Letter of the Management Board

Ladies and Gentlemen: (handwriting)

The business year 2011/12 was not only characterized by a difficult economic environment, but it also brought with it additional and very specific challenges for the voestalpine Group, the history of which originated in the distant past. This applies particularly to the antitrust proceedings that have been pending before the German Federal Cartel Office since the spring of 2011 with regard to the railway superstructure material segment (“rail cartel”), whose roots go way back. In these proceedings, which voestalpine AG initiated itself, we have committed ourselves to unconditional cooperation with the authorities; at the same time, we have used this as an opportunity to comprehensively revise the Group’s existing compliance structures. With the compliance system that has been in effect since the fall of 2011, the Group now has an instrument in place that comprises all levels, including an up-to-date whistleblower system, in order to ensure proper corporate management based on state-of-the-art international knowledge in this area.

On the other hand, however, the BÖHLER-UDDEHOLM Group—today the voestalpine Special Steel Division—has not yet been part of the voestalpine Group for long. But the joint development in the five years since our acquisition of a majority stake in the summer of 2007 has confirmed that this takeover was the right step to take, not only from a strategic, but also from an operational perspective. Today, the Special Steel Division has been fully and successfully integrated into the Group and is creating significant added value; despite the crisis of 2008 and 2009, its operational key figures show that the expectations we had in 2007 have long been met in every possible way. A few weeks ago, we were able to conclude the negotiations regarding the final assessment of those BÖHLER-UDDEHOLM shares where no agreement had been reached regarding the purchase price within the scope of the squeeze-out. On May 3, 2012, the settlement was approved by the responsible body without any restrictions. This concludes the final chapter of the largest ever Austrian industrial acquisition.

Another entirely different matter is Europe’s struggle for its future that threatens to become an unending story. In the past years, we have repeatedly pointed out that Europe needs to finally acquire leadership competency and become goal oriented. It has to finally rouse itself and get its government spending under control and take on the political administrative structures that have proliferated over the course of centuries and reduce them to a size appropriate for a modern society. The current development in Southern Europe is the writing on the wall. It must be understood that reforms in many countries are long overdue. And these reforms must not be confined to cosmetic changes alone. A very fundamental reorientation is necessary—including a new understanding of how our modern society perceives itself. The growing tendency in many countries to rely on “the government” or on “politics,” despite their deteriorating problem-solving competence, is causing Europe to fall back further and further in the face of ever tougher global competition. What Europe needs are ambitious companies and committed employees for whom the political system creates the necessary framework conditions for them to be truly competitive and not an increasingly state-regulated society that is taking on Orwellian dimensions at the expense of us all.

The discussion about European values, goals, and moral principles, combined with the willingness to take on responsibility in all areas of our lives, is long overdue. In any case, delegating responsibility to anonymous state entities and politicians, who would rather govern based on opinion polls in the interest of getting reelected instead of taking on the long-term needs of our society, is not a solution. What this is about is enabling a decent and prosperous future for the next generations. And to make this possible, we need to do more than develop agendas for resources and the environment that are not only fanciful and idealistic but unrealistic and utopian. What this needs is a balanced examination of all of the basic human needs, from work and social security through education and health to careful treatment of resources and the environment—and much more. Only when all of these factors that determine our lives are weighted in a balanced way can we create a life in the future that is worth living. We need to work on this consistently and with the awareness that the real economy—industry—has a central role in this process.

For the voestalpine Group, the new business year is particularly meaningful, as we plan to successfully complete the work begun two years ago on the long-term direction of our company. The volatility of our operational environment that has grown enormously in recent years, but also the framework conditions for our actions, which are changing in ever shorter intervals, make it tremendously challenging to make decisions that will affect us for a very long time. In this process, we are confronted with very moveable goals and objectives. However, not facing up to this challenge would mean to deny our company an orderly future and to do precisely what we are increasingly blaming the politicians for doing, namely, jeopardizing the future by taking a permanent wait-and-see attitude.

In this discussion about the future of voestalpine, one thing, however, is already clear—we will do everything in our power to continue to expand our position as a leading corporation with regard to technology, innovation, and quality with maximum consistency and focus our actions even more intensely than before on our transformation from a materials company to a technology and processing Group. Without a doubt, steel in its most sophisticated form, will continue to be the basis of our company, but only to the degree that the development of the framework conditions in Europe feasibly allow this. In any case, we will make our decisions in such a way that the future development of the voestalpine Group is in line to the greatest extent possible with the long-term interests and expectations of our employees, our customers, and our shareholders.

Linz, May 26, 2012

The Management Board






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