored to customers' requirements.
Our success in 2006 / 2007 is also reflected in the performance of ThyssenKrupp's stock: Gaining 68% in the course of the fiscal year, it significantly outperformed the DAX and DJ STOXX.
This Annual Report contains detailed information on the business situation and the main events in the reporting period, our plans for the future, our innovative capabilities and our employees. I hope that not only the content of the report but also the new design and magazine supplement meet with your approval.
In this letter I would like to address two questions relating to the future which I am sure also occupy your thoughts: What are ThyssenKrupp's goals for the next few years and how do we intend to achieve them?
Mid- and long-term prospects for ThyssenKrupp
Against the background of the strategies we have in place and the economic forecasts, we have reviewed and kept you informed of our mid- and longer-term targets. In the medium term, by around 2010, we aim to achieve sales of €60 billion; our sustainable goal for earnings before taxes and major nonrecurring items is €4 billion. Over the longer term, by around 2012, we plan sales of €65 billion and earnings before taxes and major nonrecurring items of €4.5 to 5.0 billion. Our central performance indicator, ThyssenKrupp Value Added, is expected to reach €2.5 billion in the medium term and €3.0 billion in the longer term.
ThyssenKrupp will achieve these targets as a focused conglomerate supported by three pillars: Steel, Capital Goods, and Services. These three key areas of activity, to which the Group's five segments are allocated, are the basis of our business model; they also stand for the past and future success of our Company.
Strategies for success
With many of our products and services we now occupy leading positions in the global market; we will further improve these positions in the coming years in all key regions.
In the Steel and Stainless segments, our strategy is focused on organic growth. A total of almost €7 billion is being invested primarily in a new slab production plant in Brazil, a new production and distribution location in the USA, and the optimization of capacities at our integrated steel mill in Duisburg. The central element of the new complex in the USA will be a hot strip mill, which will be used jointly by Steel and Stainless. In addition, Steel is investing in cold-rolling and coating facilities, while Stainless plans to build an electric-furnace meltshop and its own cold-rolling capacities. These measures will enable us to exploit our growth opportunities in the key markets of North America and Europe. We will further cement our leading international position as a producer of high-quality carbon and stainless steel flat products.
The Technologies, Elevator and Services segments are pursuing a combined strategy: organic growth plus acquisitions. The technology-based plant and component manufacturers combined in the Technologies segment see opportunities in the growth sectors climate, environment, infrastructure and mobility, for which the segment already delivers tailored solutions based on intelligent technologies. Mobility is also a key focus for the Elevator segment. Growth opportunities have been identified chiefly in Asia and Eastern Europe, and Elevator will concentrate in particular on service activities. The Services segment's growth strategy is focused on materials and industrial services in particular in the key regions of Eastern Europe and the Middle East.
This Annual Report provides more information about our strategic focus and key investment projects. ThyssenKrupp completed the "Divest 33+" program in 2005 and is now on a sustained and profitable growth course. An investment volume of up to €20 billion has been earmarked for this, of which over €5 billion has already been used in the past two years. These investments will play a major role in ensuring that we achieve our long-term sales and earnings targets. Anyone who has observed ThyssenKrupp for any length of time knows that our plans are always ambitious and always have a solid financial basis. This situation will not change in the future.
Our employees – the key to success
The most important investments are those we make in our employees and their innovative capabilities. That's why year in, year out, we train young people well in excess of our own needs. We constantly expand the range of further training courses for employees, promote creativity through the Groupwide Ideas Contest, and systematically facilitate knowledge transfer. The ThyssenKrupp Academy began work in the year under review and now offers more than 20 tailored programs for top executives. Fostering young talent for the future is another matter close to our hearts. To this end we carry out many activities aimed at firing young people's enthusiasm for technology and innovation from an early age and attracting them to technical and scientific careers. In May 2008 the third ThyssenKrupp Ideas Park will be held – this time in Stuttgart – and you are all very welcome to attend.
All our business activities are characterized by a common theme – responsibility for the Company and its future. This also means showing responsibility towards our customers – by supplying optimum products and services, towards our employees – by providing attractive jobs with good prospects, and towards society as a whole – by being a good corporate citizen. Central to all this is of course our responsibility towards you, our stockholders. We want to ensure your investment in ThyssenKrupp remains profitable on a sustained basis so as to justify the confidence you place in us. Stay with the Company – the future of ThyssenKrupp is worth it.
Yours sincerely,
Dr.-Ing. Ekkehard D. Schulz
Chairman of the Executive Board
Düsseldorf, November 2007