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Company News, 2007-10-07, 10:00 AM

Record year for ThyssenKrupp

The 2006/2007 fiscal year just ended (September 30) was the best ever for ThyssenKrupp AG, topping even last year’s outstanding performance. That was the message from Executive Board Chairman Dr. Ekkehard Schulz at a press conference marking the Annual Conference of the International Iron and Steel Institute (IISI) in Berlin. Schulz reaffirmed the forecast contained in the company’s third-quarter report, which predicted an increase in full-year earnings before taxes to around €3.6 billion excluding nonrecurring items and around €3.2 billion including nonrecurring items, and a rise in sales to over €50 billion. The Group will present concrete figures at its annual press conference in Essen on December 4, 2007.

“ThyssenKrupp has taken advantage of the strong world economy to achieve further growth in all five Group segments. Our mid- and longer-term goals remain unchanged,” Schulz added. 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, sales in the region of €65 billion and earnings before taxes of €4.5 to 5.0 billion are planned.

Steel plus capital goods plus services: these three pillars will remain the basis of ThyssenKrupp’s business model and success in the future. “For many years, the Group suffered from a conglomerate discount on the stock markets. But those times are over,” stressed Schulz. The strategic model had won over even the most skeptical of capital market experts. A look at the share price confirms this. Last year, the ThyssenKrupp stock gained 98 percent, the best performance in the DAX index. In the first half of 2007 alone, the value of the stock grew by 24 percent. In the same period, growth of the German DAX index was slower at 21 percent.

Since the merger of Thyssen and Krupp in 1999, the Group has sold companies with a sales volume of €9.1 billion and acquired others with sales of €8 billion. Portfolio change is an ongoing process and will be continued at ThyssenKrupp. “ We always aim to make acquisitions which are a good strategic fit and make good economic sense. We will not acquire companies simply as a means of boosting our size,” Schulz continued. Following the phase of consolidation, ThyssenKrupp is now focused on expanding its world leading positions in all major markets. One central element is the international expansion of successful business strategies. With Technologies, Elevator and Services, ThyssenKrupp is pursuing a strategic combination of organic growth and acquisitions.

The Steel and Stainless segments are pursuing a strategy of organic growth. Current examples of this are the investments of almost €7 billion in the slab facility in Brazil, the downstream facility in the USA and the capacity optimization in Duisburg.

The steel mill in Sepetiba near Rio de Janeiro, Brazil is scheduled to start production in early 2009. The investment, which will include a captive power plant and a coke plant, will be around €3 billion. The mill is designed for an annual capacity of five million metric tons. It will employ over 3,000 people and indirectly create more than 10,000 further jobs in the region. As the source of slabs for Mount Vernon and our Western European plants, the steel mill is the central element of our integrated growth strategy for the Steel segment. Low-cost slab production in Brazil will enable us to leverage growth opportunities in our core North American and European markets. Our objective continues to be a leading global position in the market for high-end flat carbon steel.

In Mount Vernon, Alabama in the southern USA, the Steel and Stainless segments plan to set up a joint production and distribution site with 2,700 employees. The aim is to significantly strengthen ThyssenKrupp’s position in North America. The central element of the new complex will be a wide hot strip mill with a capacity of 5.2 million tons per year. It will be used to process 3 million tons of slab from the new CSA steel mill in Brazil and 1 million tons of stainless steel slab. ThyssenKrupp Stainless will build an electric-furnace melt shop and cold-rolled capacities to produce stainless flat products at the same site. The investment volume is €2.3 billion for ThyssenKrupp Steel and €0.8 billion for ThyssenKrupp Stainless.

ThyssenKrupp Steel remains on growth track

In a robust economic environment the Steel segment remains on growth track. In the fiscal year just ended the company achieved record sales and earnings. Customer demand for premium carbon steel flat products was extremely high in 2006/2007 and could not be met in full for capacity reasons. The company’s capacities were fully utilized, with many facilities setting new production records. “The key reason for our success, alongside increased selling prices, was our premium product mix,” said Dr. Karl-Ulrich Köhler, Executive Board Member of ThyssenKrupp AG and Executive Board Chairman of ThyssenKrupp Steel AG. Renewed cost increases for raw materials and energy were more than offset by price and efficiency increases.

For the current fiscal year, too, ThyssenKrupp Steel sees positive signals from the market. China will remain the growth driver of the international steel market. The other regions of the world are showing steady, slightly upward trends. “We can say that steel demand is stabilizing at a very high level,” said Köhler. Because of the capacity bottlenecks ThyssenKrupp Steel has so far been unable to share in this trend to the extent it would wish. This is why in 2006 a forward strategy of profitable growth was launched based on the three pillars of a slab facility in Brazil, a downstream facility in the southeastern USA, and optimization of the company’s facilities in Europe.

Since October 1, 2006, the Umformtechnik group from the former Automotive segment of the ThyssenKrupp Group has been run by ThyssenKrupp Steel under the name Metal Forming. The companies in the group produce body and chassis stampings and assemblies, counting all major auto manufacturers among their customers. In fiscal 2005/2006 Metal Forming achieved sales of €1.4 billion and employed around 8,000 people. Its operations are concentrated on Europe, where it has sites in Germany, France, the UK, Poland, Spain and, since August, Turkey. The first steps towards an overseas presence have been taken with plants in Brazil, China and India. ThyssenKrupp Steel is now the only steel producer capable of covering the entire development and production chain from material to finished part.

ThyssenKrupp Stainless cements leading market position

ThyssenKrupp Stainless employs a total of around 12,200 people in seven subsidiaries with plants in Germany, Italy, Mexico, China and the USA. The Stainless group is world number one in stainless steel flat products and among the market leaders in high-performance materials. The strategic goal is to cement and grow these leading international market positions.

“Our growth strategy is founded on three main pillars: in stainless flat products securing our competitiveness in our core European market and further penetrating the attractive NAFTA market, and in high-performance materials expanding our business with nickel alloys and titanium. This forward strategy was rigorously continued in the 2006/2007 fiscal year just ended,” said Jürgen Fechter, Executive Board Member of ThyssenKrupp AG and Executive Board Chairman of ThyssenKrupp Stainless AG. Major investment projects to optimize production structures and increase capacity at the operating companies had been implemented or launched to further strengthen the position of the Stainless group. In addition to the USA project, further three-digit-million investments are currently being carried out in the Stainless group.

ThyssenKrupp Stainless ended fiscal year 2005/2006 with earnings of €423 million. This pleasing performance was bettered once again in the first three quarters of fiscal 2006/07. However, the parameters on the stainless market have changed temporarily. There are two main factors responsible for this. Firstly the trend in nickel prices. Nickel is an important alloying element which is a key determinant of the price of the so-called chrome-nickel steels, which account for the majority of stainless steels. Secondly, the current situation in the stainless industry is being massively impacted by imports of stainless flat products into Europe, especially from Asia and primarily from China. In this connection Fechter said that the steel association Eurofer was preparing to file an anti-dumping complaint with the European Commission.

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