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Company News, 2000-08-16, 02:00 AM

Remarks by Prof. Dr. Ekkehard Schulz, Chairman of the Executive Board, at the press conference

Ladies and Gentlemen,

We are pleased that so many of you have come despite having been invited at such short notice.

You know the reason for this press conference: ThyssenKrupp, together with consortium lead managers Deutsche Bank and Commerzbank, has reached the conclusion that the flotation of ThyssenKrupp Steel planned for September 2000 should not go ahead in view of the stock market?s current weak valuation of the steel sector. Against this background the Executive Board of ThyssenKrupp AG has decided to cancel the IPO for September 2000.

We very much regret having to take this step but we see no other option. The cancellation is all the more regrettable because the Steel group is performing very well.

Why have we decided to cancel the IPO planned for September 2000? The Steel flotation was a key component of the 6-point program for the strategic realignment of ThyssenKrupp in November 1999. On the basis of the capital market situation at the time we assumed, together with our advisers, that by floating 25 to 35% of the shares on the stock market we would be able to achieve proceeds of at least DM 3 billion.

At our press conference on July 24 in Duisburg I stated in reply to questions that despite some concerns we were relatively optimistic that we would still get close to that figure. On the one hand - in line with steel sector forecasts - we were hoping for a recovery in the capital market, as suggested by all the economic indicators. On the other hand, we believed that in view of the good performance of ThyssenKrupp Steel we would succeed in achieving an above-average valuation in comparison with our competitors.

After our analysts? meeting on July 25, last weekend we received new information regarding the valuation from the consortium banks. We are now forced to accept that the capital market is not willing to pay the expected premium for ThyssenKrupp Steel. Added to this is a relatively high IPO discount on account of the stock market?s negative valuation of the steel sector.

Opinions differ widely with regard to the way the steel sector is developing. In Europe and in particular in Germany there are certainly positive voices. Since the end of May the US capital market in particular has been discussing when the steel cycle will peak. Since the summer mainly US investors have been selling steel stocks. Against this background share prices have now reached a level which in our view no longer reflects the true value of the steel stocks ? and thus of the ThyssenKrupp Steel shares earmarked for the flotation. Steel stocks are currently trading well below their equity value.

The capital market is also not taking into account the fact that ThyssenKrupp Steel has major cost reduction potential of Euro 400 million per year through the realization of synergies and through further rationalization and improvement measures. In addition, by further expanding the share of high value added products and pursuing our global growth strategy geared to the triad markets, we will benefit to an above-average extent from the long-term growth rates of 4% for carbon steel and 7% for stainless. Against this background ThyssenKrupp Steel will be able to achieve a high level of earnings in the future and to make clear profits even during cyclical lows, as we demonstrated in fiscal 1998/99.

This divergence between good, rising earnings coupled with good market positions at ThyssenKrupp Steel on the one hand and the stock market?s low valuation of steel companies in general on the other has prompted us to cancel the IPO of Thyssen Krupp Steel AG planned for September.

Ladies and Gentlemen. ThyssenKrupp Steel is performing extremely positively.

In the 3rd quarter of the current fiscal year alone, ThyssenKrupp Steel generated pre-tax income of around Euro 200 million. This means that we generated more in the 3rd quarter of 1999/2000 than in the entire first half (Euro 183 million). For the 4th quarter of the current fiscal year we expect to report similarly excellent earnings despite the vacation period.

The reasons for these very encouraging earnings are the positive revenue trend, increasing shipments in both Flat Carbon Steel and Stainless, and the systematic realization of the restructuring measures. We believe that we will be able to raise earnings further in the coming fiscal year, based on a further increase in the share of high value added and innovative flat-rolled products and the completion of the concentration of crude steel production at Duisburg together with the increase in capacity of the thin slab casting and rolling line. A similarly positive earnings trend is also expected in the Stainless unit with its international focus.

Why is ThyssenKrupp Steel performing so well? The company is a world-class steel producer that has achieved leadership positions in its areas of business. Following restructuring, growth, acquisitions and mergers, the focus on flat products has been achieved. This is true of both our Carbon Steel and Stainless products. The full merger of Thyssen and Krupp removed the complex shareholding structure in the steel segment, allowing the advantages of the tie-up to be exploited in full. ThyssenKrupp Steel has been able to link together its technical competencies on a global scale with production sites in high-consumption growth markets such as Germany, Italy, the NAFTA region, Brazil and in the future China. A materials network has been created which is helping shape progress in steel technology around the globe.

ThyssenKrupp Steel today is fit for the stock market. We were right on schedule with our preparations for the IPO. ThyssenKrupp Steel today is extremely well positioned and has great development potential. The Steel equity story is a good one; the analysts? response to it is extremely positive.

It is all the more regrettable and disappointing that we have had to cancel the flotation due to the fact that given the current weak valuation of the steel sector a limit has been reached which would make it impossible to achieve the goal of creating added value for the Group. The strategic advantages of the IPO do not justify accepting the disadvantages currently associated with it for the ThyssenKrupp Group.

What does the decision mean for ThyssenKrupp? ThyssenKrupp will continue to aggressively pursue the goal of generating high added value within the framework of its strategic realignment. This continues to mean

・ focusing on core businesses through continuous portfolio optimization
・ steadily expanding these core businesses, which are characterized by continuous growth and leading market positions.

What does the decision mean for ThyssenKrupp Steel? As its positive earnings performance clearly documents, ThyssenKrupp Steel with its products and plants is extremely well positioned in the international marketplace. We shall now examine all the options.

The ThyssenKrupp Group has succeeded in further strengthening its earning power. Income in the current fiscal year will be well above the figure for the previous year. Major factors in this are the realization of synergies from the merger, structural improvements to the portfolio, performance improvements at the operating units and not least the favorable economic situation. An appropriate dividend will once again be paid out. From the present perspective we expect a further improvement in earnings in the next fiscal year.

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