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Capital market-relevant press releases, 2009-02-13, 08:32 AM

ThyssenKrupp in the 1st quarter 2008/2009


The global recession left a clear mark on ThyssenKrupp in the 1st quarter 2008/2009. The drastic drop in demand for carbon and stainless steel and in materials trading combined with sharply falling prices had a considerable impact on the Group’s business. By contrast, its activities in capital goods, elevators and industrial services were largely robust. Year-on-year, 1st quarter order intake was down by a moderate 3% to €12.9 billion and sales by only 6% to €11.5 billion. The drop in profits was much steeper. However, this was influenced to a significant extent by writedowns on inventories in the amount of €250 million. Correspondingly, Group earnings before taxes decreased from €646 million in the prior year to €240 million. As in previous periods, earnings were again impacted by substantial pre-operating costs for the new plants in Brazil and the USA which amounted to €83 million in the past quarter. Operating earnings before these pre-operating costs and restructuring measures at Metal Forming and Elevator were €333 million. Steel and Technologies made a very solid contribution to the Group’s earnings before taxes. Elevator reported record quarterly profits. Income at Stainless and Services was depressed by inventory writedowns. Despite this, Services reported positive earnings.

The highlights for the 1st quarter 2008/2009:
・ Despite the current economic circumstances, order intake was €12.9 billion, 3% down from the prior-year quarter.
・ Sales decreased by 6% to €11.5 billion.
・ EBITDA came to €764 million, compared with €1,083 million a year earlier.
・ Earnings before taxes slipped year-on-year from €646 million to €240 million.
・ Earnings per share dropped from €0.85 to €0.36.
・ Net financial debt at December 31, 2008 was €3,514 million, an increase of €1,930 million compared with September 30, 2008, when we reported net financial debt of €1,584 million. This rise is due to capital expenditure - in particular for our major investment projects - and also to the effects of the economic downturn and the associated impact on our operating business. At the end of the quarter, the Group had cash funds and committed, undrawn credit facilities in the total amount of over €5 billion. The equity ratio is around 26%.
<u>Outlook</u>

ThyssenKrupp expects a significant drop in sales in fiscal 2008/2009. This will be reflected in earnings. Price and volume risks will only be partly offset by declining input material prices and an extensive additional action program to increase efficiency. In addition, measures are being taken to significantly reduce net working capital.

ThyssenKrupp expects the 2nd quarter to be more difficult than the 1st. Expectations for the individual segments in the 2nd quarter are as follows:
・ Steel – further production cuts and underutilization of core units, stabilization of shipments, largely unchanged costs for raw materials and declining prices for shorter-term deals.
・ Stainless – continued production cuts and underutilization, continuing weak sales markets; further inventory writedowns cannot be ruled out.
・ Technologies – high level of planning confidence for revenues and earnings in project business due to high order backlog with good earnings quality. Only the automotive business will be impacted by production cuts by OEMs.
・ Elevator – sustained effect of performance programs with earnings higher year-on-year.
・ Services – predominantly weak demand and continued price falls in materials business at Materials Services and Special Products; the same applies to metallurgical raw materials and coke; Industrial Services predominantly stable, construction and rail equipment activities will profit from high infrastructure spending.
ThyssenKrupp expects business and earnings to be at the level of a normal recession in the 2nd half of the fiscal year. As this happens, the earnings contributions from the materials-related businesses in the Stainless and Services segments are expected to improve. Steel faces continuing price pressure and inadequate volumes but expects lower raw material costs and positive effects from ongoing cost-reduction measures. Technologies plans to maintain its strong earnings despite a continuing difficult market environment. For the Elevator segment the Group expects the good earnings picture to continue.

Executive Board Chairman Dr. Ekkehard Schulz: “I will not be able to give you a concrete forecast for the 2008/2009 fiscal year today. I stick by what I have already said: A serious business forecast for the coming months is not yet possible. But our first quarter shows that as a balanced and value-based conglomerate we are well equipped to meet the crisis. In addition we have initiated various measures: Under our Groupwide ThyssenKrupp PLUS program we will reduce costs by €1 billion year-on-year and significantly reduce our net working capital to produce a positive effect of €2.3 billion. Due to market conditions in the USA we have also introduced greater flexibility to our capital expenditure program. Among other things, this will mean that our new stainless steel mill will not start production until early 2012.”

ThyssenKrupp expects sales and earnings to stabilize again in 2009/2010. In the longer term, particularly after completion of the major investments of Steel and Stainless in North and South America and those of the other segments in other regions, the Group forecasts earnings before taxes and major nonrecurring items of €4.0 to 5.0 billion and sales of around €65 billion.


German and English versions of the full interim report are available for downloading and as an online version at http://www.thyssenkrupp.com.

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