Bekaert Business Report FY2006

Business Highlights

Business overview
For FY2006, despite the heightened competition, the Company 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 euros the Company 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, the Company will maintain this level of investment as the Chinese market shows strong and sustained growth.
In Europe, the Company recorded a lower demand for steel cord products. In North America, the strike at Goodyear in the fourth quarter had a severe impact on the level of activity at the steel cord plants in the US. In anticipation of a sustained downturn trend in demand on the North American market, the Company decided to close the plant in Dyersburg (Tennessee).

Demand for other wire products for the automotive sector weakened in the mature markets. The Company strengthened its position in wires for offshore applications with the acquisition of Cold Drawn Products Limited, a supplier of specialized profile wires in Wertern Europe.

In January 2006, the Company announced it acquired Delta Wire Corporation for US$ 10 million (8.3 million euros). Delta Wire Corporation, located in Clarksdale (Mississippi), is a major supplier of bead wire for tire reinforcement, as well as of a wide range of specialized wire products for the North American market. Delta Wire will continue to operate in its current capacity, so this transaction will have no impact on supplies to customers.

In the fall, the Company acquired a minority 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 the Company's position in China and speed up the joint introduction of top-quality products on this growing market.

Investment Activities

Capital Expenditure

in thousands of euros FY2006 FY2005
Advanced wire products 154,854 140,360
Advanced materials 6,115 8,224
Advanced coatings 4,311 9,423
Other 5,824 1,996
Eliminations (18,323) (18,117)
Total 152,781 141,886

Overseas Investment

In November 2005, with the decision taken in May 2003, the Company increased its production capacity for steel cord products for tire reinforcement in China up to 120,000 tonnes annually. This investment program raised its annual consolidated capital expenditures for 2004-2005 to approximately 160 million euros and involved the construction of a new plant in Weihai (Shandong Province) and the expansion of the plants in Jiangyin (Jiangsu Province) and in Shenyang (Liaoning Province). The Company also wants to strengthen the strong ties with its customers and suppliers and recently opened a new training and meeting center close to the technical center in Jiangyin. It also donated advanced laboratory equipment to the Materials Research and Test Center of the China Rubber Industry Association in Beijing, which plays an important role in the standardization of testing procedures and the comparisons of materials used in the rubber reinforcement industry.