Annual Results 2006

Press release

Kortrijk (Belgium), 16 March 2007

Annual results 2006
Press contacts
Françoise Vanthemsche
Tel. +32 56 23 05 71

Investor Relations
Jacques Anckaert
Tel. +32 56 23 05 72

Bekaert posts strong results in increasingly competitive global markets

Sales
Bekaert achieved consolidated sales of € 2.0 billion and combined sales of € 3.2 billion in 2006, an increase of 5% and 4%, respectively.(1)(2)

The consolidated sales’ increase was 1% from organic growth and 4% from the net movement in acquisitions and divestments.

(1) Combined sales are sales generated by consolidated companies plus 100% of sales of joint ventures and associates after intercompany elimination.
(2) All comparisons are made relative to the figures of the financial year 2005.
(3) Excluding ‘intersegment sales and others’.

Advanced wire products

(4) The key figures for the business segments were restated following the introduction of a more refined method of allocating results to the various business segments. This did not affect the Group’s consolidated figures.

Combined sales of advanced wire products were 5% higher in 2006
(wire Europe +8%, wire North America -6%, wire Latin America +7%, wire Asia +7%,
building products +11%, steel cord China +54%, steel cord others -6% and
other advanced wire products +7%).

Despite the heightened competition, Bekaert was able to advance its position in China significantly and posted a 54% sales growth in steel cord products, mainly for truck tire reinforcement. With an investment program of close to € 100 million Bekaert increased its production capacity in China, by extending the production plant in Weihai (Shandong province) and by building two new plants in very short order, in Jiangyin (Jiangsu province) and in Shenyang (Liaoning province). In 2007, Bekaert will maintain this level of investment as the Chinese market shows strong and sustained growth.

In the fall, Bekaert acquired a minority interest in Shougang Concord Century Holdings Ltd, a company which is listed on the Hong Kong Stock Exchange and whose activities include steel cord production. A framework was defined for closer cooperation in the provision of services and material supplies, which will further consolidate Bekaert’s position in China and speed up the joint introduction of top-quality products on this growing market.

In Europe, Bekaert recorded a lower demand for steel cord products. In North America, the company acquired Delta Wire Corporation, a major supplier of bead wire for tire reinforcement based in Clarksdale (Mississippi). The strike at Goodyear in the fourth quarter had a severe impact on the level of activity at the steel cord plants in the United States. In anticipation of a sustained downturn trend in demand on the North American market, Bekaert decided to close the plant in Dyersburg (Tennessee).

Demand for other wire products for the automotive sector weakened in the mature markets. Bekaert strengthened its position in wires for offshore applications with the acquisition of Cold Drawn Products Limited, a supplier of specialized profile wires in Western Europe. Bekaert also expanded its operations in Central Europe to consolidate its competitive position. In North America, there were clear signs of weakening of several economic sectors in which the company is active.

Helped by the mild winter, Bekaert was able to maintain a high level of activity in building products in Europe and Asia. In the other advanced wire products, the company expanded its carding business with the acquisition of ECC Card Clothing in 2005. The plant in Huddersfield (United Kingdom) was closed and manufacture of the short-staple products for textile machinery was integrated into the new plant in Wuxi (Jiangsu province, China).

Although volatility on raw material markets decreased in 2006, wire rod prices generally remained high, driven by the increasing global demand for steel. Prices of other raw materials, such as zinc, rose sharply. Higher energy costs also added to the pressure on margins.

The company recorded a higher level of activity in Latin America, but faced increasing competition from Asian imports and hence sustained pressure on prices. The performance benefited from a positive impact of currency movements, most notably in Brazil and Chile.

Advanced materials

Sales of advanced materials recorded growth of 11%
(fiber technologies +15%, combustion technologies +9%, composites +4%).

Bekaert achieved strong organic growth in fiber technologies. Performance also benefited from the acquisition in June 2005 of Southwest Screens & Filters SA (Belgium), which serves the industrial process filtration market.

In combustion technologies, Bekaert continued to advance its position in the market for environment-friendly burners for residential heating systems. The recent acquisition of the Dutch Aluheat B.V., which specializes in the latest technologies for condensing boilers, also contributed to growth, but 2006 was a difficult year for the project-based industrial burner system activities.

In composites, the company maintained its position in an extremely competitive environment.

Advanced coatings

Sales of advanced coatings were up by 3% in 2006
(industrial coatings +1%, specialized films +4%).

After a difficult first half, the industrial coatings business picked up in the second half of the year. In specialized films, Bekaert’s performance was adversely affected by currency movements. By increasing its sales effort, however, the company recorded sustained growth, most notably in North America and Asia.

Other activities
As well as expanding its sales organizations, Bekaert also continued to invest heavily in research and development. In order to be able to offer its customers appropriate technological support as its business in Asia grows, Bekaert is further developing its technology center in Jiangyin (Jiangsu province, China) into an efficient, customer-focused research facility.

The engineering department, which is a major supplier of machinery for the company’s investment programs, maintained a high level of activity.

Bekaert sold its 50% share in the handling business, which had its origin in the Fencing Europe business segment and was no longer considered part of its core business.

Profitability
Bekaert posted an operating result (EBIT) before non-recurring items of € 163 million, compared with € 168 million. EBIT margin on sales before non-recurring items was 8.1%. Including non-recurring items (€ 17 million, against € 32 million), the operating result (EBIT) amounted to € 146 million, compared with € 136 million. EBIT margin on sales was 7.3%.

Income taxes amounted to € 18 million, compared with € 30 million.

The companies accounted for using the equity method contributed € 51 million to the result for the period, compared with € 57 million.

The result for the period amounted to € 147 million, compared with € 202 million, which included the contribution of the divestment of Bekaert Fencing NV of € 54 million. The result for the period attributable to the Group amounted to € 142 million, compared with € 190 million.

Balance sheet
As at 31 December 2006, equity represented 51% of total assets. Net debt amounted to € 375 million and the gearing ratio (net debt to equity) was 33%.

Cash flow
EBITDA increased to € 262 million, compared with € 257 million. Cash flow attributable to the Group (continuing operations) amounted to € 262 million, compared with € 257 million.

Cash from operating activities amounted to € 193 million. Depreciation and amortization was € 116 million. Operating working capital amounted to € 452 million.
Investments in respect of the consolidated companies represented a cash outflow of € 157 million. Purchase of property, plant and equipment totaled € 153 million, mainly due to the expansion of production capacity in China.

Under the authority vested by the General Meeting of Shareholders in the Board of Directors, a total of 636 656 Bekaert shares were repurchased in 2006 at an average price of € 88.72 per share. Of these, 8 890 were transferred to the individuals who had exercised options under the SOP2 stock option plan and the remainder were cancelled, both to compensate for potential dilution due to the future exercise of 70 766 subscription rights granted under the current SOP 2005-2009 stock option plan and to further optimize the company’s debt structure. Bekaert purchased, at an average price of € 94.20 per share, and subsequently cancelled 546 779 shares in early 2007, as a consequence of which the company’s share capital of € 173 300 000 is represented as at 26 February 2007 by 20 400 000 shares.

NV Bekaert SA (statutory accounts)
Sales amounted to € 574 million. The result for the period was € 60 million, compared with € 131 million. The decrease mainly reflects the extraordinary profit generated in 2005 by the sale of Bekaert Fencing NV.

Dividend
In the light of the company’s strong performance in 2006 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 € 2.50 per share, which represents an increase of the basic amount by 25%. If this proposal is accepted, the net dividend per share will amount to € 1.875 and the net dividend on shares with VVPR strip, giving entitlement to reduced withholding tax of 15%, will be € 2.125 per share. The dividend will be payable as of 16 May 2007.

Outlook
Bekaert has made a good start in 2007, but expects raw material prices to become more volatile again this year. Bekaert will continue to step up the pace of investment in order to strengthen its market and technological leadership and to participate in the growth in the BRIC countries.

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