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SMS group . Annual Report 2006

Meeting your Expectations

SMS Demag Concast SMS Meer SMS Elotherm Cincinnati Extrusion Battenfeld Extrusion Battenfeld Gloucester

SMS group

Annual Report 2006

2.282

2.811

ORDER INTAKE by Business Areas in billion EUR

3.235 2.001 1.933 1.540 461 1.495 1.836 2.354 438 446 457 2.835

2006 2006 1.978 857 400 3.235 2.826 2.870 8,999 2002 2003 2004 2005 2002 2003 2004 2005 1.092 448 461 1.004 491 438 1.375 461 446 1.782 572 457 2.001 1.933 2.282 2.811 2.190 2.146 2.170 2.334 2.142 1.911 1.984 2.384 10,107 9,535 9,479 9,223

Total SMS metallurgy SMS Plastics Technology

SMS group in billion EUR Order intake Business Area SMS Demag Business Area SMS Meer Business Area SMS Plastics Technology

Total order intake

Sales

Order backlog

Employees*

Figures according to International Financial Reporting Standards (IFRS) *Year average with trainees

400

SMS group

Annual Report 2006

SMS metallurgy

BUSINESS AREA SMS DEMAG

Steelmaking Plants/ Continuous Casting Technology

Hot Rolling Mills/ Cold Rolling Mills SMS Demag AG, Germany Sidernaval Equipos Siderúrgicos S.A., Bilbao, Spain SMS Demag INNSE S.p.A., Milan, Italy

Strip Processing Lines

SMS Demag Metallurgical Equipment (Shanghai) Co., Ltd., Shanghai, China SMS Demag Pvt. Ltd., Gurgaon, India SMS Demag South Africa (Pty) Ltd., Parktown, South Africa SMS Demag Technology (Beijing) Co., Ltd., Beijing, China SMS Demag Ltda., Belo Horizonte, Brazil SMS Demag Inc., Pittsburgh, PA/USA SMS Millcraft LLC, Pittsburgh, PA/USA Concast AG, Zurich, Switzerland SMS Mevac GmbH, Essen, Germany HyComp Inc., Cleveland, OH/USA SMS Demag Tippins LLC, Pittsburgh, PA/USA SMS Demag Ltd., Oakville, Ontario/Canada FOEN Fontaine Engineering und Maschinen GmbH, Langenfeld, Germany SMS Demag Process Technologies GmbH, Vienna, Austria

SMS PLASTICS TECHNOLOGY

BUSINESS AREA SMS

Cincinnati Extrusion Cincinnati Extrusion GmbH, Cincinnati Extrusion (Dalian FTZ) Ltd., Vienna, Austria Dalian, China Cincinnati Extrusion GmbH, Kawasaki, Japan Cincinnati Extrusion Inc., Erlanger, KY/USA

Battenfeld Battenfeld Extrusionstechnik GmbH, Bad Oeynhausen, Germany SMS Extrusion Kempen GmbH, Kempen, Germany

BUSINESS AREA SMS MEER

Tube Plants

Long-Product Rolling Mills

Nonferrous Metal Plants

Press and Forging Technology

SMS Meer GmbH, Mönchengladbach, Germany SMS Meer S.p.A., Tarcento, Italy Hertwich Engineering GmbH, Braunau, Austria

Induction Technology SMS Elotherm GmbH, Remscheid, Germany

SMS Meer Service Inc., Pittsburgh, PA/USA

PLASTICS TECHNOLOGY

Extrusion American Maplan Corp., McPherson, KS/USA Battenfeld Extrusion Systems Ltd., Daliang Town, China

Battenfeld Gloucester Battenfeld Gloucester Engineering Co. Inc., Gloucester, MA/USA Converting Technology Srl, Bussolengo, Italien

Gloenco, Newport, NH/USA

Foshan Shunde Manufacturing Technology Ltd., Shunde, China

ANNUAL REPORT FOR THE FISCAL YEAR from January 1 to December 31, 2006

SMS group

SMS Demag Concast

BUSINESS STRATEGY

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BUSINESS AREA SMS DEMAG Steelmaking Plants and Continuous Casting Technology for Flat Products Steelmaking Plants and Continuous Casting Technology for Long Products Hot Rolling Mills and Cold Rolling Mills Aluminum Rolling Mills Strip Processing Lines Electrics and Automation Technical Service Technical Development

10 12 16 18 22 24 26 28 30

SMS Meer SMS Elotherm Hertwich Engineering

BUSINESS AREA SMS MEER Tube Plants Long-Product Rolling Mills Nonferrous Metal Plants Press and Forging Technology Induction Technology Service Technical Development 32 34 36 38 40 42 44

Cincinnati Extrusion Battenfeld Extrusion Battenfeld Gloucester

BUSINESS AREA SMS PLASTICS TECHNOLOGY Extrusion Technology ­ Cincinnati Extrusion Extrusion Technology ­ Battenfeld Extrusion Extrusion Technology ­ Battenfeld Gloucester 46 48 50

SMS group

EMPLOYEES

52

CONSOLIDATED FINANCIAL STATEMENTS Supervisory Board and Managing Board of SMS GmbH Addresses, Products and Services of the SMS group Managing Boards of the companies

55 61 62 66

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SMS group

Annual Report 2006

SMS group BUSINESS STRATEGY

ECONOMIC GROWTH The global economy continued its strong growth of the past three years at a rate of some 4 %. Especially China, India and Russia contributed to this upswing, but also large industrialized countries such as the USA achieved stronger economic growth than the average in the EU countries. The vigorous economy also led to rising investment in Germany. German companies spent 7.3 % more on machinery and plants than in the previous year. Once again the "world champion" exporting country, Germany increased its exports by 12 %. The boom in the steel industry is unbroken. It resulted in production of 1.25 billion t of crude steel in 2006, a growth of 10.6 %. China's share, at 374 million t, accounted for almost a third of the globally produced crude steel and, despite its high domestic demand, it has been a net steel exporter since 2005. Yet equally potent are other forces behind the upswing: the dynamically developing steel industries in south-east Asia, Russia, India and Latin America. There is progressive consolidation of the steel industry across national borders. The two largest producers, Mittal Steel and Arcelor, merged in 2006, and at the beginning of 2007 the Indian Tata group took over Corus.

Dr.-Ing. E.h. Heinrich Weiss, Chairman of the Board

Dr.-Ing. Kay Mayland, SMS Demag

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In 2006, our business was still driven by capacity expansions of Asian customers and many new construction projects in Russia, India and some emerging economies. It is evident that, in the medium term, there will be a surge in revamp business in the "old" steel countries. The aluminum industry continued its steady growth over the past years. Worldwide, China was both the largest producer and the biggest consumer of aluminum. Aluminum prices reached their highest level for 17 years in 2006. However, due to higher energy prices, some aluminum producers dropped out of the market.

The trend in the plastics industry remains upward. German plant builders were able to increase their sales by 4.3 %. Better yet, order intake in the last quarter of 2006 was even 15 % above the previous year's figure.

Dr.-Ing. Joachim Schönbeck, SMS Meer

Pepyn R. Dinandt, SMS Plastics Technology

Heinz Wirke, Finances and Controlling

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SMS group

Annual Report 2006

BUSINESS DEVELOPMENT The Business Areas SMS Demag and SMS Meer, united under "SMS metallurgy", were able to maintain the positive development of the past few years and achieved another jump in order intake and sales over the already high level of the previous year. Profits also grew considerably. The repurchase of the 28-% share of SMS Demag and SMS Meer still held by Siemens AG was financed from the company's own liquid assets. In the Business Area SMS Plastics Technology, the closure of our Meinerzhagen plant was followed by the sale of the remaining injection molding technology facility in Kottingbrunn/Austria. The SMS group improved its total order intake to EUR 3.24 billion, and sales to EUR 2.83 billion. More than EUR 2.8 billion of the order intake were accounted for by the SMS metallurgy companies. The annual net profit soared from EUR 37 to 68 million. The Business Area SMS Demag increased its order intake by 11 % compared to the excellent previous year. Sales and profits also rose significantly. The Business Area SMS Meer exceeded its previous year's order intake by as much as 50 %. There was also another improvement in profits, despite restructuring costs for the integration of SMS Eumuco into SMS Meer. The Business Area SMS Plastics Technology reported that the offloading of the injection molding technology sector left the remaining extrusion technology companies with good results.

The company was able to close the Meinerzhagen injection molding machine plant including adequate severance payments to the employees. The remaining injection molding technology division based in Kottingbrunn/Austria was sold in October 2006 to a strategic financial investor. In early 2007, we also sold the European extrusion technology companies, Battenfeld Extrusionstechnik in Bad Oeynhausen/Germany and Cincinnati Extrusion GmbH in Vienna/Austria along with their subsidiaries in the US and China. So now only Battenfeld Gloucester/USA remains in our portfolio ­ the company that, after a weak phase, is currently undergoing restructuring to bring it back to profit.

EMPLOYEES AND JOBS On average over the year, the companies in the SMS group employed a total of 9,000 people, 61 % of them at German locations. The sale of injection molding technology reduced the workforce by 477 employees. However, the Business Areas of "SMS metallurgy" were able to hire 304 new members of staff due to the high backlog. Once again, the proportion of trainees at the German locations, at 8 %, is much higher than the industry average. The fairly new "SMS Academy", initially set up by SMS Demag, offers all employees the opportunity to take part in a high-quality educational program outside their work time. The fact that almost all the courses and seminars are fully booked proves how popular they are among employees.

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CAPITAL EXPENDITURES AND ACQUISITIONS Once again in business year 2006, capex focused on IT and modernizing the manufacturing equipment. We were also able to expand our product range by acquiring a few smaller engineering companies as well as ­ together with Techint/Italy ­ the LOI group, a leading international industrial furnace builder. In February 2006, our new service workshop in China opened, after just one year of preparation. The integration of SMS Eumuco into the SMS Meer Mönchengladbach/Germany location made construction of a new office building and assembly shop necessary. They will be completed in 2007.

BUSINESS STRATEGY AND PROSPECTS Right now, no end to the boom in plant sales is in sight. That is why order intake and correspondingly also sales and profits of the SMS group in the current year will increase again, despite the divestment of most of the plastics technology companies. In the medium term, the revamp business, especially in the electrics and automation area, and technical service will gain in significance. Due to the steady consolidation in the steel industry, the importance of key accounts is rising. The project planning and sales departments will respond to this with more intensive key accounting. Internally, we are using the opportunity of the current excellent business situation to improve our processes and reduce specific costs. That will provide a competitive cost basis even for leaner times.

The management of SMS GmbH

Dr.-Ing. E. h. Heinrich Weiss

Dr.-Ing. Kay Mayland

Dr.-Ing. Joachim Schönbeck

Pepyn R. Dinandt

Heinz Wirke

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SMS group

Annual Report 2006 SMS metallurgy

SMS metallurgy PASSION FOR METALS Connecting the process chain

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CONCENTRATED COMPETENCE UNDER ONE UMBRELLA Now our expertise over the entire metallurgical process chain comes under one name. SMS metallurgy is the umbrella of our two Business Areas SMS Demag and SMS Meer. The Business Area SMS Demag, with an order intake of some EUR 2.0 billion, produces all the plants required for making and processing flat products: from steelworks to continuous casters and rolling mills to strip processing lines. The Business Area SMS Meer, with an order intake of some EUR 850 million, is responsible for projects relating to tube plants, long-product rolling mills and nonferrous metal plants as well as for all other metallurgical machinery and plant construction. TECHNOLOGY, PROCESS KNOWHOW AND SERVICES Our across-the-board SMS metallurgy range meets the complex demands of our customers. We supply customized, future-proof solutions, based on a unique combination of five factors: integrated technology for the entire process chain, consisting of mechanical components, all-inclusive systems and automation a high level of innovation in developing new technologies vast experience and know-how from our impressive range of references tailor-made concepts geared to our customers' demands that guarantee the high cost-effectiveness of our plants services including maintenance and revamp packages

SUSTAINABLE ADDED VALUE FOR OUR CUSTOMERS The integrative approach of SMS metallurgy gives our customers the assurance that they can always utilize and build on their existing potentials to increase their competitiveness.

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SMS group

Annual Report 2006 SMS metallurgy

STEELMAKING PLANTS and CONTINUOUS CASTING TECHNOLOGY for flat products

Our Steelmaking Plants/Continuous Casting Technology Division has participated strongly in the overall higher market volume and increased our market shares in this business field worldwide. That explains why both the number of orders received and sales were much higher in 2006. 100 YEARS OF SAF: A TECHNOLOGY FOR THE FUTURE SAF (Submerged Arc Furnace) plants contribute a considerable order volume to our sales. We supplied the first SAF furnace as early as 1906. Since then, we have continually improved this technology, and installed over 700 furnaces worldwide. Just how important our SAF technology is became evident in the huge international interest displayed at our symposiums to mark the 100th anniversary. INTEGRATED SOLUTIONS: ALL-INCLUSIVE STEELWORKS IN DEMAND There is a trend in the area of new plants toward turnkey solutions, for which we supply everything from one source. The benefits for our customers: smoothly meshed components lead to fast commissioning and high product quality. All this explains why we received new orders from Russia for all-inclusive plants for electric steelmaking. That is where our high level of technological expertise comes in, applied e.g. in our new SIS injection technology. Equally huge is the future potential in India, where we are set to erect new metallurgical plants for converter steel production.

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In secondary metallurgy, we managed to consolidate our global market leadership with our RH vacuum technology. That also applies to our patented CONARC® process technology (a combination of the electric arc furnace and BOF steel processes) which has established a strong market position with more references. ADDED VALUE THROUGH RECOVERY: ENVIRONMENT PROTECTION PLANTS Two new orders from Turkey and a commissioning project in China demonstrate that our plants for converter-gas recovery are not only eco-friendly, but also make good economic sense. The efficient recovery of valuable resources produces operational efficiency. All our regeneration and filter plants stand out for their high effectiveness and meet constantly stricter global environment protection regulations.

MAJOR ORDERS Steelworks Dragon Steel, Taiwan. Converter steelworks with duplex RH-Top plant Metallurgical Holding (Maxi), Russia. Minimill (EAF, LF), continuous caster Severski, Russia. Electric steelworks GMH, Germany. Ladle furnace Salzgitter, Germany. BOF conversion Dedusters Isdemir, Turkey. Converter-gas recovery Kardemir, Turkey. Converter-gas recovery COMMISSIONING PROJECTS Steelworks GMH, Germany. Revamp of DC furnace, dedusters Wuhan, China. Converter-gas recovery

Duplex RH plant.

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SMS group

Annual Report 2006 SMS metallurgy

The intensive improvements in our plant technologies for continuous casting are now bearing fruit. After the consolidation phase, we have succeeded in regaining our leading position in the profitable premium segment for high-quality steel grades. This contributes to an overall positive picture of the business situation in continuous casting technology. INDIA: EXTENSIVE ORDER Next, for Jindal South West Steel Ltd. Vijayanagar/India (JSW), we will erect a single-strand slab caster for products up to 2,200 mm wide. Included in the scope of supply and services are a converter gas extractor and an RH plant as well as a ladle furnace for secondary metallurgical treatment of the heats. TAIWAN, RUSSIA: NEW PLANT ORDERS Almost simultaneously with the successful commissioning of an ultra-wide continuous caster (for 3.25-meterwide slabs) in China and commissioning of India's most modern continuous caster, we received more new orders. We will develop and build a two-strand slab caster for China Steel Corporation (CSC) in Taiwan and a single-strand slab caster for Magnitogorsk Metallurgical Combine (MMK) in Russia.

USA: SEVERCORR TAKES SHAPE Our large order for SeverCorr is progressing well. The first production buildings have been erected and plant components are being installed. The pickling line was commissioned ahead of schedule on January 31, 2007. This order covers the entire production chain for highquality automotive sheet: steelworks, CSP® plant, pickling line/tandem cold rolling mill, hot-dip galvanizing, skin-pass mill. CREATING MORE BENEFITS: RESEARCH & DEVELOPMENT We have significantly increased our R&D spending in the Steelmaking Plants/Continuous Casting Technology Division. The aim of all our efforts is to develop plant and process solutions that offer our customers tangible benefits. That means less maintenance, lower energy consumption, lower overheads and better steel grades with improved notch impact strength and deep drawing capability. To give a concrete example: The new CSP® plant for our customer SeverCorr, on which it will produce automotive exposed material for the first time.

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MAJOR ORDERS Metallurgical plants Imidro (Hormozgan), Iran. Turnkey order for electric steelworks, continuous slab caster, media, electrics and automation Pervouralsky New Pipe Works (ChTPZ group), Russia. Turnkey order for steelworks Tata Steel, India. Integrated metallurgical plant with converter, hot-metal desulfurization and slab casters Slab casters CSC, Taiwan. 2-strand slab caster MMK, Russia. 1-strand slab caster Jindal SW, India. 1-strand slab caster (2,200 mm width), lamellas, converter extraction, RH plant COMMISSIONING PROJECTS Slab casters Anyang, China. World's widest slab caster Essar, India. India's most modern continuous caster

CSP® plant casting platform.

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SMS group

Annual Report 2006 SMS metallurgy

STEELMAKING PLANTS and CONTINUOUS CASTING TECHNOLOGY for long products

Once again, this Division managed to win considerably more orders. Included in the high-tech projects are: Three new electric steelworks for hot metal (ARCON® system) that went to China for the production of round and square blooms as well as billets of high-carbon steel grades. A new electric arc furnace for Tunisia and several vacuum plants with mechanical pumps for Turkey and Italy. CONCENTRATED KNOW-HOW: COMPETENCE CENTER FOR LONG PRODUCTS Concast AG specializes in long products. That means this company completes the SMS group range of products in the areas electric steelworks and continuous casters. Our Zurich plant builder supplies all-inclusive solutions for cost-effective minimills ­ including all the main and auxiliary equipment right up to marking devices with optical product recognition systems as well as complete automation systems. These highly productive, integrated plants are primarily used to produce round and square blooms, beam blanks and billets. Due to its extensive, longstanding know-how in process metallurgy, Concast AG ranks internationally as a major developer of continuous casting processes for highgrade steel. PROCESS IMPROVED: CONTINUOUS QUALITY A special feature of the casting process is Convex® technology. It results in a higher casting speed and simultaneously raises the product quality. Now, with its advancement on this process, All-Convex® technology, Concast AG has succeeded in further improving these benefits and enhancing the quality of long products right up to the critical edge areas. This process increases the yield of the downstream rolling mill and is a prime example of the company's constant commitment to research and development.

MAJOR ORDERS Jiangsu Shagang Steel, China. Minimill with electric arc furnace, ladle furnace, VD plant and 6-strand billet caster Kardemir, Turkey. VD plant with mechanical pump Elfouladh, Tunisia. Electric arc furnace with ConSo technology Posco, South Korea. 3-strand bloom caster for 370 x 490 mm Neelachal, India. 6-strand billet caster Jiangsu Shagang Steel, China. 5-strand billet caster. Peiner Träger GmbH, Germany. Beam-blank format for 1,150 mm COMMISSIONING PROJECTS Ferrostal Labedy, Poland. Electric arc furnace with ConSo technology Riva SAM Neuves Maisons, France. Electric arc furnace JSPL, India. 6-strand caster for billets Aceralia Planta de Gijon, Spain. 6-strand billet caster with Vibromold®

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SMS group

Annual Report 2006 SMS metallurgy

HOT ROLLING MILLS and COLD ROLLING MILLS

The Hot Rolling Mills/Cold Rolling Mills Division also made use of the good economic situation. Continued lively demand from China and the booming markets in India and Russia ensured a good order situation. Therefore, this Division was able to further boost both order intake and sales. POSITIVE ORDER SITUATION: CHINA In China, we attracted orders for heavy plate mills from Baotou Iron & Steel and Baosteel Group Shanghai Pudong Iron & Steel. Handan Iron & Steel and Shougang Jingtang Iron & Steel each ordered a high-performance hot strip mill from us. Wuhan Iron & Steel awarded us a contract to build a CSP® plant for a complex production range. Furthermore, we received orders for plant revamps and extensions. New plants such as the hot strip mill for Taiyuan Iron & Steel and the CSP® plant for Jiuguan Iron & Steel (JISCO) were successfully commissioned. Moreover, the CSP® plant for JISCO, for which SMS Demag supplied the entire electrical and automation systems, went into operation in record time and quickly achieved full production. GROWTH MARKETS: INDIA, RUSSIA, MIDDLE EAST The signs for China point to a decline in demand for new plants. This will be offset by the growth markets of India, Russia and the Middle East. Here, we expect increased demand for technologically advanced plants to replace older equipment or to create new capacity. We are strategically expanding our presence on these growth markets. SCOPE FOR MODERNIZATION: EUROPE, RUSSIA, USA One of the world's most powerful coiling stations for Mittal Bremen as well as numerous revamp orders from ThyssenKrupp Steel, NLMK, SSAB and Rautaruukki show that plant operators are investing in the extension or modernization of their plants and processing technologies to meet future market requirements. We are ready for this development and expect a sustained strong demand here.

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RUNAWAY SUCCESS: MORGOIL® BEARINGS New plant construction has also led to high demand for our oil film bearings and increased order intake in this area. Another contributing factor here is the spare parts business, as plant operators are currently running their rolling mills at full capacity. FROM RESEARCH TO PRACTICAL APPLICATION Our R&D departments have developed major innovations that are now ready for utilization: The new mill stand design featuring multipart and bolted construction. This leads to shorter delivery times and has already proved its worth in the Shougang heavy plate mill. The expansion of the range of steel grades processed on our CSP® plants is specially designed to include automotive exposed material. Next in line is the Multi-Head Rotary Descaler that ensures excellent surface quality while reducing overheads.

Heavy plate mill.

MAJOR ORDERS CSP® plants Wuhan Iron & Steel, China. 2-strand CSP® plant with 7-stand finishing mill Baotou Iron & Steel, China. Seventh stand Hot strip mills Handan Iron & Steel, China. Hot strip mill for 4.5 million t/year Shougang Jingtang Iron & Steel, China. Hot strip mill for 5.5 million t/year Wuhan Iron & Steel, China. Revamp of hot strip mill No. 1 NLMK, Russia. Revamp of hot strip mill for 4.5 million t/year ThyssenKrupp Steel, Germany. Revamp of 2 coilers SSAB, Sweden. Coiler station Mittal Bremen, Germany. World's largest hot strip coiler

Heavy plate mills Baotou, China. Heavy plate mill Baosteel Group Shanghai Pudong Iron & Steel, China. Heavy plate mill, 4.3 m wide Ural Steel, Russia. Revamp of heavy plate mill Xiangtan, China. Extension of plate mill Rautaruukki, Finland. Revamp of equipment for direct hardening of highstrength plate Mannesmannröhren-Werke GmbH, Germany. Revamp of finishing line, new cold plate leveler

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SMS group

Annual Report 2006 SMS metallurgy

Demand for cold rolling mill solutions remains high. What promoted our favorable order development and sales are progressive rolling technologies that give our customers a clear competitive edge. That applies in equal measure to our reversing mills, coupled pickling lines/tandem mills and multi-roll cold rolling mills for stainless steel. 30 MONTHS: ELEVEN 20-ROLL MILLS Commissioning, continuous assembly and new orders ­ business has picked up dramatically for our 20-roll mills. Buoyed by a total order intake for eleven rolling mills over the past 30 months, we have improved our leading market position. At Taiyuan alone, five 20-roll mills have successfully gone into production. Additionally, for Yieh United Steel Corporation in Taiwan, we are set to build our latest type of rolling mill: a Z-high rolling mill. This plant comes with extremely slim work rolls. COLD ROLLING MILLS FOR STEEL: NEW ORDERS Following the orders from Shougang and SeverCorr Chinese steelmaker Tiantie is another company that ordered a pickling line coupled with a five-stand six-high tandem cold rolling mill. The plant is designed for some 1.6 million t of cold strip. Likewise, Baosteel, China, ordered a pickling line/tandem mill. What is envisaged

is an annual capacity of 1.7 million t of cold strip in top quality, high-strength steel grades for the automotive industry. Benxi, from northern China, ordered two six-high reversing cold mill stands for the production of thin steel strip, while Wisco ordered a six-high reversing cold mill stand for Si-strip. Each of these contracts included our electric and automation systems. In Germany, we will completely revamp the four-stand tandem mill at Bilstein with an all-inclusive package: mechanical equipment, technology, electrics and automation. ADVANCES: FOR HIGH-STRENGTH GRADES Due to our development work, we were able to increase the versatility of our rolling mills. More specifically, they now offer a wider application and product range ­ especially relating to high-strength steel grades. Another new development is cold rolling with inert gas. Teaming up with C. D. Wälzholz group and Air Products GmbH, we developed a process that operates with ultra-low-temperature nitrogen and our minimum-quantity lubrication. Lower overheads, higher strip surface quality and purity as well as longer roll service lives are the advantages. ThyssenKrupp will apply this technology in the new inline skin-passing stand for its continuous annealing line.

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CCM Compact Cold Mill.

MAJOR ORDERS Steel Tiantie, China. Coupled pickling line/tandem mill Benxi Iron & Steel, China. 2 cold rolling mills Wisco, China. Six-high reversing stand including electrics and automation Baosteel, China. Pickling line/tandem mill Bilstein, Germany. Revamp of 4-stand tandem mill Stainless steel Yieh United, Taiwan. 20-roll cold rolling mill for stainless steel Yieh United, Taiwan. Z-high rolling mill with ultra-slim work rolls

COMMISSIONING PROJECTS Lisco, China. 20-roll cold rolling mill Taiyuan, China. Five 20-roll mills Zhejiang South East Metal Sheet, China. 2-stand Compact Cold Mill (CCM)

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SMS group

Annual Report 2006 SMS metallurgy

ALUMINUM ROLLING MILLS

Our plant and process expertise plus our metallurgical know-how also cover nonferrous metals. Especially worth mentioning are our aluminum plants for hot and cold rolling as well as strip processing that set standards worldwide. This is reflected in our positive order intake and sales. EQUIPPED FOR THE FUTURE: ALUMINUM HOT ROLLING MILLS To meet growing demand for wide aluminum plates and sheets, Northeast Light Alloy Co. Ltd. ordered China's widest aluminum hot rolling mill from us ­ with a maximum rolling width of 3,700 mm. What clinched the deal for us was the fact that we supply the complete mechanical equipment, electrics and automation from one source. Equally future-minded is the Korean works Yeongju of Novelis Inc.: We are set to erect a new F0 finishing stand for the hot finishing mill there, including additional equipment for high-grade aluminum strip. NEW ORDER: MOST POWERFUL HOT ROLLING MILL STAND Completely revamping the Aleris works in Koblenz, Germany, is another technological challenge for us. Here we will replace the existing 148-inch plate hot rolling mill stand with a larger, 160-inch plant. That will give Aleris the world's most powerful aluminum-plate hot rolling mill stand for hi-tech aluminum products with widths of up to 3,900 mm.

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CHINA: FIRST TWO-STAND ALUMINUM COLD ROLLING MILL We are all set to supply CSWA Cold Rolling Co., Ltd. (Southwest Aluminium), with China's first two-stand aluminum cold rolling mill for aluminum and aluminum alloys. This plant is the heart of an investment package that CSWA has launched to increase its cold rolling production capacity to more than a half million tons per year. The new rolling mill will focus on producing strip for cans, cladding sheet and lithography material for the printing industry. Included in our scope of supply and services are two stands with CVC 6plus® technology as well as our environment protection devices that meet the highest standards and save resources. PRE-ASSEMBLED: CVC® SIX-HIGH COLD ROLLING MILL STAND The CVC® six-high cold rolling mill for the new aluminum works of Asia Aluminium in Zhaoqing, China, was pre-assembled in our Hilchenbach workshop. It is designed for an annual production of 120,000 t of top-quality cold strip with a maximum strip width of 2,350 mm, and is currently being assembled and commissioned at the production location in China. Furthermore, for Asia Aluminium, we are building a high-performance hot strip mill and a five-stand cold mill for aluminum can material.

MAJOR ORDERS Novelis, South Korea. Conversion of hot strip mill Northeast Light Alloy Co., China. Aluminum-plate rolling mill Southwest Aluminium, China. 2-stand tandem mill COMMISSIONING PROJECTS AMAG rolling, Austria. Aluminum annealing and pickling line Hydro Aluminium Slim, Italy. First coil

Multi-plate filter station.

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SMS group

Annual Report 2006 SMS metallurgy

STRIP PROCESSING LINES

The takeovers of the internationally renowned specialists in continuous annealing furnaces and coating equipment DREVER and DUMA, plus the acquisition of the majority share in Dependeq (today: SMS Demag Process Technologies GmbH, Vienna/Austria) mean that our Strip Processing Lines Division has extended its range and enhanced its process know-how. There has been a positive response to this ­ order intake and sales have grown. Due to overcapacity in eastern Asia, the market situation for stainless steel lines is in slight decline, but we were still able to increase our market share here. The most important orders in this segment are: an annealing and pickling line for ThyssenKrupp Acciai Speciali Terni, Italy, and a revamp at ThyssenKrupp Nirosta, Benrath, Germany. HOT-DIP GALVANIZING LINES: HIGH QUALITY Not one, but two hot-dip galvanizing lines will go to Italian company Ilva S.p.A. The two lines will process high-quality strip for white goods (refrigerators, washing machines etc.) and for the construction industry. Nucor Steel Decatur, USA, ordered a hot-dip galvanizing line with a capacity of 550,000 t per year. PICKLING LINES: INNOVATIONS ORDERED The order we received for a new pickling line at Salzgitter Flachstahl GmbH, Germany, involves innovative technologies. The line, with an annual capacity of 2.5 million t, will be equipped with our newly developed laser welding machine as well as with Europe's largest fluidized-bed regeneration plant. We will also build an acid regeneration plant that uses the fluidized-bed process for the Japanese JFE Steel Corporation. Furthermore, we have received a major order from Tianjin, China, for a coupled pickling line.

SI-ANNEALING AND COATING LINES: LARGE ORDER An annealing and pickling line, a decarburization line, a combined intermediate annealing and decarburization line with MgO coating and a final annealing line with insulating coating ­ that is the impressive scope of the new order from our Chinese customer Baosteel. The four Si processing lines will be used to produce grainoriented and non-grain-oriented silicone strip for manufacturing large transformers. NEW TECHNOLOGIES: READY FOR USE Our new laser welding plants and regeneration plants with fluidized-bed technology are already major features of our latest reference plants. Added to this is our new, resource-saving high-pressure and ultrasonic cleaning system that will soon be ready for the market. It will provide an equally efficient and effective cleaning method.

Strip accumulator in a pickling line/tandem mill.

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Pickling line/tandem mill.

MAJOR ORDERS Hot-dip galvanizing lines Ilva S.p.A., Italy. One hot-dip galvanizing line for hot and cold strip each for the works in Taranto for 650,000 t/year and in Cornigliano for 470,000 t/year Nucor Steel, USA. Hot-dip galvanizing line for 550,000 t/year Pickling lines Salzgitter Flachstahl AG, Germany. Pickling line for 2,500,000 t hot strip per year Tianjin Tiantie, China. Pickling line for pickling line/ tandem mill for 1,640,000 t/y Continuous annealing lines ThyssenKrupp Steel, Germany. Revamp of the continuous annealing line in the Dortmund works Si-annealing and coating lines Baosteel, China. Four plants for hot and cold strip Stainless steel lines ThyssenKrupp Aciai Speciali Terni, Italy. Annealing and pickling line for stainless-steel hot strip

ThyssenKrupp Nirosta, Germany. Revamp of the annealing and pickling line in the Benrath works COMMISSIONING PROJECTS Hot-dip galvanizing lines Wisco, China. Three hot-dip galvanizing lines with a total capacity of 1,240,000 t/y US Steel Kosice, Slovakia. Hot-dip galvanizing line for 410,000 t/y Pickling lines Wisco, China. Pickling line for pickling line/tandem mill for 2,300,000 t/y Jinan, China. Continuous pickling line for 1,100,000 t/y Hyundai Hysco, Korea. Revamp of the pickling line for 1,550,000 t/y Continuous annealing lines Angang, China. Continuous annealing line for 1,000,000 t/y Hyundai Hysco, Korea. Revamp of the existing continuous annealing line

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ELECTRICS and AUTOMATION

Our growing order intake and sales in the "Electrics and Automation" Division clearly confirm that we have achieved our aim. We have succeeded in progressing into an integrated system supplier with all-inclusive mechatronic solutions. Here is just one major indicator of this: We are booking more and more revamp orders for electric and automation systems. Together with the numerous new orders, this contributed to an overall increase in business. To further improve our vital customer contacts in the major markets of China, Russia and India, this Division will step up its activities in these countries. That will turn us into an internationally networked electrics and automation supplier for metallurgical plant and rolling mill technology. SERVICES FROM ONE SOURCE What substantially boosts the market strength of our E&A solutions are our "X-Pact®" and "Plug and Work" packages. X-Pact® stands for our harmonized automation solutions and is considered virtually a quality guarantee. That's because the X-Pact® name means all the components and interfaces seamlessly mesh with each other. "Plug and Work" is the term for our strategy of testing and optimizing all automation components in our test lab using realistic simulations. It also gives customers the option of staff training on the real controls of soon-to-be installed systems while they are still being built. That ensures steep run-up curves, early return on investment and shorter stoppage times for revamps. THE FUTURE UNDER CONTROL: COMMISSIONING AND ORDERS One of our major commissioning projects in 2006 was for Jinquan Iron & Steel (Group) Co. Ltd. Here, we installed the electrics and automation for the steelworks and the CSP® plant. New on the books was an order from Jinan Iron & Steel Group Corp., for whom we developed and supplied the electrics and automation for the Compact Cold Mill (CCM), the skin-pass mill and the pickling line. Perfectly geared to the mechanical equipment, our E&A helped us win numerous new orders, e. g. from ThyssenKrupp Steel, China Steel, Wuhan Iron & Steel, Arcelor Bremen and Aleris Aluminum.

Control desk of a CCM Compact Cold Mill.

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MAJOR ORDERS Steelworks/Continuous casting plants Amur Metal, Russia. Electrics and automation for single-strand slab caster Nelachal Ispat, India. Automation for BOF converter Georgsmarienhütte, Germany. Electrics and automation for ladle furnace Dragon Steel, Taiwan. Electrics and automation for BOF steelworks China Steel Corporation, Taiwan. Electrics and automation for 2-strand slab caster Hot rolling mills ThyssenKrupp Steel, Germany. Revamp of electrics and automation for the cooling section and coilers for No. 1 hot strip mill Pudong Iron & Steel, China. Automation for heavy plate stand, plate cooling, hot and cold plate levelers Baotou Iron & Steel, China. Automation of heavy plate stand, plate cooling and hot leveler Wuhan Iron & Steel, China. Revamp of automation for No. 1 hot rolling mill, main drives for finishing mill Arcelor Bremen GmbH, Germany. Electrics and automation for thick-strip coiler Cold rolling mills Benxi Iron & Steel, China. Electrics and automation for 2 reversing cold rolling mills Wuhan Iron & Steel, China. Electrics and automation for reversing cold rolling mill Bilstein GmbH & Co. KG, Germany. BildunRevamp of electrics and automation for 4-stand tandem mill Northeast Light Alloy Co. Ltd. (NELA), China. Electrics and automation for aluminum-plate rolling mill Aleris Aluminum, Germany. Electrics and automation for aluminum-plate rolling mill Strip processing lines China Steel Corporation, Taiwan. Electrics and automation for annealing and coating line. ThyssenKrupp Steel, Germany. Revamp of drive systems, automation for entry side of the continuous annealing line, Level-2 system for the entire plant

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Annual Report 2006 SMS metallurgy

TECHNICAL SERVICE

Demand for our high-quality services continues to grow. We have improved our market position in the areas spare parts and technical service with increased orders and sales. SERVICE WORKSHOPS: SHORTER DELIVERY TIMES More and more, our key accounts are demanding regional services for regular repairs of their plants because manufacturing spare or replacement parts near to customers shortens delivery times. Operating our service workshop in Shanghai means we are already meeting this requirement for the Chinese and East Asian market. And our commitment here has prompted a very positive response. SERVICE CONTRACTS: GROWING DEMAND There is a growing demand for our service contracts in Europe, China and South America. Customers all over the world make use of our sophisticated services such

as technical assistance, consultancy or audits ­ including ever more large companies. Furthermore, we have successfully launched new service products such as our hydraulics service and drive maintenance, with good response from our customers. OUTSOURCING: FOCUSING ON CORE COMPETENCIES Our customers want to concentrate more on their core competencies. To offload or streamline personnel-intensive and costly "sideline" activities like repairs and maintenance work, many manufacturers use our tailor-made outsourcing services. Now, due to a number of factors, there is a mixed reaction to this incentive. We see a large potential and healthy demand in the former CIS countries and India. A service that goes beyond outsourcing is building a consignment warehouse with spare part management. Take for example SeverCorr in the US, where we have assumed complete responsibility for purchasing, logistics, storage and spare part provision for the entire works.

MAJOR ORDERS Ly Steel, China. CSP® molds Ural Steel, Russia. Slab mold, segments, oscillator Nanjing, China. Roll chair, bearing housing Corus, Netherlands. New drum shear Novolipetzk, Russia. Segments, spindles Wisco, China. Replacement part package for rolling mills ELVAL, Greece. Multi-plate filter Ilva, Italy. F1 ­ F3 mill pinion gears Angang, China. Chain-type magnetic separator, belt-type skimmer Gallatin Steel, USA. Mill pinions, pinion shaft Outokumpu, Sweden. Replacement of gear wheels ThyssenKrupp Steel, Germany. Plant Monitoring System (PMS)

Yieh United, Taiwan. Audit converter, electric arc furnace and continuous caster Arcelor Espania, Spain. Emergency repair of ladle turret CST, Brazil. Study on increasing production capacity ThyssenKrupp Nirosta, Germany. Turning the converter tilt drive Ly Steel, China. Stoppage support ThyssenKrupp Steel, Germany. Roll adjusting cylinders EBG, Germany. Temperature and vibration analysis of mill stands

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Annual Report 2006 SMS metallurgy

TECHNICAL DEVELOPMENT

The focus of all technical development is customer benefit. Always keeping this in mind, we evaluate projects and develop them until they are ready for implementation, either alone, with cooperation partners or together with our customers. CUSTOMER-CENTERED: TAILOR-MADE DEVELOPMENTS Alongside basic development, tailor-made solutions for our customers are becoming more and more important. One example of this is the revamp of the Steckel rolling mill of our customer Outokumpu in Finland. The goal was: to step up production from approx. 750,000 t per year to 1,700,000 t per year with the final extension stage of a seven-stand hot strip mill. To meet these requirements, we developed an innovative technological rolling method that combines a Steckel mill with a three-stand finishing mill. This plant design offers the option of three operating modes: Steckel, combination and tandem mode. Ensuring rolling stability and high product quality was imperative, therefore we pre-tested the entire system in an overall simulation (mechanical equipment, hydraulics, control technology) and implemented ways to stabilize the process (e. g. new mechanical devices). Also new was our conversion strategy: We mounted the stand on a foundation block and subsequently shifted the whole unit into the production line. The stoppage time was just six days ­ so impressive that it led to new conversion orders. This is how our customized developments enabled us to meet all the requirements for increased production, fast conversion times and quality results at close thickness tolerances.

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PROCESS TECHNOLOGY FOR NEW MATERIALS Producing today's new steel grades, such as dual-phase or multi-phase steels, requires innovative solutions across the entire process chain. To meet this demand, we develop process technologies from the steelworks to the rolling stages and right through to the processing plants. OPTIMIZING STEELMAKING PROCESSES Customers can use our CFD (Control Fluid Dynamic) simulations to determine the flow and heat processes in their BOF or AOD converters. It is our aim to optimize the converter geometry and the arrangement of the tuyere elements for the shortest possible mixing times with stable processes. RAPID SLAB CASTING The central goal of this project is to increase the production rate for all slab formats. Cooperating with the steel producer Corus, we aim to improve the performance of thin slab casters by raising the casting speed in stages to as high as 8 m/min. PLANT DEVELOPMENT FOR HIGHAND MAXIMUM-STRENGTH STEELS There is no end to market demand for ever better mechanical properties. That is why we respond quickly, developing the right new machine and plant types for casting, shaping and processing these grades.

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Annual Report 2006 SMS metallurgy

TUBE PLANTS

Global energy demand is rising steadily. That, in turn, boosts demand for tubes for gas and oil pipelines, power stations and oil rigs. It is due to our all-round range for tube plants as well as our technological edge that our market share has increased even further. SHAPING UP: SEAMLESS TUBE PLANTS We were able to extend our market leadership in seamless tube plants. After the successful launch of our PQF® (Premium Quality Finishing) technology in 2003, two of these plants are right now about to go into production and five more were sold in 2006 alone. Furthermore, we received numerous orders from around the globe for revamps of existing plants. Here, both the mechanical engineering and the automation technology will be adjusted to each customer's requirements. GOOD CONNECTIONS: WELDED TUBE PLANTS SMS Meer has earned a strong standing in welded tube plants in the tube diameter range of 6 5/8 inches to 24 inches. Moreover, we have received an order for a welded tube plant to produce 26-inch diameter tubes with a wall thickness of 24 mm. This is the world's first plant for this dimension range. We will also be able to better penetrate the market for small dimensions with commissioning of an innovative precision tube plant. It is designed to manufacture precision tubes for the automotive industry.

LARGE ORDERS: PLANTS FOR LARGE-DIAMETER PIPES Business development and order intake for large-diameter pipe plants are favorable. This particularly applies to the former CIS states and Asian countries that energize the market. We are the only manufacturer worldwide to supply all the core machines for large-diameter pipe production from one source: plate-edge milling machines, plate-edge crimping presses, forming presses, tack welders, expanders, pipe testers and chamfering machines. There is a steady, unbroken demand for JCOE® plants (forming in stages in one press). The first plant in Russia was commissioned that uses the JCOE® process to produce large-diameter pipes up to 18 m long. Right now we are building a UOE plant (forming in two stages with two presses) for a Chinese customer. This is the first order worldwide for this type of plant for some 30 years.

MAJOR ORDERS Baosteel, China. UOE large-diameter pipe works for 56", expander Padana Tubi, Italy. Welded tube plant for 14" Atlas, Canada. Welded tube plant for 8 5/8", relocation of pipe welding plant for 16" Zimekon, Austria. Welded tube plant for 8 5/8" BMZ, Belarus. PQF® plant for 6 5/8" ISMT, India. PQF® plant for 6 5/8" Jindal, India. PQF® plant for 7" TPCO, China. PQF® plant for 9 5/8" OAO TMK, Russia. PQF® plant for 10 3/4" V&M Star, USA. Revamp of MPM COMMISSIONING PROJECTS ITZ, Russia. 18-m large-diameter pipe works Vyksa, Russia. Forming and crimping press Baosteel, China. Welded tube plant for 24" Chengdu, China. MPM mandrel mill

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An expander in a large-diameter pipe works.

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Annual Report 2006 SMS metallurgy

LONG-PRODUCT ROLLING MILLS

There was strong growth in order intake and sales for our section and billet mills, wire rod and bar mills as well as light section mills. NEW MILL STAND GENERATION: SECTION AND BILLET MILLS We are the market leader in medium section mills with our reversing mills, because a new generation of mill stands, CS (Compact Stand), with an extremely rigid closed-housing design and modular system enabled us to gain new market shares ­ even in the segment of continuous mills. These stands can be used as universal, horizontal or vertical stands. As part of a larger order, we will supply one of these new, highly versatile mills to Steel Dynamics Inc., USA. The new stand generation is also ideal for use in billet mills. We were able to improve our leading market position in the area of heavy section and rail rolling mills, especially due to the high order intake from China. WELL POSITIONED: WIRE ROD, BAR AND LIGHT SECTION MILLS There were several new developments that have strengthened our position on the market. Geared to producing precision bars, our newly developed PSM® (Precision Sizing Mill) was successfully commissioned at Edelstahlwerke Südwestfalen, Germany. The hydraulic roll adjustment ensures that close rolling tolerances are achieved over the entire bar length. We booked additional orders for our newly developed VCC® Vertical Compact Coiler. This plant for twist-free coiling of rebars and rounds creates compact coils that can be processed more easily. We clearly benefited from the good business climate in the steel industry that translated into a raft of new orders for all-inclusive rolling mills for light sections and wire rod, complete with re-heating furnaces. One rolling mill is being equipped for "endless" rolling. This involves welding the reheated billets together with a welding machine and then rolling them continuously into bars and coils.

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MAJOR ORDERS Steel Dynamics, USA. Medium section mill and walking beam furnace Wuhan Iron & Steel, China. Section and rail rolling mill HMISHO, Syria. Wire rod and light section mill with billet welding machine Simara Carajas, Brazil. Wire rod and bar mill NSMMZ, Russia. Conversion of light-section finishing line and new walking beam furnace Nucor Darlington, USA. Pusher furnace

DDS (Duferco), Denmark. Finishing line for bars Gerdau (Knoxville), USA. Finishing equipment for bars Rizhao Steel, China. Vertical Compact Coiler VCC® ChMZ, Russia. Stacking machine for light sections Hunan Valin Xiangtan, China. Wire rod mill COMMISSIONING PROJECTS Baotou, China. Medium section mill EWS, Germany. PSM® Precision Sizing Mill Jinxi I&S, China. Heavy beam mill

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Annual Report 2006 SMS metallurgy

NONFERROUS METAL PLANTS

ALUMINUM PLANTS Hertwich Engineering has further improved its leading position as an equipment supplier for aluminum foundries. There is also a constant demand for continuous casting plants for extrusion billet. Essentially, the plants consist of continuous homogenizing furnaces, saws and packing plants complete with the necessary conveying systems and additional components, such as ultrasonic testing equipment and swarf briquetting presses. Steady improvements in technology and comprehensive expertise are major factors that enable us to supply the entire system "from one source". Responding to the increasing supply of aluminum scrap, we have shifted our development focus in recent years to technically advanced smelting units for contaminated material. High metal yield, low energy consumption and low staffing requirement give our modern smelting plants the technological edge. Our impressive order intake for this kind of equipment shows that the industry appreciates its technological and economic benefits. We are confident we will achieve a very strong position in this growing market segment. COPPER PLANTS The markets for our copper plants present an uneven picture. That's due to a dramatic price rise for copper cathodes ­ the basic product used in high-quality applications. The resulting strong increase in demand for extra refinery capacities led to a good order intake for our anode casters ­ casting wheel and CONTILANOD® ­ used in the preliminary process for cathode manufacturing. On the other hand, the price hike meant that wire rod producers' margins decreased, which is reflected in the demand for this kind of plant. There is also weak demand from producers of bathroom and kitchen installation pipes of copper, because the high material price encourages increasing substitution with plastic tubes. Yet the situation for industrial tubes ­ especially for air conditioning devices (ACR tubes) ­ is buoyant. We won an order from the Middle East to supply a directube® plant. This contributed to the further establishment of this technology as a leading method of in-line casting and rolling Cu tubes. We are focusing on Asia/China for new business with our TECHNICA continuous copper casters. That's where we look back on a successful year and where we see substantial potential in the short and medium term.

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MAJOR ORDERS Kaiser Alu, USA. Plate stretcher Corus (Duffel), Belgium. Plate stretcher Dubai Cable, Dubai. CONTIROD® plant CSP, Iran. Copper tube plant, directube® plant China Steel, China. Aluminum ingot scalper Dubal, Dubai. Casting plant No. 2, round bar handling and saw plant AMAG rolling, Austria. Smelting furnace with vertical scrap pre-heating AMAG, Austria. Batch homogenization Talum, Slovakia. Smelting furnace with vertical scrap pre-heating Elkem Lista, Norway. Continuous homogenization plant Alcoa Köfem, Hungary. Continuous homogenization plant China Aluminium, China. Horizontal continuous caster Metallhüttenwerke Bruch, Germany. Rotary tilting furnace Erbslöh, Germany. Continuous homogenization plant Hydro Aluminium, Germany. Smelting furnace with vertical scrap pre-heating COMMISSIONING PROJECTS AMAG, Austria. Plate stretcher Venalum, Venezuela. Continuous homogenization plant Rusal, Russia. Horizontal continuous caster Aluar, Argentina. Continuous homogenization plant Hydro Aluminium, Norway. Continuous homogenization plant VAW Imco, Germany. Smelting furnace with vertical scrap pre-treatment

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Annual Report 2006 SMS metallurgy

PRESS and FORGING TECHNOLOGY

Overall, the business situation of press and forging technology is very positive. The upward trend is due to the strong demand for our plant solutions from the emerging markets in the Far East such as China, India and South Korea. This Division was integrated into SMS Meer as per January 1, 2007. As a result of the merger, production and administration were relocated from Leverkusen to Mönchengladbach. Our customers benefit from this pooling of expertise with an extended scope of supply and services plus lower costs. FORGING AHEAD: HYDRAULIC PRESSES Our main customers for open-die forging presses are European plant operators. We are the market leader in forging presses. Equally gratifying is the situation for plate stretchers, in demand for the manufacture of large aircraft components.

EP 2000 eccentric press.

INTERNATIONAL HIGH PROFILE: EXTRUSION PRESSES In the segment of extrusion presses, we have gained market shares. Especially our light metal presses with front-loading technology have become established on the market. The first successful installations of the new CF (Compact Frame) presses as well as our new runout and furnace concepts aroused lively interest among plant operators. In the heavy metal segment, we have significantly strengthened our market position by means of innovative concepts for extruding tubes. OPTIMIZED PLANTS: CLOSED-DIE FORGING Our new EP press series achieved rapid market success, with four machines sold straight away. As a result of growth in the aviation industry, we expect good business opportunities not only on the German market, but also in the US.

63/80-MN push-down forging press.

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MAJOR ORDERS Closed-die forges Hirschvogel, USA. EP 2000 eccentric press Hirschvogel, China. EP 2000 eccentric press Hugo Dürholt, Germany. VPRL 140 Hasenclever-Vincent press Extrusion presses Nanshan Group, China. Two 16/17.5-MN front-loader extrusion presses Tongling Nonferrous Metal Group, China. 28-MN indirect heavy metal press Bowon Light Metal, South Korea. 22/24-MN short-stroke front-loader press UVIS Nicopol, Ukraine. 44-MN steel tube press Can Art, Canada. 30/32-MN light-metal extrusion press Wieland, Germany. 65-MN direct/indirect tube press for heavy metal Hydraulic presses Ravne, Slovakia. 40/45-MN push-down forging press Hammerwerke Erft, Germany. 30/35-MN push-down forging press ThyssenKrupp VDM, Germany. 40/45-MN push-down forging press Ring rolling machines Galperti, Italy. RAW 200/160 radial-axial ring rolling machine Plettenberg, Germany. MERW 16 small ring rolling machine Ramkrishna Forgings, India. RiWa 2000/32 ring rolling machine with KRP 2000 ring blank press and MERW 32-500/200 radial multimandrel ring rolling machine Suzlon, India. RiWa 5000/200 ring rolling machine with SRP 5000 ring blank press and RAW 200 radial-axial ring rolling machine and RKP 1000 ring expander Meadville, USA. MERW 16 small ring rolling machine Brück, Germany. SRP 8000 ring blank press

ALL-ROUND SUCCESS: RING ROLLING The demand for rings on the secondary market has increased. This coincides with demand from mechanical engineering, the power sector and the offshore industry, so that our ring rolling plants business is also booming. The main customers are Indian and European companies. There is a clear global trend toward large ring rolling machines.

Forged ring with a diameter of 9 m.

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Annual Report 2006 SMS metallurgy

INDUCTION TECHNOLOGY

The overall market for induction technology was sluggish, yet we succeeded in once again increasing our market share. PROFITABLE GROWTH: DRIVEN BY TECHNOLOGICAL DEVELOPMENTS We achieved growth in the "Inductive Heating" Product Area ­ mainly due to successful new developments and improvements in our "ELOWELD" welded tube plants for tube diameters from 8" to 26". Equally successful, again in 2006, was our performance on the market for tube and bar material tempering plants ­ an area which is relatively new for SMS Elotherm. This development is underlined by the order for an induction tempering line we received from Timken Corp. for its Canton, Ohio location, USA. NEW MACHINE DESIGNS: NEW CUSTOMER BENEFITS The "Inductive Hardening" Product Area suffered from a weak market up to the third quarter of the year, with few contracts being signed. However, SMS Elotherm was able to buck the trend with its new machine types "AKWH", "TTH" and "UVH" for crankshafts, axle parts and drive train components. The new machines score in terms of lower costs and higher benefits.

MAJOR ORDERS Induction heating plants SMS Meer, Germany. Induction plant for re-heating shells, induction plant for re-heating mandrel rods Molla, Italy. Heating plant for billet material for subsequent hot shaping MHP, Germany. Weld seam-annealing plant for tubes TIMKEN, USA. Hardening and tempering plant for tubes and bar material EUPEC Pipe Coatings, Germany. Induction heating plant for drying PE-coated steel pipes Scholz, Germany. Continuous hardening plant for bar material Mannesmann Fuchs, Germany. High-frequency welding generator for longitudinal seamwelding of pipes Wuppermann, Austria. Re-heating plant for welded seams on pipes

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Induction hardening plants VW, Germany. Fully automatic hardening plant for steering gear racks Avtovaz, Russia. Induction hardening plant for axle journals, induction hardening plant for gear racks Tata, India. Fully automatic hardening plant for crankshafts ThyssenKrupp, Germany. Semi-automatic hardening plant for truck crankshafts GKN Drive Shaft, China. Universal hardening machine for engine parts, 6 induction hardening plants for auto axle journals Liebherr, Germany. Ring hardening plant for gear wheels of up to 3.4 m diameter BMW, Germany. Hardening plant for sprocket wheels, conversion of crankshaft hardening plant BMW, Austria. Hardening plant for sprocket wheels, conversion of crankshaft hardening plant

Hardening plant with control cabinet.

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SERVICE

After-sales business was re-organized at the beginning of the year to create a new Product Area with three service lines: Spare Parts Service, Technical Service and Technical Field Service. This pooling of our service activities provides the right conditions for profitable and sustained growth as well as for product-spanning synergies. That is how it ensures more efficient and intensive operation on the after-sales market. To increase plant availability, improve product quality and reduce overheads, we offer our customers extensive, holistic solutions in spare parts service. SPARE PARTS SERVICE: AT A CLICK The core business in our service area is the spare parts service, with OEM spare parts, initial equipment packages and tools. We have introduced an electronic spare parts catalog to simplify part identification and ordering. TECHNICAL SERVICE: TOP PERFORMANCE Our Technical Service area was founded as part of the re-organization. Key activities here are improving the customer-oriented range of services and continually building up a strong service culture. A central part of product development are sophisticated services such as analyses, advice and audits, because plant operators increasingly demand them. The first orders carried out by our Technical Service were run-up support for our customer Mahshahr Pipe Mill and current status analyses for our customers Hadeed and ANSDK.

TECHNICAL FIELD SERVICE: HUGE DEMAND The vigorous new plants business created a great deal of work for our Technical Field Service in 2006. Compared to the previous year, the number of deployments increased by almost 50 %. Regionally, the major markets here were China and Russia. PROSPECTS: INCREASED REGIONAL PRESENCE To intensify after-sales activities and improve customer support, we will establish more locations around the globe.

OUR SERVICES Erection/assembly and commissioning Training Components and spare parts Electronic spare part catalog Inspection, maintenance and repairs Potential analyses Run-up support and plant optimization Revamps Repair advice Emergency service

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Annual Report 2006 SMS metallurgy

TECHNICAL DEVELOPMENT

Our constant improvement of technologies ultimately has one aim: to benefit customers. Therefore, building on the findings of our technical development, we optimize product quality as well as productivity for our customers and in this way create the business conditions for increased competitiveness. PSM®: GREATER VERSATILITY IN BAR PRODUCTION During a revamp of the bar mill at Edelstahlwerke Südwestfalen GmbH, Germany, we commissioned the new sizing block using our PSM® (Precision Sizing Mill) technology. The machine works according to the three-roll principle and is based on the PQF® (Premium Quality Finishing) philosophy familiar from tube rolling technology. It uses hydraulic roll adjustment. Compared to conventional processes, the finishing block with its six PSM® stands provides significantly more versatility, better product quality and higher productivity in bar production. There are further practical advantages for our customers, such as shorter delivery times and lower stocks. JCOE® PROCESS: THE FIRST 18-m PIPES Successful commissioning of Ishora Trubny Zavod (ITZ) large-diameter pipe mill in St. Petersburg means that the SMS Meer-developed JCOE® forming process for manufacturing SAW (Submerged Arc Welding) largediameter pipes was established as the leading process on the market. This was the first time pipes with a length of 18 m were produced. So, after just a short time, all leading customers and institutes certified ITZ as a supplier.

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VCC®: REVOLUTION IN COIL TECHNOLOGY Developed by the Light Section area of SMS Meer, the high-performance VCC® (Vertical Compact Coiler) is a new machine design that increases the pack density of coiled light sections by up to 80 %. The compact dimensions of the twist-free coils significantly enhance the efficiency of coil transport. Furthermore, VCC® shortens the coil production process chain. Using this machine, producers can wind light sections with dimensions of 6 to 50 mm into coils with a weight of up to 3.5 t, an internal diameter of 850 mm and a maximum height of 800 mm. INDUCTIVE TEMPERING: QUALITY IMPROVEMENT Considerable development efforts relating to induction technology went into establishing the Tempering Technology area. Currently, we are processing two large orders for the erection of single high-grade-steel bar-tempering equipment.

JCO® forming press.

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Annual Report 2006

SMS Plastics Technology

EXTRUSION TECHNOLOGY

CINCINNATI EXTRUSION Cincinnati Extrusion, Vienna, Austria, achieved satisfying growth in 2006. It boosted both order intake and sales with its branches in the USA, China and Japan. SALES SUCCESSES: ALPHA AND FIBEREX EXTRUDERS On the market for just four years and already more than 300 sold: Our 300th Alpha extruder went to Tubos Perfilados, one of Spain's largest tube manufacturers. Our Fiberex line for WPC (Wood Plastic Composites) also achieved an impressive sales landmark, with 100 machines sold. The 100th plant was installed at the Finnish company UPM Group. LARGE ORDER: TWIN-SCREW EXTRUDER Working for a US customer, we built the world's largest counter-rotating twin-screw extruder ­ the Argos 173. This jumbo machine is 9.5 meters long and weighs 30 t. It has a production rate of 2,000 kg/h and is used to produce PVC panels.

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IMPROVED PERFORMANCE: NEW EXTRUDER GENERATIONS Our new single-screw extruder MONOS is a high-performance machine for high heat quality at low temperatures. The production rate is some 30 % higher than that of previous models. Another innovation worth mentioning is our RAPIDEX. Impressively, at maximum speed, this innovative extruder achieves double the output of conventional extruders. Right now, a prototype is being tested under real-life conditions at our customer's, Rehau AG + Co. So far, all the tests have been successful.

Intensive cooling: Cooling the panel directly after smoothing using driven, cooled rolls shortens the cooling section and improves thickness tolerances.

MAJOR ORDERS CERTAIN TEED, USA. 2 Argos 135 PVC panel plants for foamed trim-boards up to 31 mm wall thickness - TERNA, Russia. 11 Argos and Konos extruders for expansion of siding and wall panel production - FIRAT, Turkey. 30 Monos extruders for manufacturing PE composite tubes - An Italian company. 2 ALU-PEX composite tube plants - Eastern European companies. More than 30 extruders, especially for window profile plants - STL, Russia. 3 Argos 135 for double-extrusion window profiles, 2 Titan 92 for window sills, Konos 50 for auxiliary profiles

PVC foam panel extrusion with three-roll smoother.

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Annual Report 2006

SMS Plastics Technology

EXTRUSION TECHNOLOGY

BATTENFELD EXTRUSION Once again in 2006, the companies incorporated in Battenfeld Extrusion were able to continue the positive trend of previous years and increase both order intake and sales. Furnished with two works in Germany, one each in the US and China and one participation in an Indian partner company, we are globally well situated to extend our leading position on the world market. There was growth in all three market segments ­ tube plants, profile plants and film and sheet plants. LEADING TECHNOLOGY: OUR EXTRUSION PLANTS Our main works in Bad Oeynhausen attracted major orders from two European manufacturers for 19 and 12 all-inclusive profile extrusion lines. These orders are typical of the overall positive business climate, with our plant solutions for large-diameter tubes playing a strong role here. For instance, we built a plant for tubes with a diameter of 2,000 mm for a Chilean producer. In the US, American Maplan Corporation was able to consolidate its leading market position in PE and PVC tube extruders. Likewise, order intake at our subsidiary

Battenfeld China also picked up considerably compared to the weak previous year. Particularly in demand were extruders for PE and PP tubes. DEVELOPMENT: INNOVATIONS IMPLEMENTED The past business year saw a whole range of technological developments which we perfected and are now using in our plants. Included here is the improvement of our high-speed single-screw extruder for film extrusion. We succeeded in cutting energy consumption by up to 25 %, reducing the footprint and shortening color and material changeover times. Next came a spindle sleeve tool for coextruded tubes that enables producers to manufacture precision multi-layer tubes even at low speeds. And our strategy of designing a low-cost standard line for small and technical profiles also paid off. There is a healthy global demand for our techBEX, entirely produced in China. This plant type is some 30 % cheaper than comparable standard lines, yet it is technologically advanced with sophisticated, reliable functions.

The high-speed extruder uses up to 25 % less energy than conventional extruders.

Blister and food packaging films are manufactured on the PET plant built by BCE.

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For complete extrusion lines that manufacture large tubes, Battenfeld Extrusionstechnik supplies all the components from one source.

MAJOR ORDERS Faerch, Denmark. High-speed extrusion line for PP thermoform film for food packagings A Japanese company. A-PET plant for sushi packagings A Chilean company. Plant for tubes with an outer diameter of 2,000 mm Italian and Turkish companies. 3 aluminum PEX-c composite tube lines for underfloor heating systems and drinking water pipes Various companies. 4 PE tube extrusion plants for tubes with diameters of between 500 and 1,600 mm

A Chinese company. 6 techBEX plants for IC tubes and profiles made of PC, MPPO and PA A Chinese company. 6 3-layer blown film plants for milk and toothpaste packs as well as FFS bags

49

SMS group

Annual Report 2006

SMS Plastics Technology

EXTRUSION TECHNOLOGY

BATTENFELD GLOUCESTER Both our producer of film and foil plants, Battenfeld Gloucester, and the energy company Gloenco did not achieve similar levels of orders and sales values to the previous year. The decline in sales at Gloenco is attributable to increased fuel prices. As a result, energy producers are switching to alternative power sources. The consequence: the market for high-performance gas turbines shrank. However, we expect a significant recovery in 2007. Moreover, the Gloenco R&D center has developed a new fuel feed technology that will be launched on the market this year. NEW GROWTH: STEPS TAKEN Battenfeld Gloucester took strategic and product policy steps to permanently enhance the company's competitiveness in the future. Included here is the decision to extend the sales network and customer services in Europe to achieve better closeness to customers and boost business there. NEW PLANTS: INNOVATIVE DESIGNS It was a pleasure working for a North American customer and building a 17-layer coextrusion plant ­ suitable for extension to 34 layers. This unique plant is used to manufacture packaging for foods and medical products. Also active for a South American customer, we built one of the world's largest blown film plants for the production of 3-layer geo-membrane films.

NEW IDEAS: FROM RESEARCH AND DEVELOPMENT Our technological advances will also contribute to new growth. We cooperate closely with raw materials producers and participate in the development of blown film formulas that we test in our own Technical Research Center. DuPont Packaging & Industrial Polymers uses two of our coextrusion blown film plants in its newlyopened Shanghai research center for new developments. Added to this are major innovations such as our gripper, a vertical pneumatic arm for unloading large film coilers as well as a new infrared reflection thickness measuring system and an automatic cutting device.

MAJOR ORDERS Alvarez Group, Spain. Blown-stretch film plant for silage film and 3-meter cast plant Swanson, Malaysia. 6-meter cast-stretch film plant Scientex, Malaysia. 6-meter cast-stretch film plant Century Bond, South-East Asia. 6-meter cast-stretch film plant BrandPak, South-East Asia. 6-meter cast-stretch film plant P.T.TekPak, South-East Asia. 6-meter cast-stretch film plant Trioplast-Mada Partnership, Saudi Arabia. Two 3-meter cast-stretch film plants A Mexican company. 2 Thermo-Flex panel extrusion plants, including smoothers Rowad, Middle East. Blown film plant for geo-membrane foil

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Checking the film quality.

The gripper can easily be retrofitted to the 1002, 1002DS and 1027S coiler models.

Cast 2020, the standardized all-inclusive plant concept for cast film, is a big success on the market.

51

SMS group

Annual Report 2006

SMS group EMPLOYEES

The SMS group companies worldwide employed a workforce of 8,999 on average in 2006. The successes of our companies are built on the expertise, commitment and innovative energy of our employees. That is why we promote professional and personal development at all levels with various programs, and allow our employees to share in our profits. Meanwhile, more than 90 % of the workforce in Germany directly participates in our corporate success. HIGH STANDARDS: TRAINING AND CONTINUING EDUCATION The SMS group companies are committed to solid vocational training ­ reflecting our business and social responsibility for the future. In Germany, 431 young people underwent training in our manufacturing and administrative departments. Our training quota is some 8 %, which is significantly higher than average. Many of our apprentices won awards from the Chambers of Commerce for their excellent results. CLOSE CONTACTS: STUDENTS AND GRADUATES We also want to enthuse and attract youngsters starting out on an academic career ­ especially engineers. To this end, we offer e.g. dual higher education courses, trainee programs and numerous tailor-made support programs. Included here are cooperation schemes with the universities RWTH Aachen, TU Darmstadt, Siegen University and TU Clausthal-Zellerfeld. MORE KNOWLEDGE: SMS AKADEMIE Devoted to educating our employees, the SMS Demag Akademie is a model for the future. 1,773 employees took part in 118 further education events to benefit from the huge range of topics covered, including technical and company-related subjects, foreign languages and inter-cultural information. EXPANDING COMPETENCE: MANAGEMENT EMPLOYEES Our managers take part in modern programs relevant to their area of work. Included here are our 360-Degree Feedback Process, Personnel Development Process (PEPPlus), Strategic Selling and a large number of workshops geared to the strategic interests of the company. IDEAS MANAGEMENT Our employees submitted well over 1,000 improvement suggestions to our IMPULSE ideas management scheme. This figure not only proves the high identification of our employees with their company and workplace, but also revealed considerable savings potentials.

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53

SMS group

Annual Report 2006

54

CONSOLIDATED FINANCIAL STATEMENTS

INCOME STATEMENT 2006 (in thousand EUR) SMS group

2006 Net sales Manufacturing costs Gross profit Costs of projects and sales General administration costs Other operative income Other operative expenses Dividends Net interest result Result before income taxes Income taxes Net income 2,826,148 -2,314,371 511,777 -209,451 -129,768 9,664 -133,496 1,810 34,518 85,054 -16,952 68,102

2005 2,333,828 -1,843,627 490,201 -213,732 -120,971 52,289 -158,047 357 -8,565 41,532 -4,971 36,561

The financial statement and the profit and loss statement for the SMS group were derived from the IFRS group financial statement of SIEMAG Weiss GmbH & Co. KG.

55

SMS group

Annual Report 2006

BALANCE SHEET at December 31, 2006 (in thousand EUR) SMS group

Assets

Dec 31, 2006

Dec 31, 2005

Fixed assets Long-term receivables

538,460 36,443

558,289 36,754

Long-term assets

574,903

595,043

Inventories Short-term securities, liquid assets Short-term receivables Short-term assets

465,156 1,135,585 538,370 2,139,111

480,971 1,143,931 477,417 2,102,319

Total assets

2,714,014

2,697,362

56

Equity and liabilities Equity Accruals for pensions Long-term financial liabilities Other long-term liabilities, accruals Long-term liabilities and accruals

Dec 31, 2006 296,326 462,005 1,212 244,174 707,391

Dec 31, 2005 296,225 463,362 2,610 253,428 719,400

Customer deposits Short-term financial liabilities Other short-term liabilities and accruals Short-term liabilities and accruals

494,367 59,042 1,156,888 1,710,297

450,949 39,820 1,190,968 1,681,737

Total equity and liabilities

2,714,014

2,697,362

57

SMS group

Annual Report 2006

SUPPLEMENTARY INFORMATION to the statement of the SMS group December 31, 2006

Sales revenues in thousand EUR 2006 Break-down by Business Areas SMS Demag SMS Meer SMS Plastics Technology 1,775,849 669,464 380,835 2,826,148 1,379,928 492,300 461,600 2,333,828 2005

Order intake in thousand EUR 2006 2005

1,978,890 856,561 399,997 3,235,448

1,781,658 572,117 457,206 2,810,981

Break-down by regions Europe Americas Asia / Oceania Africa 1,165,032 547,368 1,059,444 54,304 2,826,148 898,890 414,935 982,121 37,882 2,333,828 1,266,048 575,719 1,350,410 43,271 3,235,448 1,180,503 620,803 966,956 42,719 2,810,981

58

Employees SMS group

2006 Break-down by Business Areas SMS Demag SMS Meer SMS Plastics Technology Personnel without trainees Trainees Total employees 4,774 1,729 2,051 8,554 445 8,999

2005

4,571 1,756 2,430 8,757 466 9,223

Break-down by functions Engineering Material procurement Manufacturing Project engineering and sales Administration Personnel without trainees Trainees Total employees 2,990 400 2,907 1,263 994 8,554 445 8,999 2,807 392 3,187 1,389 982 8,757 466 9,223

59

SMS group

Annual Report 2006

60

SUPERVISORY BOARD and MANAGING BOARD SMS GmbH

SUPERVISORY BOARD Dr.-Ing. E. h. Rudolf Rupprecht, Augsburg, Former Chairman of the Managing Board of MAN Aktiengesellschaft, Chairman Detlef Wetzel, Kreuztal, Executive Officer of Metalworkers' Union, North-Rhine Westphalia, Vice Chairman Frank-Günter Benner, Hilchenbach, Executive Vice President Hot and Cold Rolling Mills Division, SMS Demag AG (since April 4, 2006) Detlef Bierbaum, Cologne, Partner Sal. Oppenheim jr. & Cie. KGaA Dr. rer. pol. Manfred Bischoff, Munich, Chairman of the Supervisory Board of DaimlerChrysler AG Winfried Haasch, Duisburg, Project engineer, SMS Demag AG Prof. Dr.-Ing. E. h. Hans-Olaf Henkel, Berlin, Honorary Professor, Mannheim University Prof. Dr. oec. publ. Herbert A. Henzler, Munich, Vice Chairman of the Advisory Board of Credit Suisse Group Wilfried Kurtzke, Frankfurt/Main, Secretary of the Board, Metalworkers' Union (since April 4, 2006) Gert-Dieter Möser, Düsseldorf, Attorney Thomas Otto, Frankfurt/Main, Trade union secretary of Metalworkers' Union (up to April 4, 2006) Joachim Schwellenbach, Düsseldorf, Executive Vice President Turnkey/ Integrated Plants, SMS Demag AG (up to April 4, 2006) Helmut Six, Hilchenbach, Technical clerk, SMS Demag AG Klaus-Jürgen Treude, Erndtebrück-Schameder, Electrical repairman, SMS Demag AG MANAGING BOARD Dr.-Ing. E. h. Heinrich Weiss, Hilchenbach, Chairman & CEO Pepyn R. Dinandt, Munich (since October 1, 2006) Dr.-Ing. Kay Mayland, Rösrath Dr.-Ing. Joachim Schönbeck, Kronberg Heinz Wirke, Hilchenbach

61

SMS group

Annual Report 2006

ADDRESSES, PRODUCTS and SERVICES in the SMS group

Business Area SMS Demag

SMS Demag AG Eduard-Schloemann-Strasse 4 40237 Düsseldorf, Germany Tel.: +49 (0) 211 881-0 Fax: +49 (0) 211 881-4902 Wiesenstrasse 30 57271 Hilchenbach-Dahlbruch Germany Tel.: +49 (0) 2733 29-0 Fax: +49 (0) 2733 29-2852 www.sms-demag.com [email protected] Machines, plants and systems for producing and processing steel and nonferrous metals: submerged arc furnaces (SAF), basic oxygen steelmaking plants (BOF, AOD), components and systems for dedusting electric furnaces and steelworks, electric steelmaking plants (AC, DC), secondary metallurgy plants and processes, continuous casting plants for slabs, blooms and beam blanks, combined continuous casting and hot rolling facilities for the production of flat and long products (CSP®, CBP, MPS), hot flat rolling and cold rolling mills, tandem mills coupled with pickling lines, finishing lines, powder coating lines, strip processing and coating lines for steel and nonferrous metals (surface treatment and refining), drive systems, MORGOIL® bearings, electrics, automation technology and control systems, hydraulic systems, oil lubricating and cooling systems, water supply and treatment plants SMS Mevac GmbH Bamler Strasse 3 a 45141 Essen, Germany Tel.: +49 (0) 201 6323-0 Fax: +49 (0) 201 6323-200 www.sms-mevac.com [email protected] Secondary metallurgy: RH recirculation degassing plants, tank degassing plants, VOD plants, ladle heaters (chemical), ladle treatment stands, hot metal desulfurizing units, steel plant components FOEN Fontaine Engineering und Maschinen GmbH Industriestrasse 28 40764 Langenfeld, Germany Tel.: +49 (0) 2173 2700-31 Fax: +49 (0) 2173 2700-95 www.foen-gmbh.com [email protected] Technology and equipment for galvanizing metal strip SMS Demag Process Technologies GmbH Schwarzenbergplatz 6 1030 Vienna, Austria Tel.: +43 (0) 1 698 5738-15 Fax: +43 (0) 1 698 5744 www.sms-demag.at [email protected] Push-pull pickling lines, acid regeneration plants, process engineering automation for strip processing lines DUMA Maschinen- und Anlagenbau GmbH Theodor-Heuss-Str. 99 47167 Duisburg, Germany Tel.: +49 (0) 203 51904-0 Fax: +49 (0) 203 51904-50 www.dumagmbh.com [email protected] Coating lines Drever International S.A. Parc Scientifique du Sart-Tilman Allée des Noisetiers 15 4031 Liège, Belgium Tel.: +32 (0) 4 3666262 Fax: +32 (0) 4 3677678 www.drever.be [email protected] Equipment for strip refining, continuous annealing lines, stainless-steel bright annealing lines, annealing and pickling lines, continuous galvanizing lines SMS Demag INNSE S.p.A. Via Milano, 4 20097 San Donato Milanese (MI), Italy Tel.: +39 02 2124-1 Fax: +39 02 2124-699 www.innse.com [email protected] The entire range of metallurgical plant and rolling mill technology (without long-product rolling mills) Sidernaval Equipos Siderúrgicos SA Apartado Postal 559 Henao, 7-1° 48009 Bilbao, Spain Tel.: +34 (0) 94 423-9000 Fax: +34 (0) 94 424-6494 www.sidernaval.es [email protected] The entire range of metallurgical plant and rolling mill technology

62

Concast AG Toedistrasse 9 8027 Zurich, Switzerland Tel.: +41 (0) 44 204-6511 Fax: +41 (0) 44 202-8122 www.concast.net [email protected] Steelworks and continuous casting technology: continuous casting plants for billets and light blooms with all auxiliary and ancillary facilities, automation systems, quality control systems, water supply and treatment plants, electric steelworks SMS Demag Inc. 100 Sandusky Street Pittsburgh, PA 15212-5852, USA Tel.: +1 (0) 412 231-1200 Fax: +1 (0) 412 231-3995 www.sms-demag.us [email protected] The entire range of metallurgical plant and rolling mill technology (without strip processing lines) SMS Demag Ltd. 2775 Coventry Road Oakville, Ontario L6H 5V9 Canada Tel.: +1 (0) 905 829-2888 Fax: +1 (0) 905 829-5001 www.sms-demag.ca [email protected] Strip processing technology

SMS Demag Ltda. Rua Bernardo Guimarães, No. 245 10th to 17th floor Funcionários 30140-080 Belo Horizonte Minas Gerais, Brazil Tel.: +55 (0) 31 2125-1160 Fax: +55 (0) 31 2125-1408 www.smsdemag.com.br The entire range of metallurgical plant and rolling mill technology SMS Millcraft LLC 100 Sandusky Street Pittsburgh, PA 15212-5852, USA Tel.: +1 (0) 412 231-1200 Fax: +1 (0) 412 231-3995 www.millcraft-sms.us Service for steelworks, casters, rolling mills SMS Demag Tippins LLC 100 Sandusky Street Pittsburgh, PA 15212-5852, USA Tel.: +1 (0) 412 231-1200 Fax: +1 (0) 412 231-3995 www.sms-demag-tippins.us [email protected] Steckel rolling mills HyComp Inc. 17960 Englewood Drive Cleveland, OH 44130-3438, USA Tel.: +1 (0) 440 234-2002 Fax: +1 (0) 440 234-4911 www.hycompinc.com [email protected] Self-lubricating materials, bearings and wearing plates for use in rolling mills

SMS Demag Pvt. Ltd. India 387, Udyog Vihar, Phase II Gurgaon 122 016, India Tel.: +91 (0) 124 435-1591 Fax: +91 (0) 124 435-1603 [email protected] The entire range of metallurgical plant and rolling mill technology SMS Demag Technology (Beijing) Co., Ltd. Star City Building, Tower C, 15th Floor No. 10 Jiuxianquiao Road Chaoyang District Beijing 100016, China Tel.: + 86 (0) 10 5865-7188 Fax: + 86 (0) 10 5865-7140 www.sms-demag.cn [email protected] The entire range of metallurgical plant and rolling mill technology SMS Demag Metallurgical Equipment (Shanghai) Co., Ltd. Shanghai Chemical Industrial Zone Fengxian Sub Zone 1388 Canggong Road, Fengxian Shanghai 201424, China Tel.: +86 (0) 21 37504020*8001 Fax: +86 (0) 21 57448310 Service, repairs and assembly

63

SMS group

Annual Report 2006

Business Area SMS Meer

SMS Demag South Africa (Pty) Ltd. Milner Place 4 Carse O'Gowrie Street Parktown 2193, South Africa Tel.: +27 (0) 11 480-1800 Fax: +27 (0) 11 480-1805 www.smsdemagsa.com [email protected] The entire range of metallurgical plant and rolling mill technology SMS Meer GmbH Ohlerkirchweg 66 41069 Mönchengladbach, Germany Tel.: +49 (0) 2161 350-0 Fax: +49 (0) 2161 350-667 www.sms-meer.com [email protected] Tube and copper plants, long-product rolling and wire rod mills, press and forging technology SMS Meer S.p.A. Via Udine, 103 33017 Tarcento (Udine), Italy Tel.: +39 0432 799111 Fax: +39 0432 784556 www.sms-meer.it [email protected] Long-product rolling mills: wire rod mills, combined bar and wire rod mills, rebar mills, light-section rolling mills, finishing lines Hertwich Engineering GmbH Weinbergerstrasse 6 5280 Braunau, Austria Tel.: +43 (0) 7722 806-0 Fax: +43 (0) 7722 806-122 www.hertwich.com [email protected] Machines and equipment for the aluminum industry SMS Elotherm GmbH In der Fleute 2 42897 Remscheid, Germany Tel.: +49 (0) 2191 891-0 Fax: +49 (0) 2191 891-229 www.sms-elotherm.com [email protected] Induction, hardening, tempering and heating technology SMS Meer Service Inc. 100 Sandusky Street Pittsburgh, PA 15212-5852, USA Tel.: +1 (0) 412 320-4580 Fax: +1 (0) 412 231-7332 www. sms-meer.us [email protected] Service for tube plants, long-product rolling mills, nonferrous metal plants, press and forging technology

64

Business Area SMS PLASTICS TECHNOLOGY

Battenfeld Extrusionstechnik GmbH Königstrasse 53 32547 Bad Oeynhausen, Germany Tel.: +49 (0) 5731 242-0 Fax: +49 (0) 5731 27124 www.sms-k.com [email protected] Single- and twin-screw extruders with extrusion dies and downstream equipment for pipe and profile extrusion, socketing units, planetary roller extruders for calender feeding and pelletizing, twin-screw extruders with die-face pelletizers, extrusion lines for cast film and sheet, as well as Calandrettes® (compact calenders) SMS Extrusion Kempen GmbH Hooghe Weg 4 47906 Kempen, Germany Tel.: +49 (0) 2152 1495-0 Fax: +49 (0) 2152 1495-50 [email protected] Downstream equipment for profile and pipe extrusion, calibration and cooling facilities, haul-offs and cutting devices American Maplan Corporation 823 S. Bypass McPherson, KS 67460, USA Tel.: +1 (0) 620 241-6843 Fax: +1 (0) 620 241-0207 www.sms-k.com [email protected] Single- and twin-screw extruders, pipe extrusion dies, downstream equipment for the extrusion of pipes and profiles, including siding, decking and fencing, planetary roller extruders for calender feeding and pelletizing, extrusion lines for sheet, manufacture of barrels and screws for single and twin-screw extruders Battenfeld Extrusion Systems Ltd. 2 Jinxiang Road Fengxiang Industry Park, Daliang Shunde Foshan, Guangdong P.C. 528300, China Tel.: +86 (0) 757 223 80 112 Fax: +86 (0) 757 223 80 195 www.sms-k.com [email protected] Single- and twin-screw extruders with extrusion dies and downstream equipment for pipe and profile extrusion, extrusion systems for the production of blown and cast film and sheet as well as downstream equipment and film winders Cincinnati Extrusion GmbH Laxenburger Strasse 246 1230 Vienna, Austria Tel.: +43 (0) 1 61006-0 Fax: +43 (0) 1 61006-8 www.sms-k.com [email protected] Cincinnati Extrusion GmbH, Japan Branch 726-4 Unane, Takatsu-ku Kawasaki-shi, Kanagawa 213-0031, Japan Tel.: +81 (0) 44 811 5746 Fax: +81 (0) 44 822 0048 [email protected] Cincinnati Extrusion (Dalian FTZ) Ltd. Office 1307, Time Building No. 7 Gangwan Street, Dalian City 116001 Liaoning Province, China Tel.: +86 (0) 411 8279-8619 Fax: +86 (0) 411 8279-8615 Cincinnati Extrusion Inc. 1455 Jamike Dr. Erlanger, KY 41018, USA Tel.: +1 (0) 859 7461 530 Fax: +1 (0) 859 3714 534 [email protected] Single- and twin-screw extruders with extrusion dies and downstream equipment for pipe, profile, sheet and Wood Plastic Composites extrusion, manufacture of barrels and screws for all twin-screw extruders, retrofitting microprocessor controls Battenfeld Gloucester Engineering Co. Inc. Blackburn Industrial Park Gloucester, MA 01930, USA Tel.: +1 (0) 978 281-1800 Fax: +1 (0) 978 282-9111 www.sms-k.com [email protected] Mono- and multi-layer extrusion systems and components for the production of blown film, cast film, foam and sheet as well as downstream equipment, film winders, machine direction orienters and bag making machines

65

SMS group

Annual Report 2006

MANAGING BOARDS

Business Area SMS Demag

SMS Demag AG Managing Board Dr.-Ing. Kay Mayland, President & CEO Burkhard Dahmen Dieter Rosenthal Eckhard Schulte Heads of Divisions Steelmaking Plants/Continuous Casting Technology: Franz Axtmann Christian Geerkens Dr.-Ing. Jens Kempken Hot Rolling Mills/Cold Rolling Mills: Frank-Günter Benner Rüdiger Holz Stephan Krämer Strip Processing Lines: Dr.-Ing. Hans-Georg Hartung Rüdiger Zerbe Electrics and Automation: Klaus-Dieter Berger Joachim Schlichtig Service: Pino Tesè SMS Demag Ltda. Pedro Braga, President & CEO SMS Demag Pvt. Ltd. Aditya Kumar Misra, Managing Director SMS Demag South Africa (Pty) Ltd. Till Schreiter, Managing Director SMS Demag Ltd. N.N. SMS Demag INNSE S.p.A. Franco Damiani, CEO SMS Mevac GmbH Rainer Dittrich, Managing Director Concast AG Jacques Zuber, President & CEO Sidernaval Equipos Siderúrgicos S.A. José Ramón Egusquiza, Managing Director SMS Demag Technology (Beijing) Co., Ltd. Robert Gruß, President SMS Demag Inc. Joseph T. Dzierzawski, President & CEO SMS Metallurgical Equipment (Shanghai) Co., Ltd. Knut Schellhorn, Managing Director FOEN Fontaine Engineering und Maschinen GmbH Pascal Fontaine, Managing Director SMS Demag Process Technologies GmbH Herbert Weissenbaeck, Managing Director Horst Krenn, Managing Director DUMA Maschinen- und Anlagenbau GmbH Peter de Kock, Managing Director Ronald Jabs, Managing Director Drever International S.A. Jean Marc Raick, Managing Director SMS Millcraft LLC Doug A. Dunworth, President & CEO SMS Demag Tippins LLC John E. Thomas, President & CEO HyComp Inc. Robert Scoular, President & CEO

66

Business Area SMS Meer

SMS Meer GmbH Managing Board Dr.-Ing. Joachim Schönbeck, President & CEO Torsten Heising Hertwich Engineering GmbH Franz Niedermair, Managing Director SMS Meer S.p.A. Managing Board Marco Asquini, President Marco Fattori, Marco Pirisi, SMS Elotherm GmbH Managing Board Dr.-Ing. Andreas Seitzer, President & CEO Philipp Kannengießer

Business Area SMS PLASTICS TECHNOLOGY

Battenfeld Extrusionstechnik GmbH Wolfgang Studener, Managing Director SMS Extrustion Kempen GmbH Peter Franz, Managing Director American Maplan Corporation Kurt Waldhauer, President & CEO Battenfeld Extrusion Systems Ltd. Samuel Ning, General Manager Cincinnati Extrusion GmbH Walter Häder, Managing Director Cincinnati Extrusion Inc. Hans-Jürgen Matthesius, President Cincinnati Extrusion Technology Japan Branch Koki Kashiyama, General Manager Cincinnati Extrusion (Dalian FTZ) Ltd. Peter Schürz, Managing Director Battenfeld Gloucester Engineering Co. Inc. John Kaplan, CEO

67

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