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26. March 2009

Noticeable impact of the financial crisis on the business progress of our company

After a positive development in the first half of 2008, in the second half-year order bookings and shipped volumes fell sharply. Simultaneously falling raw material and alloy costs put sales revenues under pressure. As from the fourth quarter of 2008, capacity reduction measures were unavoidable. Revenue was EUR 4'091.9 million (2007: EUR 4,247.3 million). Operating profit before depreciation and amortisation (EBITDA) amounted to EUR 233.9 million (2007: EUR 416.8 million), and EBIT to EUR 138.4 million (2007: EUR 326.0 million). Included in this amount are value adjustments on inventories of EUR 134.5 that were made in the second half-year to take account of lower prices for scrap and alloying elements. Consequently, net income was only EUR 62.8 million (2007: EUR 188.5 million). The consolidated financial statements as at December 31, 2008, will be published for the first time based on the International Financial Reporting Standards (IFRS). Given the low visibility in the markets, it is currently difficult to make any statement about the further progress of business in 2009.

The global financial crisis and the resulting economic recession have had a perceptible impact also on our company. After good progress in the first half of 2008, the demand for steel products in many of our market segments weakened massively in the second half-year. We experienced the most dramatic decline with our customers in the automobile and automobile components supply industries. The customers responded to the weakening business progress by running down inventories as well as reducing, cancelling and postponing orders. As from the fourth quarter, this compelled us to reduce capacities at our works. The adaptation was achieved through compensation of overtime/flexible-worktime balances, utilisation of holiday entitlements, and reductions in borrowed and temporary workers. Since January 2009, we have had to introduce short-time working at various plants. It is our goal to retain our permanent workforce as far as possible so as not to lose the available know-how.

A further negative impact on our earnings situation derived from the volatile development of prices for raw materials and alloys. By the end of 2008 scrap prices had halved from their all-time highs of June 2008, and in the second half-year prices for important alloying elements such as nickel also fell sharply. This made value adjustments for a total of EUR 134.5 million necessary. Currencies also developed unfavourably, particularly the exchange rates of the Swiss franc and US dollar to the euro.

Financial reporting for the fiscal year 2008 was based for the first time on the International Financial Reporting Standards (IFRS). This will make the Group financial statements, which were formerly prepared according to the Swiss GAAP FER standards, even more transparent and internationally comparable for the capital market.

Key figures

Group revenue for 2008 was EUR 4,091.9 million (2007: EUR 4,247.3 million). After value adjustments of EUR 134.5 million on inventories, operating profit before depreciation and amortisation (EBITDA) amounted to EUR 233.9 million (2007: EUR 416.8 million). EBIT was EUR 138.4 million (2007: EUR 326.0 million). Group net income (EAT) closed at EUR 62.8 million (2007: EUR 188.5 million).

Financial position

Cash flow before acquisitions of Group companies was EUR 41.1 million (2007: EUR - 45.5 million). Total assets stabilised at EUR 2,670.2 million (2007: EUR 2,661.0 million). Net financial liabilities rose slightly to EUR 988.0 million (2007: EUR 950.7 million). The equity ratio was 30.7% (2007: 27.4%). The equity base was strengthened by obtaining external hybrid capital of EUR 80 million which was provided by the main shareholders of SCHMOLZ+BICKENBACH AG, SCHMOLZ+BICKENBACH Holding AG and Gebuka AG. Already in May 2008 we placed a promissory note for EUR 250 million with tranches of three, five and seven years to secure our long-term financing. On the same date we repaid EUR 100 million of the existing consortial credit.

Proposal for dividend payment

The Board of Directors will propose to the Ordinary General Meeting payment of a dividend of CHF 0.50 per share (2007: CHF 1.25 per share).

Investments

With EUR 221.4 million (2007: EUR 243.4 million), we again made a significant volume of investments. The investments aim to further increase the efficiency of our works and sales organisations as well as to provide additional, higher-value products and services. The main project is still construction of the new steelworks at A. Finkl & Sons in Chicago. No major acquisitions comparable to those of the previous years were undertaken in 2008. We acquired relatively small sales activities in Germany and France. New branch offices were also established in India and Dubai.

Outlook

We expect the weak tendencies in the market segments of the automobile and mechanical engineering industries that are important for us to continue. Developments may be better in the energy extraction and generation segments. Based on currently available information, we anticipate a slight improvement in the order situation in the second half of 2009 at the earliest, which will also improve capacity utilisation. By then, the excess inventories at our customers and along the entire value chain should have been consumed which will trigger a corresponding requirement. We expect this requirement to be at a lower level than in the last few years. In view of the difficult market environment, we expect revenue and earnings for 2009 to be lower than in the preceding years. The adaptations that we have made in our workforce and capacities, rigorous cost control, strict working capital management, the cost-reduction and financing measures that have been introduced and the investment projects that we have implemented in the last few years make us confident that with the position we occupy in the engineering, stainless and tool steels segments we are well equipped for the challenges of the current year.

Contact persons for further information are:

Benedikt Niemeyer, CEO, phone +41 41 209 50 40

Dr. Marcel Imhof, COO, phone +41 41 209 51 81

Investor Relations

Axel Euchner, CFO, phone +41 41 209 50 35

www.schmolz-bickenbach.com

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