Press release Kortrijk (Belgium), 16 March 2006   Annual results 2005

Press contacts Françoise Vanthemsche Tel. +32 56 23 05 71 Investor Relations Jacques Anckaert Tel. +32 56 23 05 72

Strong 2005 performance by Bekaert

Sales
Bekaert achieved consolidated sales of € 1.9 billion and combined sales of € 3.1 billion in 2005, an increase of 10% and 14% respectively (1)(2).  

The consolidated sales’ increase was 8% from organic growth, 1% from the net movement in acquisitions and divestments and 1% from currency movements.

Combined sales of advanced wire products were 14% higher
(wire Europe –7%, wire North America –4%, wire Latin America +26%, wire Asia +24%,
building products +12%, steel cord China +39%, steel cord others +15% and
other advanced wire products +19%).

After an extraordinary year in 2004, which saw unprecedented price rises for wire rod (the raw material for advanced wire products), in 2005 Bekaert continued to experience the significant impact of the volatility of raw materials markets worldwide. In contrast to 2004, when customers built up their inventories, because of difficulties in obtaining supplies, the company experienced just the opposite in 2005, with customers running down their stocks, which translated into a slow-down in customer demand in some markets. Both raw materials prices and selling prices were higher on average than in 2004. The application of the inventory valuation rules had a limited impact on the operating result in 2005 unlike 2004 when this change had a positive effect of € 35 million, due to significant raw materials price increases.

In the mature markets of Western Europe and North America, Bekaert saw demand for its advanced wire products weaken noticeably, especially in the automotive industry.

Bekaert continued to drop some of the less profitable products from its portfolio and concentrate on applications with a higher added value. Its production platforms were realigned in response to the shifts in market demand and the cost structure was modified at several plants, for which Bekaert recognized € 16 million non-recurring expenses.

With the acquisition of Conflandey Inc.’s activities and various items of machinery and equipment in early 2006, Bekaert aims to strengthen its position in industrial stapling wire and fine specialized wires on the North-American market. Bekaert also worked hard to improve its customer service. In the wake of the major natural disasters in North America, it was able to respond at very short notice to the demand created by the rebuilding programs, especially for energy supplies, telecommunications, construction and infrastructure work.

Bekaert will also continue to reinforce its position in Central and Eastern Europe, including in Russia. The company performed strongly in Latin America. Bekaert experienced significant growth in all its activities in Asia, particularly in China. Demand for steel cord products was strong. Bekaert developed new products and announced an important new investment program in advanced wire products.

By taking over ECC Card Clothing in June 2005 and setting up the Wuxi Owl Textile Accessories Co. Ltd. joint venture in China, Bekaert embarked on worldwide expansion of its advanced wire products for the textile sector.

Combined sales of advanced materials recorded growth of 21%
(fiber technologies +23%, combustion technologies +26%, composites +2%).

Bekaert experienced a strong increase in sales in advanced materials, but operating result was negatively influenced by € 8 million due to impairment losses.
In fiber technologies, Bekaert registered an important breakthrough in the field of environment-friendly gas filtration. In mid-2005, it also acquired Southwest Screens & Filters SA, a world player in industrial process filtration based on Bekaert metal fibers.

In combustion technologies, environment-friendly heating equipment for the residential sector performed strongly. The same was true for the industrial applications, partly due to the acquisition of Solaronics for which only nine months’ figures were included in 2004. By the end of 2005, with the acquisition of Shell’s interest, Bekaert owned 100% of the combustion technologies activity platform. The company now intends to implement its growth strategy for environment-friendly gas burners alone, capitalizing on the increasingly strict environmental regulations in Europe and the United States. 

Combined sales of advanced coatings were up by 4%
(industrial coatings –4%, specialized films +11%).

Bekaert recorded modest growth in advanced coatings. In industrial coatings, there was growth in diamond-like coatings, which are used for example on engine components for racing cars, but sputter products, where demand is largely project-driven, had a difficult year. The reallocation of the worldwide production capacity in sputtered films necessitated € 7 million non-recurring expenses.

Specialized films performed strongly in 2005, mainly thanks to substantial growth in Asia.

In November 2005, Bekaert officially opened its new plant for advanced materials and coatings in Suzhou (China), which will considerably strengthen its position in the growing Asian markets.

Profitability
In continuing operations, Bekaert achieved a consolidated operating result (EBIT) before non-recurring items of € 168 million, compared with € 148 million in 2004. Including non-recurring items (€ 32 million, as against € 9 million), the consolidated operating result (EBIT) amounted to € 136 million, compared with € 139 million in 2004, representing an EBIT margin on sales of 7.1%.

The companies consolidated using the equity method contributed € 57 million to the result, as in 2004.

The consolidated net profit from continuing operations amounted to € 136 million compared with € 141 million. The consolidated net profit from discontinued operations was € 54 million, mostly in the form of the gain on the sale of Bekaert Fencing NV. The consolidated net result of the Group amounted to € 190 million, compared with € 168 million. 

Balance sheet
As at 31 December 2005, equity represented 51% of total assets. Net debt amounted to € 272 million, compared with € 369 million and the gearing ratio (net debt to equity) was 24%, compared with 38% as at year-end 2004.

Cash flow
EBITDA was € 257 million. Cash flow amounted to € 257 million.

Cash provided by operating activities amounted to € 179 million and depreciation, amortization and impairments totaled € 121 million. Operating working capital amounted to € 431 million, compared with € 453 million. The sale of the fencing systems Europe business segment reduced working capital by € 93 million, while the higher activity level and currency movements increased the working capital by € 72 million.

Cash used in investing activities of the consolidated companies totaled € 36 million. Cash proceeds from the sale of Bekaert Fencing NV amounted to € 86 million. Investments in property, plant and equipment totaled € 142 million, mainly due to the expansion of the production capacity in various growth markets, especially those in Asia.

Under the authority vested by the General Meeting of Shareholders in the Board of Directors, 585 000 Bekaert shares were purchased in 2005 at an average price of € 61.04, of which 576 550 were canceled.

NV Bekaert SA (statutory accounts)
The parent company's sales amounted to € 601 million. The profit was € 131 million, compared with € 58 million, mostly due to the extraordinary result on the sale of Bekaert Fencing NV.

Dividend
In the light of the company’s strong performance in 2005 and its confidence in the future, the Board of Directors will propose that the General Meeting of Shareholders approve the distribution of a gross dividend of € 3.00 per share. This gross dividend is composed of a basic amount of € 2.00 (an increase of 6.7 % from last year’s basic amount) and an exceptional payment of € 1.00 on account of the gain on the sale of Bekaert Fencing NV. If this proposal is accepted, it will result in a net dividend per share of € 2.25. In that case, the net dividend on shares with VVPR strip, giving entitlement to reduced withholding tax of 15%, will be € 2.55 per share. The dividend will be payable as from 17 May 2006.

Outlook
Bekaert has started 2006 well, but is experiencing more intense competition around the world and higher costs for both raw materials and energy.

Bekaert will continue to pursue its strategy of sustainable profitable growth in 2006 in all business segments and regions. In the mature markets, especially in Europe, Bekaert is witnessing a slight weakening of demand for some products. In the growth markets, Bekaert aims to continue strengthening its position and will make further substantial investments in expanding its production capacity.

Profile
Bekaert (www.bekaert.com) seeks sustainable profitable growth based on its two core competences: advanced metal transformation and advanced materials and coatings.
Bekaert aims to consolidate its position as both market and technological leader around the world. With its broad range of high technological products, systems and services, Bekaert offers high added value for its customers.
Bekaert (Euronext Brussels: BEKB) is an European based company, headquartered in Belgium, employing 17 000 people. Bekaert, present in 120 countries, generates sales of € 3 billion.