ThyssenKrupp is on the right track. That is proven by the key figures for the first nine months (October 2004 to June 2005) of fiscal year 2004/2005:

· Order intake and sales increased at double-digit rates: order intake by 10 percent to EUR32.1 billion and sales by 14 percent to EUR31.5 billion.
· Income from continuing operations before taxes and minority interest increased from EUR1,069 million to EUR1,454 million.
· Net financial payables at June 30, 2005 stood at EUR1,649 million, EUR1,184 million less than at September 30, 2004.

In terms of earnings before taxes, excluding the effects of major disposals, acquisitions and restructuring measures, the Group aims to achieve around EUR1,700 million, surpassing the very good level of 2003/2004 (EUR1,470 million). The Steel segment will contribute considerably more than EUR1 billion to this. Exact figures are not yet available. The Group's medium-term goal is to achieve total sales of EUR45 to 50 billion.

Since the merger in March 1999, when ThyssenKrupp started out with sales of around EUR36 billion and 173,000 employees, the Group has changed significantly: To date businesses with sales of EUR7.0 billion have been divested and others with sales of EUR7.0 billion have been acquired. Since the merger the number of employees has risen to over 184,000 (September 30, 2004).

In fiscal year 2003/2004, ThyssenKrupp generated foreign sales of EUR25.8 billion with customers in over 70 countries - representing 65 percent of the Group's total sales. In the Asia Pacific region alone, the company has 130 production and sales locations. This international presence is being systematically expanded.

In fiscal year 2003/2004 the Group generated sales of EUR3.5 billion in the Asia Pacific growth region, equivalent to 13.6 percent of total foreign sales. The Group's activities in the region are still heavily dominated by business in China. ThyssenKrupp generated sales of EUR1.1 billion in the People's Republic in the past fiscal year and employs more than 3,700 people there. The Group's presence in the region is being further expanded through targeted strategic acquisitions and joint ventures. Today ThyssenKrupp has five subsidiaries in South Korea. 1,100 employees in the country generate sales of EUR355 million.

ThyssenKrupp Steel

Effective October 1, 2005 the Steel segment with the business units Carbon Steel, Stainless Steel and Special Materials was reorganized. Two separate segments were created in ThyssenKrupp Steel (formerly ThyssenKrupp Stahl) and ThyssenKrupp Stainless. This was in response to the different market conditions and production processes of Carbon and Stainless.

ThyssenKrupp Steel expects crude steel production in fiscal 2004/2005 of around 16.5 million metric tons, level with the previous year. Based on provisional figures, sales and order intake each increased to over EUR14 billion, compared with EUR13.2 and EUR13.7 billion respectively last year.

The market, particularly in Western Europe, was in a weak state. However, world steel production this year will probably rise to 1.1 billion metric tons, an increase of 4%. Whereas China particularly, but India as well, contributed to this with unbroken production growth, output in the NAFTA region and Western Europe was reduced beginning in the spring in response to falling demand. In the EU 25, steel output is therefore expected to be around 5% down from last year at 183 million metric tons.

German steel production will also be down from 2004 at around 45 million tons. After operating close to capacity in the first few months of the year, the German steel mills cut back production for the first time in May and then increasingly in the summer months. ThyssenKrupp Steel, however, maintained its crude steel output. The downstream operations of ThyssenKrupp Stahl reduced their output by around 800,000 tons, mainly in the cold rolling mills and coating lines. For ThyssenKrupp the motto of "price before volume" continues to apply. At Stainless Steel, production was reduced by 120,000 tons in the summer.

The situation in fiscal 2004/2005 was also characterized by weak demand, mainly due to inventory cycle factors, and initially high supply. In many regions of the world, significant speculative stock building took place. These inventory overhangs resulted in a marked decrease in steel demand in most markets from the beginning of 2005. In parallel with this, competitive pressure increased - particularly in the USA and Western Europe - as a result of higher imports. Steel prices subsequently decreased; in the USA, the high point of the steel price cycle was reached in fall 2004, while in Western Europe the main price reductions started in the second quarter 2005. After expanding the year before, steel consumption in Western Europe in 2005 showed hardly any growth. In some cases, Western European producers of flat-rolled carbon steel offset the shipments lost in the EU with higher deliveries outside the EU.

The portfolio realignment with the concentration on the core business of flat-rolled steel was largely completed in the past fiscal year. ThyssenKrupp Steel disposed of long products activities representing sales of EUR1.1 billion. After the disposal of Berkenhoff GmbH and Krupp Edelstahlprofile GmbH in fiscal 2003/2004, Edelstahl Witten-Krefeld GmbH (EWK), which produces stainless steel long products, was sold in spring 2005 to Swiss Steel AG, part of the Dusseldorf-based Schmolz + Bickenbach group.

The electrical steel activities have been completely restructured in the last few years. This process will be completed with the closure of production in Terni in Italy. ThyssenKrupp Electrical Steel, with production sites for grain-oriented electrical steel in Gelsenkirchen und Isbergues (Northern France) will be assigned to the Carbon Steel business at the beginning of fiscal 2005/2006, allowing the Special Materials business unit to be dissolved. The non-oriented electrical steel business was integrated into Carbon Steel last year.

The Carbon Steel and Stainless Steel business units have positioned themselves successfully. Following completion of the focusing programs, they are active in very different markets operating with different strategies. The Executive Board of ThyssenKrupp AG therefore decided in August 2005 to dissolve the intermediate holding company ThyssenKrupp Steel AG with effect from September 30, 2005, and to create two new segments in the steel area, namely Steel (flat-rolled carbon steel) and Stainless (stainless steel flat products). ThyssenKrupp Stainless GmbH will be changed into a stock corporation (AG) and act as lead company for the Stainless segment. ThyssenKrupp Stahl AG will be renamed ThyssenKrupp Steel AG and as the largest single unit will lead the new Steel segment as operating holding company. In the world market for carbon steel flat products, Steel (new) is one of the leading producers and ranks second in Europe.

Steel (new) represents sales and order intake of almost EUR9 billion and has 30,000 employees. Earnings will comfortably exceed last year's level of EUR588 million.

To participate in the growth of the steel market and expand ThyssenKrupp Steel's position, additional crude steel capacity is needed. This is to be created in Brazil. Regional cost advantages and proximity to the raw material base for iron ore are reasons in favor of this location. In Sepetiba in the state of Rio de Janeiro, ThyssenKrupp Steel plans to build a steel mill with a capacity of 4.4 million tons of slabs per year in collaboration with the world's largest iron ore producer Companhia Vale do Rio Doce (CVRD). The plan involves the construction of two blast furnaces, a basic oxygen steelmaking shop, two continuous casters and a dock. The aim is to utilize growth opportunities in North America and the expanded EU market. This would then also require capacity expansions at the company's sites in Germany.

ThyssenKrupp Stainless

Compared with other metallic materials, stainless steel has enjoyed relatively constant growth for many years at an average rate of over 5% p.a. The size of the world stainless market is just under 26 million metric tons per year. Stainless flat products - the first of the two product segments in which ThyssenKrupp Stainless is active - account for some 17 million tons per year. The key consumption regions are Europe, NAFTA, and Asia, particularly China. Together, these three regions account for over 90% of worldwide stainless consumption. In terms of shipments of cold-rolled stainless products, ThyssenKrupp Stainless is world market leader and intends to maintain this position in the future.

The Stainless segment is focused on the following priorities:

· moderately adjusting capacities to regional market conditions
· continuously advancing products and processes, and
· further enhancing existing standards of quality and service.

In its second product segment - nickel-base materials - ThyssenKrupp Stainless also occupies a world leading position. Following a lengthy period of weakness as a consequence of 9/11, there is now persistent economic growth in Asia and the NAFTA region and a significant revival in demand for the company's products. The main drivers are the aerospace, oil and gas sectors. Plant construction has profited internationally from the upturn in investment spending, with increasing project activities in the global chemical processing equipment sector. This encouraging demand situation has also made it possible to implement significant price increases again after a lengthy lean period.

In fiscal 2003/2004, the ThyssenKrupp Stainless group achieved sales of around EUR5 billion and EBT of EUR385 million. It produced around 2.7 million metric tons of crude steel in total and shipped some 2.4 million tons, with flat-rolled stainless products alone accounting for more than 2.2 million tons. Despite a considerably more difficult market environment, the company closed the fiscal year just ended with another profit.

The world market for the company's core cold-rolled stainless products is forecast to grow by 3.8% this year, which is slightly weaker than in previous years. A volume of around 14 million metric tons is expected at year end, with growth being driven mainly by developments in Asia and North America.

Following weaker growth last year, China - now the world's biggest national market for flat-rolled stainless products - is once again leading the way. This upward trend will continue in the coming years, albeit at a slower pace and with temporary dips in growth. However, domestic production capacities are growing even faster than consumption, so it must be assumed that China will shortly become a net exporter. The first signs of this are already evident: despite the fact that it imports around 1 million tons of stainless cold-rolled strip, China is already exporting just under 150,000 tons per year, with not insignificant amounts going to Europe and the USA. This massive increase in national capacities and the increasing battle for market share among Chinese producers - without regard for the ability of the market to absorb these volumes - resulted over the course of the year in a significant supply overhang. From the 2nd quarter 2005 this led to a rapid fall in market prices for stainless cold-rolled strip, which in the preceding months had risen to almost international levels.

On the North American market, the continuing consolidation on the producer side led to the closure of further capacities. On the other hand, supply pressure increased due to rising imports, particularly from China. With demand weakening slightly, the result was a fall in base prices.

In Western Europe, the market for cold-rolled stainless products fell well short of expectations throughout the year as a result of generally weak economic activity, particularly in the countries with the highest stainless consumption - Germany and Italy. High inventory levels at customers and uncertainty about how raw materials prices would develop depressed demand, while continued high imports from non-EU countries and producers' new capacities exacerbated the imbalance between supply and demand. As a consequence, base prices came under increasing pressure from the 2nd quarter 2005. Most producers countered this with in part massive production cutbacks.

This widening of the gap between supply and demand in the flat-rolled stainless segment, now admitted by competitors and gaining media coverage, comes as no surprise to the Group. In fact it is more surprising that this development, which the company has been anticipating and including in its planning for some time, was not recognized much earlier by other market players and market observers.

Against this background, for several years now ThyssenKrupp Stainless has been concentrating less on expanding its own capacities and more on increasing its market presence. To this end the company is expanding its distribution and service center network and extending its range of services. In addition, it is constantly developing new products and applications and improving its processes to enhance quality and increase profitability

ThyssenKrupp Stainless puts its investment funds to targeted use, with different emphasis in different regions. In Europe, the focus is on optimizing processes at the production plants as well as increasing value added and thus service for customers. In Germany and Italy the company is currently concentrating on improving its service center structure, increasing its processing capacities and thus extending its range of product-specific services. One key element is the service center in Turkey. The segment will also be strengthening its presence in the faster-growing Eastern European market in the future. In addition to the existing service center in Hungary, a further service center is currently being built in Poland.

The NAFTA market is served from the Mexican subsidiary ThyssenKrupp Mexinox, which supplies high value-added products in particular to end customers. The new bright annealing line, which will start operation in the 2nd quarter 2006, will play an important part in this development. It will allow the company to add significantly to its portfolio, particularly in high-quality grades and finishes.

The subsidiary Shanghai Krupp Stainless is active in what is currently the most difficult market. Given the pressure from the major Chinese competitors, most of which concentrate on the volume segment, the company will seek suitable niche areas. The end-customer segment, with its demanding quality and delivery performance requirements, fits the bill particularly well. After initially producing cold-rolled strip in bright-annealed finishes only, the company will increase its capacity from 90,000 tons to around 250,000 tons p.a. over the course of this year with the start-up of two cold rolling stands and a cold-rolled annealing/pickling line. A new hot-rolled annealing/pickling line, scheduled to start production in mid-2006, will round off the cold rolling mill operations.

An important step in strengthening the distribution network in Asia is the establishment of a stainless distribution center in Guangzhou with direct access to the high-consumption regions of South China and as a bridgehead to Southeast Asia. It is currently starting operations.

ThyssenKrupp Stainless also supplies high-performance materials at the tip of the materials pyramid. ThyssenKrupp VDM is market leader for nickel-base alloys in all standard product forms. Titania, a subsidiary of ThyssenKrupp Acciai Speciali Terni, is particularly strongly positioned in the European titanium market. The market for both product segments is in very good shape at present, allowing targeted investments to be made aimed at adjusting capacities to rising demand.