ExEcutivE Summary o f t h E 2 0 0 8 financial StatEmEnt

E x E c u t i v E S u m m a r y

o f t h E 2 0 0 8

f i n a n c i a l S t a t E m E n t

Dillinger Hütte

eng_ums_1500_dihd_geb_cs3.indd 1 24.06.2009 12:15:13 Uhr

1

K e y f i g u r e s

2007 2008

Hot metal purchase in kt *) 2 297 2 241

Crude steel production in kt 2 655 2 619

Total production of heavy plate in kt 2 388 2 227

of which produced in Dillingen in kt 1 607 1 481

of which produced in Dunkerque in kt 781 746

Total shipments in kt 2 926 2 921

of which heavy plate in kt 2 307 2 254

of which semi-finished product in kt 619 667

Total workforce (excluding trainees) as of 31 Dec. 5 233 5 322

Personnel expenses in millions of 334 345

of which for pensions in millions of 18 22

Balance sheet total in millions of 2 466 2 748

Shareholders’ equity in millions of 1 119 1 369

Fixed assets in millions of 1 131 1 488

Net annual income before profit transfer in millions of 533 607

Earnings from ordinary activities in millions of 537 609

EBITDA in millions of 558 613

EBIT in millions of 493 549

Cashflow from operations in millions of 608 532

Sales by country in millions of

Germany 972 1 097

France 550 739

Other EU countries 475 463

Other exports 629 733

Total sales 2 626 3 032

Change

– 2.4 %

– 1.4 %

– 6.7 %

– 7.8 %

– 4.5 %

– 0.2 %

– 2.3 %

+ 7.8 %

+ 15.5 %

*) Total production ROGESA Roheisengesellschaft Saar mbH: 4 357 kt (2007: 4 631 kt)

eng_inh_1500_dihd_geb_cs3.indd 1 24.06.2009 12:16:01 Uhr

2

High-tech plate from Dillinger Hütte for extraordinary buildings: the new Porsche Museum


3

C o n t e n t s * )

Members of the Supervisory Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Members of the Board of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Report of the Board of Management (abridged*)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Annual financial statement (abridged*)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Balance sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Profit and loss statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Cash flow statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Listing of shareholdings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

*) This abridged English-language financial statement is an excerpt from the annual report of Dillinger Hütte for the 2008 financial year. This publication does not correspond to the complete form required by law (for this, please see the 2008 Annual Report for Dillinger Hütte in German).


4

M e M b e r s o f t h e

s u p e rv i s o ry b oa r d

Dr. MICHAEL H. MÜLLER Attorney Saarbrücken Chairman

ARMIN SCHILD District Manager for IG Metall Hessen, Biebertal Rheinland-Pfalz, Thüringen, Saarland 1st Deputy Chairman as of 3 April 2008

MICHEL WURTH Member of the Group Management Board, ArcelorMittal Luxembourg 2nd Deputy Chairman

Dr. BERND BERGMANN Member of the Executive Board of the Curatorship Wallerfangen for the Montan-Stiftung-Saar (as of 11 July 2008)

Prof. Dr. HEINZ BIERBAUM Director of the INFO-Institute, Saarbrücken Saarbrücken

CARL DE MARÉ Vice President ArcelorMittal, Chief Technical Belsele Officer Flat Carbon Europe (as of 11 July 2008)

OTFRIED FORSSMAN Former Chairman of the Supervisory Board of Saarstahl AG Luxembourg (until 11 July 2008)

HANS-GÜNTER HERFURTH Managing Director of ROGESA Dillingen Roheisengesellschaft Saar mbH (until 31 March 2009)

ALBERT HETTRICH State Secretary, Ministry of Economic and Scientific Affairs Saarbrücken for Saarland

ROBERT HIRY Primary Authorized Representative for IG Metall Rehlingen-Siersburg Völklingen Administrative Office

GÜNTER LUDWIG Deputy Chairman of the Dillinger Hütte Works Council Losheim

ALEX NICK Vice President Global Plate, ArcelorMittal Luxembourg (until 11 July 2008)

REINER PETRY Member of the Dillinger Hütte Works Council Rehlingen-Siersburg

ALBERT RINNEN Vice President Controlling, ArcelorMittal Luxembourg (as of 27 Feb. 2008)

EUGEN ROTH Chairman of Deutscher Gewerkschaftsbund Saar Merchweiler (German Federation of Trade Unions, Saar District)

ROMAN SELGRATH Chairman of the Dillinger Hütte Works Council Dillingen

ERICH WILKE Bank Executive (ret.) Königstein (Taunus)


M e M b e r s o f t h e

b oa r d o f M a nag e M e n t

Dr. PAUL BELCHE Chief Executive Officer, Commercial Division Chairman

Dr. NORBERT BANNENBERG Executive Officer, Technical Division

Dr. KARLHEINZ BLESSING Executive Officer, Human Resources

FRED METZKEN Executive Officer, Financial Division

5


r e p o rt o f t h e b oa r d

o f M a nag e M e n t (abridged)

General economic situation

The steel market

Noticeable cooling of world economy

The global economy increasingly cooled during the course of 2008. Turbulence in the

financial markets began impacting the real economy during the summer of 2008 and, by

the following autumn, penetrated the manufacturing industry, whose production rapidly

declined. This cooling effect was also reflected in the price of oil, which continued to be

highly volatile. After reaching a record price of US$ 140 per barrel during the summer,

it had plunged to just US$ 35 per barrel by the end of the year. Western industrial coun-

tries have been hardest hit by the global economic slump, with a mere 1 % overall rate

of increase of their gross domestic product (2007: + 2.7 %). Additionally, during the last

months of the year, emerging markets were increasingly impacted by the events on the

financial markets; still, growth in those markets remained relatively dynamic. Overall, an

average 3.4 % *) rate of growth in the world economy is still expected to be reached in

2008 (2007: + 5.2 %), along with an overall increase in world trade – despite greater

weakening at the end of the year – of 4.1 % (2007: + 7.2 %).

Declining growth in Europe

Economic conditions in Europe continued to develop positively at the start of 2008, but

weakened at an increasing pace during the course of the year. With the sharp cooling of

the world economy, most member states of the EU region suffered drastic weakening of

exports to nonmember states and sharp declines in investment. This led to plummeting

industrial orders. Burdened by high prices for energy and food, demand among private

households also slipped. Eurostat, the statistical office of the European Communities, has

calculated a growth rate of 0.9 % for the entire EU in 2008, and a 0.7 % rate within

the euro zone. Due to good development and strong exports in the first months of the

year, Germany was still able to achieve a rate of economic growth of 1.3 % for 2008

(2007: + 2.5 %). The economic situation progressively slowed in the following months,

and slid into recession.

Worldwide crude steel production declines slightly

Following uninterrupted growth in global steel production since 1998, which grew in

2007 by another 7.6 %, production decreased for the first time in 2008 by a moderate

1.2 % to around 1.329 billion tons **). Following strong growth in production during the

first eight months (+ 5.6 %), there was a significant decline from September through the

end of the year, with the negative trend increasingly worsening in November (- 19 %)

and in December (- 24.3 %). Reasons were the major impact of the financial crisis on the

real economy and rapid weakening of the world economy, which led to serious insecu-

rity and declines in orders in all significant consumer sectors. Most steel companies react-

ed by reducing production in order to adapt supply to the weaker demand. Steel pro-

duction declined in almost all manufacturing countries, including those in Europe, North

and South America, and the CIS countries. In contrast, Asia (+ 1.9 %) and the Middle East

6

*) All figures regarding economic conditions and the steel market are based on currently available, sometimes preliminary official and non-official statistics.

**) Production figures from the World Steel Association, as of January 2009


Report of the Board of Management

(+ 1.2 %) were able to increase overall production.

As the first country to exceed the 500 million ton

mark (502 million tons), China remained dominant

in the global raw materials market in 2008 as well,

with a world market share of 37 %. But with a

growth rate of just 2.6 % compared to the previous

year, it appears that the steep climb of the annual

production curve has been halted here as well.

Worldwide demand for steel plunges

at the end of the year

As a consequence of the international crisis in the

financial markets, the strong upsurge in worldwide

steel demand, which had persisted since 2002 with

average growth rates of 8 %, came to an abrupt

end in August 2008. Demand growth in 2008 is

anti cipated to be about 3 %. There was a noticeable

decline in activity in numerous sectors of the econ-

omy as well as in the companies’ inclination to invest in businesses. Because of the declin-

ing market in important customer segments along with the simultaneous reduction of

excess stock inventories, incoming orders for steel producers have dwindled in many

countries and for numerous products. While producers reduced their capacities world-

wide in the last quarter in order to regain market equilibrium, the price for most types of

steel nonetheless fell significantly from their previously very high level.

Steel consumption in Europe declines

Until the middle of the year, European producers were operating near their capacity

limits and the steel market was marked at times by scarcity among some steel products

and by high prices – in part as a consequence of increases in prices for energy and raw

materials. Given these circumstances, and increasingly due to consistently high import

volumes, particularly from China, excess stock inventory reached a very high level. Steel

consumption began to weaken noticeably in the middle of the year. Significant decline

in demand and liquidation of stock begun by traders and consumers at the end of the

year caused the market volume to shrink by 20.9 % in the fourth quarter and placed

pressure on prices. The European Confederation of Iron and Steel Industries (Eurofer)

estimates a 7.2 % decline in market volume and a 3.2 % decline in real steel consump-

tion for the year. Despite strong growth in the first half of the year, production in the

European Union’s steel processing sector fell by 1.5 % overall in 2008 when compared

with the previous year. Hardest hit were the automotive sector (- 5.5 %), household

goods (- 3.9 %), the tube industry (- 2.7 %) – particularly the precision-made tube

segment – as well as the construction sector (- 0.4 %). In contrast, the machine construc-

tion (+ 1.8 %) and ship building (+ 1.6 %) sectors were able to increase their production

from the previous year’s levels.

7

World total

Rest of World

CIS

South Korea

China

India

Japan

USA

EU-27

0 500 1000 1500

(in millions of t)209.6

198.6

98.2

91.5

120.2

118.7

489.2

502

51.5

53.5

124.2

114.1

+ 3.9 %

+ 2.6 %

– 1.2 %

– 6.8 %

– 5.3 %

– 1.2 %

20082007

53.1

55.1+ 3.7 %

– 8.1 %

196.2– 1.6 %

1345.4

1329.7

199.4

Steel production in 2007 and 2008 (as of January 2009)

EU-27

USA

Japan

China

SouthKorea

CIS

Rest ofworld

EU-27: 198.6 million t (15 %)

USA: 91.5 million t (7 %)

Japan: 118.7 million t (9 %)

China: 502 million t (37 %)

South Korea: 53.5 million t (4 %)

CIS: 114.1 million t (9 %)

Rest of world:196.2 million t (15 %)

1.329 billiontons

India: 55.1 million t (4 %)

India

Percentage share of world steel production in 2008: 1.329 billion tons (as of January 2009)


8


Good position in the heavy plate market

Worldwide demand for heavy plate remained very good until autumn 2008. However,

the market was consistently marked by very high stock inventories with what were ini-

tially very high rates of sales from stock. While import volumes declined somewhat, espe-

cially those from China, by the end of the year they were once again on the upswing.

Production of heavy plate in Europe sank in 2008 by 4.2 % and therefore did not attain

the record level reached in 2007. Activity in many heavy plate consuming segments

decreased noticeably at the end of the year, particularly in the construction machinery

and ship building sectors. In contrast, steel processing companies supplying the energy

sector have until recently maintained good utilization of capacities. This is particularly

true for boiler and pressure vessel construction, the offshore industry, large-diameter

line pipe production, and heavy machine construction.

The market for heavy plate became increasingly fractured during the last months of the

year. Demand fell sharply for so-called commodities – i.e., grades with a low degree of

specialization. In addition, end customers, traders and flame cutting businesses began

reducing the extremely high stock inventories. Given these circumstances, prices – after

increasing steadily until midyear – fell significantly. The worldwide expansion of capacity

carried out in years past exacerbated this situation. In contrast, in the market segment

for specialty steels – those with high-end qualities and extraordinary dimensions –

consumption and prices remained mostly stable up to the end of the year after having

risen sharply in the first half of the year.

High utilization of mill capacities

Dillinger Hütte (DH) experienced high demand in 2008 from all customer segments for

both of its primary product groups – pipe and normal plate – which utilized the capa c-

ities of the production facilities very well. As in the previous year, the very high demand

from customers for certain products could not be completely satisfied. The company

meanwhile continued to focus with success on a more sophisticated product mix with a

growing proportion of higher and more complex grades.

Production figures were slightly under the record volumes of the previous

year in the primary stages (production of hot metal and steel), as well as at

both rolling mills, i.e., at Dillinger Hütte itself and at the wholly-owned sub-

sidiary, GTS Industries S.A. in Dunkerque (France). The main reasons for the

slight decline were malfunctions in the blowers in the blast furnace area at

the start of the year and a scheduled three-week shutdown for repairs in

Dillinger Hütte’s rolling mill. Purchases of hot metal therefore declined by

2.4 % compared to the previous year, to 2 241 kt (2007: 2 297 kt), and the

production of crude steel fell by 1.4 % from the previous year to 2 619 kt

(2007: 2 655 kt).

Dillinger Hütte achieves record earnings once again

0

500

1000

1500

2 000

2 500kt

2005

1556

2 347

791

2006

1533

2 258

725

in Dillingen in Dunkerque

2007

1607

2 388

781

2008

1481

2 227

746

Production of heavy plate



9

The continued high steel production levels satisfied the slab supply for the

rolling mill in Dillingen as well as the majority of slab requirements of GTS

Industries. The production of the rolling mills (2 227 kt) declined by a total of

6.7 % from the previous year (2 388 kt), whereby 1 481 kt of heavy plate was

produced in Dillingen (2007: 1 607 kt) and 746 kt of heavy plate was produc ed

by GTS Industries in Dunkerque (2007: 781 kt).

Sales volume rose considerably

Shipping and sales volume levels remained very high in 2008, commensurate

with the good utilization of production capacities. Total sales of heavy plate

amounted to 2 254 kt (2007: 2 307 kt). Despite the slight decline in volume,

better earnings led Dillinger Hütte to record double-digit growth in its sales

revenue (+ 15.5 %) to € 3.032 billion, enabling the company in 2008 to

exceed the € 3 billion mark for the first time (2007: € 2.626 billion). This

signif icant growth is also the result of an increasingly high-end product mix.

All of the main markets were able to profit equally from the increase in sales,

and their share of total sales remained nearly constant compared with the

previous year: Germany (36.2 %), the European Union (39.7 %) and the remain-

ing export countries (24.1 %).

Earnings from operations again at a record level

Dillinger Hütte achieved € 516 million in earnings from operations in 2008

compared with € 457 million during the previous year; these earnings are

adjusted for depreciation based on the previous year’s valuation of inven-

tories according to the LIFO method. The strong growth in earnings is the result

of further improvements in the level of sales revenue. Due to the excellent

market situation, it was possible to further focus the available production

capacity on products with high added value. In addition, sharply increased

costs for materials had to be passed on to customers. The ongoing programs

for improving profit performance also made an important contribution to the

positive development of earnings at Dillinger Hütte.

Personnel expenses rose by 3.4 % to € 345 million

compared to 2007 (€ 334 million), with staffing

levels remaining nearly constant. The € 30 million

increase in income from shareholdings and interest

is primarily attributable to greater earnings from

dividends and profit transfers as well as to increased

interest earnings. Earnings from ordinary activities

thus amounted to € 609 million (previous year:

€ 537 million), which corresponds to a 13.5 %

increase.

Earnings before interest & taxes (EBIT) rose by € 56

million to € 549 million. Earnings before interest,

Germany FranceOther EU countries Other

0

20

40

60

80

2005

10

30

50

70

90

36.0

2006

100

19.0

15.7

29.3

37.3

18.9

15.7

28.1

%

2007

37.0

20.9

18.1

24.0

2008

36.2

24.4

15.3

24.1

Geographic distribution of sales volume, 2005 - 2008

0

100

200

300

400

500

Millions of

2004 2005 2006

10

20

30

40

50

110

455

401

247

198

65

EBIT EBITDA ROCE

0

%

2007

493

600

2008

613

558 549

8.5 %

25.0 %

44.2 % 44.7 %

40.9 %

Development of EBIT, EBITDA and ROCE

2007

533

2 626

Sales volumein millions of

0

50

100

150

200

250

0

Profitin millions of

2005

300

2 053

203

350

400

450

500

2006

420

3 000

2 500

2 000

1 500

1 000

500

2 266

Sales volumeAnnual profit

550

607

3 032

2008

600

650

700

Annual sales and profit performance


10


taxes, depreciation and amortization (EBITDA) rose to € 613 million (2007: € 558 mil-

lion). Return on capital employed (ROCE), at 40.9 %, was slightly below the previous

year’s level (44.7 %). After deduction of taxes and compensatory payment to outside

shareholders, net income for the year, before profit transfer, amounts to € 607 million

(2007: € 533 million). After allocations to earnings reserves amounting to € 250 million,

profit transfer to the controlling company, DHS – Dillinger Hütte Saarstahl AG, amounted

to € 357 million.

Qualified, flexible and dedicated employees, along with modern processing and innova -

t ive techno logies, are crucial to Dillinger Hütte’s business success. Occupational safety

and effective promotion of employee health remained central to human resources policy

in 2008. By increasing the com pany’s workforce and trainee pool, Dillinger Hütte strove

during the year under review to meet its high requirements for qualified new staff.

Workforce increased – high degree of occupational safety

*) Before first-time LIFO depreciation of € 27 million

Key figures 2004 2005 2006 2007 2008

Capital intensity

Shareholders’ equity millions of 639 739 869 1 119 1 369

Balance sheet total millions of 1 366 1 599 2 070 2 466 2 748

in % 46.8 46.2 42.0 45.4 49.8

Liquidation ratio for fixed assets


Fixed assets millions of 816 876 1 032 1 131 1 488

in % 78.3 84.4 84.2 98.9 92.0

Debts

Long-term bank liabilities millions of 109 89 114 100 93


in % 17.1 12.0 13.1 8.9 6.8

EBIT margin

EBIT millions of 65 *) 198 401 493 549

Sales DH-products millions of 1 142 1 554 1 786 2 043 2 343

in % 5.7 12.7 22.5 24.1 23.4

EBITDA margin

EBITDA millions of 110 *) 247 455 558 613

Sales DH-products millions of 1 142 1 554 1 786 2 043 2 343

in % 9.6 15.9 25.5 27.3 26.2

Return on capital employed (ROCE)

EBIT millions of 65 *) 198 401 493 549

Shareholders’ equity, tax provisions,

liabilities subject to interest (average) millions of 765 793 907 1 102 1 342

in % 8.5 25.0 44.2 44.7 40.9

Internal financing capability

Cash flow from operations millions of 130 309 562 608 532

Net investment in tangible assets millions of 48 32 66 78 121

in % 270.8 965.6 851.5 779.5 439.7

Expense structure in % of total operating revenue

Material intensity in % 70,8 68,1 63,3 66,5 67,7

Personnel intensity in % 19.9 16.6 15.8 12.5 11.3

Gross yield from business property (location-based)

Gross operating result millions of 75 224 348 475 506

Gross business property millions of 640 688 742 847 845

in % 11.7 32.6 46.9 56.1 59.9



11

Occupational safety a focal point – best results in company history

Effective improvement of occupational safety continued to be a priority in

2008. The goal specified in the annual development plan for the financial year

under review called for registering no more than 60 accidents requiring at

least one day of time off. With 54 accidents requiring at least one day of

time off and a 6.0 rate of accident frequency – e.g., the number of accidents

requir ing one day of time off per 1 million hours worked – Dillinger Hütte

achieved its lowest rate of accidents to date. This constitutes an important

victory on the path to the corporate goal of 100 % occupational safety, to

“zero accidents.”

Number of employees grows

A total of 5 322 people were employed at the Dillingen location at the end

of the 2008 financial year (31 Dec. 2007: 5 233). These employees worked at

Dillinger Hütte itself, at Zentralkokerei Saar GmbH (ZKS) and at ROGESA Roh-

eisengesellschaft Saar mbH (ROGESA). The adaptation of staffing levels, which

was undertaken as part of the DH-TOP 2007 earnings improvement program

that concluded in 2008, was continued and is being carried out through

socially responsible means – primarily through partial retirement or normal

employee turnover. These were largely counterbalanced in the 2008 financial

year through the acceptance of trainees and hiring of qualified employees to meet addi-

tional staffing requirements in specific production areas. This resulted in an additional

89 employees (+ 1.7 %) being added to the workforce in Dillingen when compared with

the previous year. 3 163 additional workers are employed at Dillinger Hütte’s subsidiaries

and affiliated companies (2007: 3 045).

Significant increase in the number of trainees

In 2008, Dillinger Hütte increased the number of new trainees by over 25 % to 96, up

from 75 in the previous year. This brings the number of young people currently under-

going their initial vocational training with prospects for a career in the company to 290

(2007: 274). With its dedication to training its own young staff, Dillinger Hütte has tradi-

tionally been considered one of the region’s most important employers and training

companies.

Dillinger Hütte’s "GPS" program for integrated planning and control (in German: Ganz-

heitliche Planung und Steuerung) is aimed at systematically intensifying the continuous

improvement process and at ensuring the coherence of the process within the company.

The key element of the program is the annual development plan. As in the previous year,

the plan for 2008 included company-wide focal topics such as occupational safety. As

indicated by the significant reduction of accidents in 2007 and 2008, the measures taken

up to now have already made a significant impact.

In addition to general and company-wide focal topics, specific divisional topics were also

developed within the annual development plan in 2008. Communication of the topics,

2002 2003 2004 2005 2006

50

100

150

200

250

300

350

400

450

0

Other trainees

Retraining commercial + tech/industrial

Technical college trainees

Tech/industrial trainees(without course of study)

2007

Cooperative studies with universities

Commercial trainees

2008

Strong dual system of initial training at Dillinger Hütte

Continuous improvement with GPS


12


Built with 6 500 tons of Dillinger steel: the 6-lane Golden Ears cable-stayed bridge, Vancouver/Canada (Photos courtesy of Bilfinger Berger and Corbett Philips)



13

goals and measures specified in the plan is therefore of major importance. Various

methods are used for this, including informational events, works assemblies and

employee reviews. As a continuous dialog, employee reviews in particular are to be used

to support and improve alignment with corporate objectives.

As in years past, high-tech plates from Dillinger Hütte were used during 2008 to realize

extraordinary and technically sophisticated projects all over the globe. The versatility of

these plates is demonstrated through their use in a wide range of locations for an

equally wide range of applications. Whether due to their special dimensions, high

strength or extraordinary toughness, engineers from all over the world have a long list

of reasons for selecting Dillinger heavy plate.

Nord Stream – heat from a frigid region

Preparations are underway for one of the world’s longest subsea pipelines, which will

run from Wyborg in Russia to Greifswald in Germany, to provide better access to Siberia’s

enormous natural gas reserves. The 1 200 km gas pipeline, which is to be laid with the

help of special ships, will contribute significantly to ensuring long-term energy security

in Europe. Dillinger Hütte provided the initial supplies for this unique project in 2008:

165 000 tons of pipe plate with special toughness properties. EUROPIPE GmbH, a sub-

sidiary half-owned by Dillinger Hütte, processed 75 % of the pipe supplied for the first

strand with an outer diameter of 1 220 mm and wall thickness of 27 to 41 mm, enabling

the pipes to withstand the required operating pressure of 220 bar.

Airbus maintenance hall – the ultimate garage

With a length of 73 meters, a wingspan of 80 meters and a height of 24 meters, the Air-

bus A380 is currently the world’s largest passenger aircraft. In order to comply with the

complex maintenance schedule for this state-of-the-art behemoth, a new maintenance

hall has been constructed specifically for it at Frankfurt Airport. The building’s cantilever

roof construction presented a challenge. In the end, it was achieved with two parallel

main trussed beams that span 180 meters and are placed 48 meters apart. The sophis-

ticated construction required steel grades that featured constant tensile yield strength

along the entire range of thicknesses. Dillinger Hütte made it possible to achieve this

project with a customized solution, and delivered 1 100 tons of a special steel grade.

Golden Ears Bridge – homage to a majestic bird

For years, traffic jams have hindered the flow of people and goods on both sides of the

Fraser River in the eastern part of Vancouver on Canada’s Pacific coast. To solve this prob-

lem, Canada’s TransLink transportation authority ordered the construction of the 6-lane

Golden Ears cable-stayed bridge, with a total length of 960 meters. The name of the

bridge, which is decorated with statues of eagles, is based on the nests of the eagles

("Golden Aeries") that were characteristic of the region in former times. Dillinger Hütte

supplied 6 500 tons of steel for this extraordinary project, which will open in summer

2009.

Dillinger high-tech steel for prominent projects – worldwide



14

Investment volumes increase once again

The “swing” on the Rhine and the Irish harp

Until recently, anyone wanting to cross the Rhine at the town of Wesel had to drive

across a semi-permanent bridge that was constructed on the foundation of the Wesel

Rhine Bridge, which had been blown up in the final days of World War II. This bottleneck

passage, traveled every day by more than 30 000 vehicles, is now being replaced by a

cable-stayed bridge with a total length of 773 meters. The 334-meter cantilever section

is supported by a single 130-meter-high pylon placed on land, which gives the bridge its

characteristic appearance and has earned it the nickname “Schaukel” (German for

“swing”). Dillinger Hütte supplied 2 800 tons for the construction of the bridge’s deck.

The Samuel Beckett Bridge, a 120-meter-long, double-span cable-stayed bridge, is under

construction in Dublin over the Liffey River. Its designer and architect, Santiago Calatrava,

took his inspiration for its design from the Irish harp, a symbol of Ireland that can be

found on many of its emblems and coins. The bridge can be rotated up to 90 degrees

to allow smooth traffic flow for boats and ships. Construction of this complex design is

possible thanks to a special high-strength Dillinger plate that features an unusual thick-

ness of 180 mm.

Alpha Ventus – wind energy from the North Sea coast

Germany's first offshore wind park, the Alpha Ventus, is being developed about 45 km

north of the North Sea island of Borkum. It is to serve as a test field that will provide

insight for future commercial use of offshore facilities. It will employ generators with a

peak output of 5 megawatts – the largest used industrially to date. With the help of

special ships, the wind turbines will be mounted on 700-ton steel tripods made from

Dillinger steel, stretching up to 148 meters in height. Dillinger Hütte supplied a total of

12 800 tons of steel for the project.

Laxiwa Dam – hydroelectric power on the Yellow River

China's hunger for energy cannot be satisfied over the long term with fossil fuels alone.

Regenerative hydroelectric energy is therefore gaining in importance. Once it is complet-

ed, the Laxiwa hydroelectric power plant in Qinghai Province will supply about 4 200

megawatts of electricity, which will be produced by six Francis turbines. The enormous

hydraulic pressure in the lower part of the giant downpipe lines, with a diameter of up

to 9.5 meters, means that the steel used must feature superior welding properties as

well as high strength. Dillinger Hütte supplied 4 750 tons of plate with these special pro-

perties for this exemplary hydraulic engineering project constructed from steel.

In order to further develop the company’s technological capabilities, Dillinger Hütte con-

tinuously invests in the optimization and modernization of its facilities and processes. At

€ 122 million, Dillinger Hütte's total investments for 2008 were once again significantly

higher than in the previous year (€ 79 million). An additional € 111 million was also

invested at the Dillingen location during the year under review in both indirect subsidia-

ries ROGESA Roheisengesellschaft Saar mbH and Zentralkokerei Saar GmbH. Dillinger

Hütte bore half of these investment costs, in proportion to its share in the companies.



15

Detailed information on these investment projects can be found in the section “Most

significant shareholdings of Dillinger Hütte”. As in years past, improvements in environ-

mental standards were again a focal point of investment activities for Dillinger Hütte,

ROGESA and ZKS.

In the steel plant, automation of the converter, including renovation of the drive con-

cept, was accomplished in the course of modernizing the electrical equipment for the

converter control system. During the year under review, the engineering phase was com-

pleted for the new secondary dedusting plant, which removes dust from the converter

and lime discharge. Plans were also completed for renovating continuous casting

machine 5.

In keeping with its focus on ever-more sophisticated products with increasingly high-

end and complex grades, Dillinger Hütte has also made numerous investments in the

rolling mill. For instance, to safeguard pipe plate production – particularly the produc-

tion of 56-inch pipe plate – a new, modern cross-cut shear has replaced the previous

equipment. The new roller hearth furnace 3, aimed at increasing heat treatment capacity,

began trial operation in early January 2009. In addition, an order was placed during the

2008 financial year for a new straightening press for heavy plate, which will be installed

in the rolling mill’s Hall 11 in late 2009.

Dillinger Hütte continuously invests in research and development to make sure its prod-

ucts are ready for the markets of tomorrow and to ensure the availability of processes

that enable cost-effective manufacturing of these products.

Production of hot metal and coke

One focus of research in the production of hot metal and coke during the 2008 financial

year was a close examination of the aging process of coking coal. The goal is to ensure

optimal coke quality.

Steel production

In recent years, the share of production made up by high-alloy steel grades has contin u-

ed to rise. Because the smelting and casting of these types of steels places high

demands on the primary and secondary metallurgy, as well as on the continuous casting

equipment, researchers have developed various alloying models for individual process

phases. Thanks to newly developed secondary-cooling strategies for casting high-alloy

grades, modern and highly specific analysis concepts can be implemented with the

existing continuous casting facilities.

Plate production

The company relies on continuous product development to respond to trends and devel-

opments in the heavy plate market, where demands include ever-higher tensile yield

strength and increasing plate thickness. Dillinger Hütte continuously works to develop

customized products and designs that feature these special, high-end combinations of

properties – properties which may even have never been realized before.

Research and development: optimization and innovation

02005

20

40

60

80

100

120

140

Millions of

79

32

66

2006 2007

122

2008

Development of investments in property, plant and equipment at Dillinger Hütte



16

The boom in demand on the supply markets for raw materials and sea transport further

intensified until mid-October of the year under review. Up to this point, the markets for

ore, fuels and shipping space were marked by massive bottlenecks in availability and by

an intensified struggle for raw materials. This led to partly drastic price increases on the

procurement side in all sectors. The impact of the financial crisis led to an abrupt turn-

around starting in October: the de mand

for raw materials and shipping space

collapsed, and as a result, the rates for

sea freight dropped drastically.

During the annual ore price negotia-

tions completed in early summer 2008,

steel producers were forced to accept

record-setting price increases for fines

and lump ore as well as pellets. Devel-

opments in the sea freight market for

iron ore were extremely volatile.

A highly strained volume situation prevailed also in the market for fuels until the con-

sequences of the financial and economic crisis became extensively felt. The logistical

infrastructures in the supplier countries could not keep up with the exploding demand.

Einkaufsgesellschaft der Dillinger Hütte und Saarstahl mbH (Dillinger Hütte and Saar-

stahl mbH Purchasing Company), founded by Dillinger Hütte and Saarstahl, con tin ued to

ensure supplies for both steel works in 2008. By combining the requirements of both DH

and SAG in the purchasing company, new procurement strategies and solu tions based

on partnership were developed with both traditional and new procurement sources,

thereby heightening synergy potentials.

Basic provisions for ROGESA, ZKS and Cokes de Carling (CdC) are secured long-term with

an extensive pack age of contracts for raw materials procurement and transport that run

through 2010. Einkaufsgesellschaft der Dillinger Hütte und Saarstahl mbH used tight

time frames for ROGESA and ZKS in 2008 to execute the first deals for certain coking and

blast furnace coals. The world coke market was marked by extreme price increases due

to the record-high coking coal prices, additional export restrictions by the Chinese

government, and massive demand. However, ROGESA was not affected by this, as ZKS

and CdC ensure the supply of coke. In the fourth quarter of 2008, a collapse was also

observed in the price for coke.

Due to the good utilization of capacities in the production plants, transport volume at

the Dillingen location was around 16.9 million tons, which was almost unchanged from

the previous year. Environmentally sound railway and inland vessels continued in 2008

to be used to ship most – in fact, more than 85 % – of the company’s transport volume.

0

100

200

300

400

500

600

700

1986

Index

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

Year

2008

Itabira PICarajas SF

Development of ore prices, FOB Brazil, index-based (1986 = 100) Carajas Sinterfeed / Itabira Pellets

Supply and transport market situation remains tense



17

In keeping with its corporate vision and environmental guidelines, Dillinger Hütte strives

consistently throughout the entire company for sustainable and ecologically sound

management and production. During the past financial year, a major share of the invest-

ments made in the Dillingen location again went toward new, modern equipment aimed

at effectively protecting the environment and optimizing energy efficiency.

The focus of extensive investments in environmental protection during 2008 continued

to be emission control. Various projects contributed to reduction of on-site dust emis-

sions. For instance, numerous measures were included as part of the ongoing refurbish-

ment of ZKS, which lead to improvements in air quality: state-of-the-art emission control

was installed for coke production (see “Most significant shareholdings of Dillinger

Hütte”).

The retrofitting of both ROGESA sintering plants with new process gas treatment equip-

ment represented another significant contribution to reducing dust emissions. The

first treatment plant on sintering plant 2 began operating in late 2008. Retrofitting of

sintering plant 3 with the same efficient flue gas cleaning technology begins in 2009.

Dillinger Hütte will also build a secondary dedusting facility to prevent dust emissions

from the converter section of the steel works. The planning was completed and the

system order ed during the year under review.

Zentralkokerei Saar GmbH, Dillingen

Dillinger Hütte and Saarstahl AG each hold an indirect 50 % interest in Zentralkokerei

Saar GmbH. ZKS produces coke intended exclusively for use in ROGESA blast furnaces.

Coke production (959 kt) declined from the previous year (975 kt). The slight weakening

of production by 1.6 % can be attributed to the overall lower operating mode of the

ROGESA blast furnaces. ZKS is a company without employees. Personnel are provided by

Dillinger Hütte for operation of the coking plant.

Investments increased significantly compared to the previous year (€ 43 million) to a

total of € 68 million. The most important investment project involved in this was the

new construction of Coke Oven Battery 3, which will serve to optimize production and

reduce emissions. The laying of the “cornerstone” for the oven took place on 15 January

2008. After operation of this oven battery begins, which is planned for September 2009,

an old battery will be cooled down and reassembled. Once the second phase of con-

struction is completed, the second old battery will be shut down. This procedure will

ensure that two oven batteries are always in operation during the construction work.

Implementation of this investment project ensures that the coke-oven technology and

environmental controls are state-of-the-art, and safeguards ZKS’s original production

capacity as of 2011.

In the course of ongoing refurbishment of the coal by-product plant – the so-called

“white side” of ZKS – all equipment that serves to clean the coke gas will be modernized

to meet the latest standards.

Most significant shareholdings

02005

250

500

kt

9901 011

2006

750

1000

1250

2007

975

2008

959

Coke production, ZKS

Environmental investments successfully expanded



18

ROGESA Roheisengesellschaft Saar mbH, Dillingen

ROGESA Roheisengesellschaft Saar mbH, in which Dillinger Hütte holds a

50 % interest (indirect and direct), produces hot metal exclusively for its

shareholders, AG der Dillinger Hüttenwerke and Saarstahl AG. The operational

management of ROGESA, as a company without employees, lies in the hands

of Dillinger Hütte. Despite a weakening when compared with the previous

year, the capacities of ROGESA’s facilities were consistently utilized at a high

level. Annual production in 2008, at 4 357 kt, was 5.9 % lower than the record

annual production achieved in 2007 (4 631 kt). Aside from malfunctions in

the blowers in the first quarter, the lower quantities ordered through Saar-

stahl at the end of the year were the main causes of this decline in product-

ion. Of the amount produced, 2 241 kt of hot metal was supplied to Dillinger

Hütte (2007: 2 297 kt) and 2 116 kt delivered to Saarstahl (2007: 2 334 kt).

Investments in ROGESA amounting to about € 43 million during 2008 were

significantly higher than those of the previous year (2007: € 22 million). A significant

share of the total investment sum went to preparations for the planned second new

lining of Blast Furnace 5 in 2010.

Another major project in the ROGESA division began in September of the year under

review with the expansion of the coal pulverizing plant with a third coal pulverizer,

which increases the coal injection capacity of both blast furnaces. With coal injection

technology, pulverized coal is injected with the hot blast through the tuyère into the

furnace. The increased pulverized coal and injection capacities allow coke consumption

to be reduced, along with the manufacturing cost of the hot metal. The new coal

pulverizer is being installed in the refurbished and reinforced frame of the former Blast

Furnace 1, and will begin operating in November 2009.

A blast furnace gas-fired power plant is currently under construction at the Dillingen

location. Shareholders in the Gichtgaskraftwerk Dillingen GmbH & Co. KG, are Evonik

New Energies GmbH (49.9 %), formerly known as STEAG Saar Energie AG, VSE AG (25.2 %),

and ROGESA Roheisengesellschaft mbH (24.9 %). The blast furnace gas-fired power plant

will have a net output of 90 MW. The investment allows the electricity needs of the Dil-

lingen location to be covered. Through the construction of the blast furnace gas-fired

power plant, excess blast furnace gas that is produced during the blasting process will

be completely converted into energy. The finest technology currently available is being

employed in the new power plant in order to ensure optimal environmental protection

and maximum energy efficiency. Significant investments were also made by ROGESA in

2008 in the resources-related connections for this new power plant.

Cokes de Carling S.A.S., Carling

Cokes de Carling S.A.S., in which ROGESA holds an indirect (100 %) interest, produced a

total of 862 kt of coke in 2008, compared with 741.4 kt during the previous year. Sales

volume amounted to € 227 million (2007: € 194 million). The company employed a total

of 393 people as of 31 Dec. 2008 (2007: 400).

0

1000

2 000

3 000

4 000

kt

DH SAG

2005

500

1500

2 500

3 500

4 500

2 107

2 028

4 135

2 129

2 218

4 347

2006

5 000

2007

2 297

2 334

4 631

2008

2 241

2 116

4 357

Hot metal production, ROGESA for DH and SAG



19

Cokes de Carling S.A.S. invested almost € 3.3 million during 2008 in modernization work

on its production facilities. In addition, work valued at € 3.1 million was done as part of

continuing efforts to meet environmental protection requirements. The new equipment

for extracting dust emissions when discharging coke ovens is already in operation in

Carling 2. This system efficiently reduces emissions. This type of dedusting system for the

Carling 3 plant is currently in the final assembly phase.

GTS Industries S.A., Dunkerque

GTS Industries S.A. (GTS), a wholly-owned subsidiary of Dillinger Hütte, operat-

es a heavy plate rolling mill in Dunkerque (France). The products are market ed

almost exclusively through Dillinger Hütte. GTS also procures the majority of

its input material from Dillinger Hütte. Although the financial crisis and the

general decline in business activity have already sharply impacted the steel

processing sectors, no significant losses were noted in the heavy plate seg-

ment in 2008. Like its parent company, GTS Industries experienced extremely

high demand during all of 2008 and was able to continue the outstanding

performance of the previous year.

In order to satisfy demand, all GTS Industries production facilities were operat-

ed at a high level of capacity utilization similar to that for 2007. At 746 kt,

production volume continued to be high, even if there was a slight decline

when compared to 2007 (781 kt). This can be attributed to difficulties in pro-

curing additional input stock (slabs) in the first half of the year. Productivity

continued to operate at the same good level as in 2007, which represents a

special achievement given the increasingly sophisticated and complex prod-

uct mix. These good results can be attributed in part to the impact of

numerous measures taken in the course of the GTS-TOP 2007 earnings im -

provement program.

The quantities shipped remained almost unchanged when compared with

the previous year. Because of the improved product mix, along with increased

sales revenue, GTS Industries’ sales volume rose from € 630 million in 2007 to

more than € 709 million in 2008. The increase of sales revenue compensated

for the rise in prices for input material and energy. Thanks to consistent con-

trol of expenses and savings from numerous measures to improve productiv-

ity, GTS Industries achieved a record-setting performance once again in 2008,

with earnings of € 77 million surpassing the previous year’s record earnings

of € 70.8 million.

At the end of 2008, there were 626 people employed at GTS Industries, com-

pared with 618 during the previous year. In 2008, 57 new employees were

hired. The rate of hiring remained high in order to replace members of the workforce

who entered normal or early retirement. The number of full-time equivalent employees

increased further and totaled 587 employees at the end of 2008 (2007: 563). In 2009, the

last employees will enter retirement through the opportunity for partial retirement.

0

100

200

300

400

Normal plate Pipe plate

Millions of

Other

500

2005

259

528

226

43

600

2006

275

206

39

520

2007

303

262

65

700

630

2008

327

337

45

709

Sales performance of GTS Industries

0

400

500

600

700

kt

100

200

300

2005

800 781790

2006

725

Normal plate Pipe plate

2007

746

2008

Development in heavy plate production, GTS Industries



20

GTS Industries, like its parent company, gives top priority to the issue of safety. With

three accidents subject to reporting requirements in 2008, the results were slightly

worse than in the previous year (2). Despite this slight increase, the accident situation

overall is at a very good level.

The year 2008 was an important one for GTS where investments are concerned as well.

Following the resolution in 2007 to invest in a new slab pusher type furnace, the founda-

tion work for the furnace was performed in 2008 so that the new furnace can be con-

structed and begin operation in 2009. Further significant investments were made or

initiated to modernize and renovate the facilities. Investments worth noting here include

renovation work on the cooling plant that will continue in 2009, installation of a turn

table for the plates behind four-high rolling stand no. 1, the startup of operation of a

width measuring device on four-high rolling stand no. 1, completion of renovation work

on the side-cut shears, renovation of the plate turnover device in the finishing line, and

reinforcement of the roller table at the heat treatment furnace for rolled plates. In addi-

tion, two new test piece sample shears were put into operation, and the data processing

department was modernized as part of process informatics.

EUROPIPE GmbH, Mülheim

The EUROPIPE Group manufactures and sells welded large-diameter line pipe made of

steel. The diameters range from 20 inches (508 mm) to 60 inches (1 524 mm). As the

management company for the EUROPIPE Group, EUROPIPE GmbH manages the group

and coordinates the technical and commercial activities of the subsidiaries and share-

holdings. Dillinger Hütte holds a 50 % share of EUROPIPE GmbH, which together with its

affiliated companies is among the world’s leading corporate groups in this market seg-

ment, with annual production of pipe amounting to more than one million tons, or

about 3 000 km.

Within Europe, large-diameter line pipe is produced at Mülheim, Germany, and Dunker-

que, France. Both the acquisition of the input material and the sale of the pipe produced

at the German and French locations to customers worldwide are handled through

EUROPIPE GmbH in Mülheim. Pipe coating in Mülheim is handled through MÜLHEIM

PIPECOATINGS GmbH (MPC), Mülheim, whose sole shareholder is EUROPIPE GmbH. In

France, the pipe produced by EUROPIPE is coated, as in the past, by EUPEC France of

Dunkerque, which operates as an external service provider for EUROPIPE GmbH.

In the United States, the operational companies of the EUROPIPE Group were consolidat-

ed in 2008 under the new holding company, BERG EUROPIPE Holding Corp. in Panama

City, Florida (USA). Berg Steel Pipe Corp. (BSPC), with its registered office in Panama City,

primarily supplies the North American market. Marketing activities for the American

companies within the United States and Canada are combined with those for EUROPIPE

GmbH in the BERG EUROPIPE Corp. (BEC) marketing company of Houston, Texas (USA).

Construction of the spiral pipe mill in Mobile, Alabama (USA), was completed according

to plan in 2008. The subsidiary Tubos Soldados Atlântico Ltda. (TSA), in Serra (Brazil), in

which EUROPIPE holds a 70 % interest, began production of spiral pipe in March 2007.



21

Loading of EUROPIPE’s large-diameter pipes for "Nord Stream", the longest subsea pipeline.



22

The market for large-diameter line pipe continues to be robust. The impact of the finan-

cial crisis and the weakened world economy has not yet impacted the world market for

large-diameter line pipe. In 2008, the EUROPIPE Group benefitted from good demand for

welded large-diameter line pipe and experienced good utilization of capacities. In 2008,

significant orders for EUROPIPE GmbH were received in particular from Germany, Great

Britain and the Middle East. The plants of EUROPIPE GmbH operated almost continuously

in two shifts during 2008. The utilization of capacities for the pipe plant and coating in

Panama City, Florida (USA), was also quite favorable; in Brazil, the TSA is still in the start up

phase and could not yet report satisfactory utilization.

The EUROPIPE Group was able to increase its total operating performance in 2008 over

the previous year to € 1 588.9 million (previous year: € 1 238.8 million). Group sales

volume rose to € 1 593 million (previous year: € 1 154 million). EUROPIPE GmbH alone

was able to increase its sales volume by 41 % to € 1 229 million (previous year: € 870

million). This improvement can be attributed for the most part to further improvement

in revenue and an increase in quantities shipped. The tendency toward greater weight

per meter continued during the financial year, in keeping with the trend of the previous

years; the weight per meter for the quantity shipped by EUROPIPE GmbH rose by 11 %

to 569 kg/m (previous year: 512 kg/m) and the quantity shipped measured in kilometers

rose to 2 839 km (previous year: 2 412 km). Shipped tonnage amounted to 1 229 kt

(2007: 1 016 kt).

Good earnings were achieved in 2008 despite the increasingly gloomy economic condi-

tions in the fourth quarter of the financial year. The EUROPIPE Group finished the 2008

financial year with after-tax earnings (in accordance with HGB, the German commercial

code) amounting to € 90.3 million (previous year: € 88.2 million) and EUROPIPE GmbH

finished the financial year with after-tax earnings (HGB) amounting to € 62.0 million

(2007: € 47.2 million).

The permanent staff of EUROPIPE GmbH included a total of 655 employees on the report-

ing date of 31 Dec. 2008 (previous year: 667). The EUROPIPE Group employed 1 302 per-

manent employees at the end of 2008 (previous year: 1 260).

The EUROPIPE Group invested a total of € 76.5 million in 2008 (previous year: € 41.4

million). Of this, € 19.6 million were invested in the Mülheim location (plant and head-

quarters) for plant, property and equipment and for intangible assets as investments in

replacement, rationalization and modernization. The goal is to maintain and further

develop the superior technical standard of the production facilities in comparison to the

competition.

The Group is in a comfortable position in comparison with competitors due to the cur-

rent backlog of orders amounting to more than 1.4 million tons as of 31 Dec. 2008. On

this basis, good utilization of capacities in the European plants is expected for 2009.

Company executives also do not see any relevant risks for EUROPIPE in the processing of

current larger orders (Nord Stream).



23

Further developments in the market for large-diameter line pipe depend to a particular

degree on developments in the energy markets, especially oil and gas prices. Despite

the significant decline in energy prices it is still expected that the prices of both oil and

gas will again rise to a higher level over the medium term. At this higher level, explora-

tion work for the oil and gas industry becomes more attractive and an increased demand

for energy in emerging market countries is once again expected over the medium term.

Company executives expect sales volume and earnings for the new financial year to be

comparable with the previous year. Prospects for the following year are marked by great

uncertainty due to the possible impact of the economic crisis.

Saarstahl AG, Völklingen

Specialties of Saarstahl AG, in which Dillinger Hütte holds 25.1 % of shares, include

the production of wire rod, bar steel and semi-finished products in various qualities.

Open-die forgings are also included in the product range. These products are important

primary products for the automotive industry and its suppliers, for the construction

industry, the energy machine construction industry, the aerospace industry, for general

machine construction, as well as for other steel-processing industries.

Saarstahl AG was able to improve its sales volumes for steel products in the significant

sales areas, and to achieve an increase of about 9.3 % over the previous year. The same

development was seen in the subsidiaries of the semi-finishing company. The sales

volume for Saarschmiede GmbH increased by about 22 % from 2007.

Crude steel production for 2008 was at 2.5 million tons, down from the previous year by

0.2 million tons (- 9 %). Rolling mill production was at 2.2 million tons. This represented a

decrease of about 8 % compared to 2007. Shipping of steel products sank by 0.2 million

tons (- 8.9 %) to about 2.3 million tons.

Despite lower volumes, sales revenue increased by 9.3 % to € 1 925 million (previous

year: € 1 762 million). The increase is a consequence of prices. Annual net income amount-

ed to € 158 million (previous year: € 184 million).

In 2008, additions to Saarstahl AG’s property, plant and equipment amounted to € 49.2

million (previous year: € 60.1 million). Investment activities during the 2008 financial

year were marked by major projects in various production divisions as well as numerous

smaller and moderate-size investments.

Work begun in 2007 to modernize the S1/S3 continuous casting facility in the LD steel

works continued, and construction of a new testing equipment for bars as-rolled began

in the Nauweiler rolling mill. A new grinding machine was acquired for preparation of

semifinished products in Neunkirchen and a new hall was constructed for the steel

inspection sampling shop.

The investment volume was considerably higher for the expansion and modernization

of the forging capacity of the Saarschmiede GmbH open-die forge. This major invest-



24

ment began in the previous year and was continued during the year under review. Total

volume amounted to approximately € 450 million. In 2008, additions to property, plant

and equipment amounted to € 172.6 million.

The total workforce of Saarstahl AG amounted to 5 058 employees on 31 Dec. 2008,

compared with 4 972 on 31 Dec. 2007.

Trading and flame-cutting companies in the DH Group

To supplement the range of products and lengthen the value-added chain, Dillinger

Hütte holds several indirect and direct shareholdings in trading and flame-cutting com-

panies in Germany, the Netherlands, France and Dubai. These companies are specialized

both with regard to their regional alignment, their product ranges and their processing

depth, whereby products from other steel producers are also marketed and processed.

All primary geographical markets were able to profit from the overall good economic

conditions on the heavy plate market in 2008. Correspondingly, the trading, flame-

cutting and prefabrication activities experienced an increase in both sales revenue and

sales volumes. All companies were able to achieve clearly positive earnings. Overall, with

€ 482.8 million, sales volume in 2008 increased by 15.9 % from the previous year's level

(€ 416.7 million) and the net shipped tonnage increased by 5.8 % to 349 kt (2007:

330 kt). The increase in sales primarily involved the trading activities. Due to mate-

rial purchase prices in 2008, which were likewise significantly higher, earnings from

ope rations for 2008, at € 33.4 million, are comparable to those of the previous year

(€ 34.8 million).

Global downturn of the world economy

Because of the extraordinarily complex and problematic environment, prospects for

2009 are marked by a high degree of uncertainty, with the risk of declines dominating.

The economic forecasts prepared in the last months were extremely short-lived and

were marked by massive errors in judgment. With these circumstances in mind, this fore-

cast foregoes the use of quantified prognoses for growth in the development of both

global economic conditions and the steel market. At the beginning of 2009, the world

economy experienced a drastic and synchronized downturn. Not a single region was

able to establish a true counterweight to the predominant downturn that occurred.

Industrial countries including the USA, Japan and the nations of the European Union

were especially hard-hit, and together slid into recession. At the same time, the econom ic

situation in the emerging and developing countries cooled noticeably. Because of this,

the volume of world trade will shrink in 2009 for the first time in 26 years. The export-

oriented European economic region will be particularly impacted by the decline in

worldwide economic power. A stabilizing impulse in support of the global market may

emanate from the numerous governmental stimulus programs, from money policy

measures – all major issuing central banks have lowered the prime rate – and from

decreasing price pressure on the markets for raw materials. It remains to be seen when

and to what degree these measures will have an impact.

Future prospects

54 million 11 %

108 million 22 %

256 million 53 %

Netherlands:AncoferWaldram Steelplates B.V.,Oosterhout

France:Eurodécoupe S. A. S., Lyon-ChaponnayAncofed S.A.R.L., Lyon-Chaponnay

Dubai:Dillinger Middle East FZE, Dubai

187 kt53 %

59 kt17 %

30 kt9 %

73 kt21 %

Germany:Ancofer Stahlhandel GmbH, MülheimJebens GmbH, Korntal-MünchingenFischer H.C. Eisen GmbH, Mannheim

483 million

Sales volume

349 kt

Shippedtonnage

65 million 14 %

Sales volume and shipped tonnage in 2008 for the trading and flame-cutting companies in the DH Group



25

Worldwide steel market under tremendous pressure

The development of the steel market is likewise marked by a high degree of uncertainty.

The steel industry is especially impacted by the worldwide economic crisis, and initially,

a vigorous liquidation of stocks is anticipated in many regions of the world. As already

was the case in the second half of 2008, numerous manufacturers will continue to curtail

operation of their plants in 2009. Given these circumstances, experts expect a decline in

global steel production in 2009 and anticipate a moderate recovery only in 2010. Mean-

while, China – the world’s largest steel market – continues to play a key role. If the invest-

ment programs issued by the Chinese government take hold, demand there could be

reinvigorated; this, however, would be accompanied by a risk of renewed overcapacities.

In Europe, a sharp decline in consumption is expected due to weak activity in the steel

consuming sectors, especially in the automotive and machine- and tool-building indus-

tries. There are currently no signs of a revival, which means that a more persistent crisis

can be expected. In the next few months, even greater pressure is expected to be placed

on the European market due to rising imports.

Negative prospects for the heavy plate market

As in the second half of 2008, heavy plate production continues to decline at the begin-

ning of 2009 as numerous manufacturers react to falling demand by cutting back on

their production. In the course of the dynamic spread of the economic slowdown and

the dramatic collapse of industrial production, especially in Europe, consumption in the

heavy plate market has also fallen significantly and prices are slipping. The fracturing of

the market that began in 2008 continued at the beginning of 2009. In the first quarter,

very weak demand for commodity grades was countered by a continuation of relatively

good demand for products in the higher quality segment. However, the development of

the heavy plate market in the further course of the year is marked by a great degree of

ambiguity. Currently, a significant weakening of demand for heavy plate is anticipated

across the board and in all products. Up to now, the only customer segments still experi-

encing relatively good business activity are the wind power plant construction segment

and the offshore and large-diameter line pipe segments.

Opportunities and challenges in the future

One of the biggest future challenges for Dillinger Hütte is the further development of

new heavy plate capacities worldwide, including in the high-end segment. The crisis,

however, has put a stop to or delayed numerous construction projects for new plants.

On the other hand, in China – the most important steel market in the world – the

announced radical consolidation of the sector has not yet occurred.

The current financial and economic crisis has seriously impacted the worldwide steel

market. Nevertheless, steel consumption will increase again over the medium- to long-

term, despite an expected decline over the next two years. The reason for this is the con-

tinued high demand for steel in emerging markets that continue to industrialize, such as

China, India or Brazil. Increasingly protectionist measures being taken by many countries

A difficult year for Dillinger Hütte


26



27


Heavy plate from Dillinger Hütte for the North Rankin offshore platform project under construction in Australia

worldwide could prove burdensome in the next few months to the general steel market

and to the market for heavy plate, especially in Europe. These lead to a restriction of free

world trade, to distortions in competition, and – by diverting trade flows – to drastically

rising imports, especially in Europe.

Moreover, it is crucial for Dillinger Hütte, as well as for the entire German steel industry,

that suitable long-term conditions be established within energy and climate policy, par-

ticularly with regard to emissions trading. This is essential in order to ensure and devel op

the long-term competitiveness and viability of the region as a location for industry.

In the procurement market, the price for ore and coking coal has more than doubled

since 2003. No significant long-term relief is expected, especially where ore is concerned

– not least because of the strong concentration of the market with only a few suppliers.

For 2009, however, price reductions for the most important raw materials are expected

due to the decline in worldwide demand for steel. Dillinger Hütte emphasizes long-term

safeguards and diversification in the procurement of raw materials and energy. The com-

pany and its subsidiaries, ROGESA and ZKS, want to utilize the current relief in the freight

market to conclude new, long-term transport contracts. Energy supply and resource

efficiency is being improved with measures including the construction of a new blast

furnace gas-fired power plant and the full utilization of surplus blast furnace gas at the

Dillingen location.

Despite an extremely difficult environment, Dillinger Hütte is holding fast to the imple-

mentation of ongoing and planned investment programs at the Dillingen and Dunker-

que production locations. All investments in the optimization of the plant and process

configuration and in modern and cost-cutting process technologies are being continued.

This continuously improves productivity and reinforces the market strategy toward an

increasingly sophisticated product mix.

An important key to success is a dedicated and qualified workforce. Employee commit-

ment and skills are developed through continuous investment in their qualifications and

training. In the area of initial vocational training, which has been at a high level for many

years, the number of trainee slots was increased in 2008 by over 25 %, and the work-

shops and resources for training were expanded and modernized. On the basis of a pro-

gressive human resources management policy, Dillinger Hütte will continue to recruit

top graduates from universities as well as from the pool of skilled workers. Successful

cooperative efforts will continue with schools and universities, such as through “coope-

rative courses of study,” as is currently practised. This provides the company with its own

supply of qualified trainees and prepares for coming demographic changes.

With its balanced mix of products and countries, its closeness to its markets and custom-

ers, and strong specialization in high-quality and sophisticated heavy plate products,

Dillinger Hütte is also well-positioned to meet future market requirements. In doing so,

relevant market developments are being identified through intensive market obser-

vation and analysis of customer requirements. Closeness to customers is viewed as



28

Gigantic dimensions – special plate from Dillinger Hütte for the Alpha Ventus offshore wind park off Borkum island (Photo courtesy of Stiftung Offshore Windenergie DOTI 2008)

partnerships that are based on intensive technical consultation, superior reliability and

quality, and top service. By developing new and innovative processes and products, the

value-added chain is continuously improved and existing technological advantages are

secured and further developed. Profitability is being effectively enhanced with the suc-

cessful conclusion of the DH-TOP 2007 earnings improvement program and with contin-

uous cost control, so that positive earnings can be expected for 2009 and 2010 despite

significant declines when compared with the previous record years. With the “GPS”

system for integrated planning and control, and the associated annual development

plans, the company has introduced a management instrument that effectively supports

the process to further advance the company.

Dillinger Hütte well armed

Although steelmakers in Germany and Europe had already been impacted by the crisis

by the fourth quarter of 2008, Dillinger Hütte was able to continue producing at full

capacity through the last quarter of 2008 and the first quarter of 2009. The first three

months of 2009 continued to be marked by continued good activity and corresponding-

ly good utilization of facility capacities. In the second quarter, however, the consequences

of the worldwide financial and economic crisis also began to be clearly felt at Dillinger

Hütte, raising serious uncertainties regarding the rest of the year. The relatively stable

demand from a few sectors, such as wind power plant construction, the offshore indus-

try and the construction of oil and gas pipelines, was not enough to compensate for

the general decline in demand. In this environment, the company will make adjustments

to production beginning in the second quarter, and if necessary, will utilize human

resources policy measures ranging from depleting vacation and time accounts to short

time work, if needed. Overall, Dillinger Hütte anticipates significant declines in 2009 in

incoming orders, utilization of capacities, development of sales volumes and financial

results.

Based on the company’s consistent strategic alignment as a premium supplier in the

worldwide heavy plate market with a highly specialized product mix, and as an interna-

tionally recognized supplier of pipe plate for a promising energy market, Dillinger Hütte

considers itself well armed and prepared to react flexibly and to operate profitably

within an exceedingly difficult market environment. For this reason, positive results are

also anticipated for 2009.


Report from the Board of Management

29


A n n uA l f i n A n C i A l s tAt e m e n t

B A l A n C e s h e e t

Assets

EUR ’000 31/12/2008

Fixed assets

Intangible assets 1 910

Tangible assets 391 157

Financial assets 1 094 519

1 487 586

Current assets

Inventories 154 987

Receivables and other assets 640 215

Cash at bank and in hand 464 957

1 260 159

Deferred items 232

2 747 977

30

31/12/2007

2 021

332 693

796 309

1 131 023

120 003

571 366

643 870

1 335 239

2 466 262


Balance sheet

31

Shareholders’ equity and liabilities

EUR ’000 31/12/2008

Shareholders’ equity

Subscribed capital 178 500

Capital reserve 378 574

Earnings reserves 812 271

1 369 345

Provisions

Provisions for pensions and similar obligations 275 573

Tax provisions 1 356

Other provisions 551 194

828 123

Liabilities 550 509

2 747 977

31/12/2007

178 500

378 574

562 271

1 119 345

260 494

1 545

530 748

792 787

554 130

2 466 262


P ro f i t A n d l o s s s tAt e m e n t

32

EUR ’000 2008

Sales 3 032 151

Increase in finished goods and work-in-process and other own work, capitalized 11 296

Other operating income 21 370

3 064 817

Cost of materials 2 061 870

Personnel expenses 345 077

Amortization and depreciation 64 191

Other operating expenses 103 548

2 574 686

490 131

Income from shareholdings 58 727

Net interest income 60 533

Result from ordinary activities 609 391

Taxes on income and earnings – 187

Other taxes – 756

Compensatory payment to minority shareholders – 1 004

Profit transfer due to profit and loss transfer agreement – 357 444

Net income for year 250 000

Transfer to earnings reserves – 250 000

Unappropriated retained earnings 0

2007

2 626 150

35 733

57 536

2 719 419

1 770 410

333 810

64 992

102 500

2 271 712

447 707

45 039

44 224

536 970

– 1 899

– 887

– 1 004

– 283 180

250 000

– 250 000

0


33

C A s h f l ow s tAt e m e n t

EUR ’000 2008

Net income for the year before profit transfer 607 444

Depreciation/write-ups

Intangible assets and tangible assets 64 191

Financial assets – 5

Increase in long-term provisions 45 998

Change in receivables and liabilities due to affiliated companies – 174 432

Change in inventories and receivables (without affiliated companies) – 57 774

Result from the disposal of fixed assets – 257

Change in other provisions and liabilities (without affiliated companies) 46 781

Cash flow from operations 531 946

Investments in

Intangible assets and tangible assets – 122 577

Financial assets – 298 599

Retirements of fixed assets 684

Cash flow from investment activities – 420 492

Change in long-term financial liabilities – 7 187

Previous year’s profit transfer – 283 180

Cash flow from financing activities – 290 367

Change in liquidity – 178 913

2007

533 180

64 992

– 10

25 468

1 595

– 138 049

– 21

121 334

608 489

– 78 869

– 86 302

1 259

– 163 912

– 13 515

– 290 314

– 303 829

140 748


l i s t i n g o f

s h A r e h o l d i n g s

34

Share of capital in % Shareholders’ Results Currency Direct Indirect Total equity 2008

1. Affiliated companies ’000

Domestic companies:

Saarlux Stahl GmbH & Co. KG, Stuttgart EUR 53.0 53.0 13 994 436

Vertriebsgesellschaft Dillinger Hütte GTS mbH, Stuttgart EUR 100.0 100.0 4 210 1)

SATRANS Speditionsgesellschaft mbH, Saarlouis EUR 60.0 60.0 190 1)

Ancofer Stahlhandel GmbH, Mülheim/Ruhr EUR 90.0 90.0 25 880 3 567

Fischer H. C. Eisen GmbH, Mannheim EUR 100.0 100.0 615 1)

Jebens GmbH, Korntal-Münchingen EUR 100.0 100.0 19 739 1)

DHC-Consult GmbH, Dillingen EUR 100.0 100.0 149 13

Cargo-Rail GmbH, Dillingen EUR 100.0 100.0 55 11

2. Dillinger Projekt GmbH, Dillingen EUR 100.0 100.0 2 531 31

Foreign companies:

GTS Industries S. A., Grande-Synthe EUR 100.0 100.0 265 893 77 129

Eurodécoupe S.A.S., Lyon-Chaponnay EUR 100.0 100.0 3 499 1

AncoferWaldram Steelplates B.V., Oosterhout EUR 100.0 100.0 40 326 9 746

Trans-Saar B.V., Rotterdam EUR 100.0 100.0 1 363 894

Dillinger Hütte GTS Nederland B.V., Amsterdam EUR 100.0 100.0 539 461

Dilling-GTS Ventes S. A., Paris EUR 100.0 100.0 1 452 68

Dillinger Hütte Norge AS, Oslo NOK 100.0 100.0 1 983 861

Dillinger Middle East FZE, Dubai AED 100.0 100.0 66 892 23 702

Ancofed S.A.R.L., Lyon-Chaponnay EUR 100.0 100.0 528 – 72

Dillinger Hütte Services B.V., Zwijndrecht EUR 100.0 100.0 21 1

Dillinger USA Inc., New York USD 100.0 100.0 189 164

DH-GTS Sweden AB, Alingsås SEK 100.0 100.0 3)

Dillinger Hütte Italy S.R.L., Milano EUR 100.0 100.0 3)

Dillinger Hütte Spain S.L.U., Madrid EUR 100.0 100.0 3)

Dillinger Hutte UK Ltd., London GBP 100.0 100.0 3)


Listing of shareholdings

35

1) A profit and loss transfer agreement exists.2) Consolidated profit3) Earnings figures are not yet available.

Share of capital in % Shareholders’ Results Currency Direct Indirect Total equity 2008

2. Shareholdings ’000

Domestic companies:

Dillinger Hütte und Saarstahl Vermögens- verwaltungs- und Beteiligungs-OHG, Dillingen EUR 50.0 50.0 257 479 1)

Zentralkokerei Saar GmbH, Dillingen EUR 50.0 50.0 57 212 1)

Einkaufsgesellschaft der Dillinger Hütte und Saarstahl mbH, Saarbrücken EUR 50.0 50.0 99 1)

ROGESA Roheisengesellschaft Saar mbH, Dillingen EUR 24.5 25.5 50.0 224 636 1)

ROGESA Beteiligungsgesellschaft mbH, Dillingen EUR 50.0 50.0 13 003 8

Cokes de Carling S.A.S., Carling EUR 50.0 50.0 18 292 4 379

EUROPIPE GmbH, Mülheim/Ruhr EUR 50.0 50.0 278 845 61 968

EUROPIPE France S. A., Grande-Synthe EUR 50.0 50.0 4 274 1 311

BERG EUROPIPE Holding Corp., New York USD 50.0 50.0 173 188 68 133 2)

MÜLHEIM PIPECOATINGS GmbH, Mülheim/Ruhr EUR 50.0 50.0 27 021 8 920

Tubos Soldados Atlântico Ltda., Serra BRL 35.1 35.1 5 736 – 46 264

Saarstahl AG, Völklingen EUR 25.1 25.1 2 277 676 488 329 2)

1. Dillinger Projekt GmbH, Dillingen EUR 50.0 50.0 108 3


36

Imprint

Editor:

Aktien-Gesellschaft

der Dillinger Hüttenwerke

Werkstraße 1

66763 Dillingen

Phone: +49 (0) 68 31/47-0

Fax: +49 (0) 68 31/47-2212

http: //www.dillinger.de

e-mail: [email protected]

Responsible:

Ute Engel, Dillinger Hütte

Conception/Design:

Wolfgang Schmitt, Dillinger Hütte

Printed by:

Krüger Druck+Verlag, Dillingen

Photos:

Uwe Braun, Dillinger Hütte

Bilfinger Berger

Corbett Philips

EUROPIPE

Stiftung Offshore Windenergie DOTI 2008


ExEcutivE Summary o f t h E 2 0 0 8 financial StatEmEnt

Documents

Transcript of ExEcutivE Summary o f t h E 2 0 0 8 financial StatEmEnt