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Annual ReportMAN Ferrostaal AG2004
Turning Ideas into Reality
MAN FERROSTAAL GROUP€ million
2004 2003
New orders 3.508 2.738
Sales 3.185 2.880
Employees as of Dec. 31 (number) 4.679 6.689
Capital expenditures 36 22
Cash flow 69 65
Shareholders’ equity as of Dec. 31 307 331
Earnings before taxes on income 62 65
Net income 55 40
At a glance
The structure of the MAN Group...>
The Structure of the MAN Group
MAN is one of Europe´s leading engineering groups. As a systems provider employing some 62,000 people in its five key areas of Commercial Vehicles, Industrial Services, PrintingSystems, Diesel Engines and Turbomachines, MAN operates in120 countries and generates annual sales of b15 billion (2004).The MAN Group ranks among the top three suppliers in each of its markets and is a technological leader. MAN´s blue-chipshares are listed in the DAX 30.
ENGINEERING THE FUTURE.
MAN Aktiengesellschaft
Commercial VehiclesMAN Nutzfahrzeuge is one of the leading commercial vehicle manufac-turers in Europe with production plants in Germany, Austria, Poland, Turkey and South Africa.– Trucks from 7.5 to 50 t for every field of application– Buses and coaches– Vehicle, marine and industrial engines– Services for every aspect of commercial vehicles
Industrial ServicesMAN Ferrostaal is a worldwide supplier of industrial services.– Contracting: project development, project management and financing
packages for industrial plants– Industrial Equipment and Systems: delivery of machinery, ships,
transport equipment– Steel Trading and Logistics: systems and logistics services, steel trade
Printing SystemsMAN Roland Druckmaschinen is a globally leading manufacturer and system supplier for the graphic arts industry.– World market leader in web offset presses for newspaper printing
and commercial jobs– Second-largest manufacturer of sheet-fed offset presses for pub-
lishing, advertising and packaging printing– Supplier of digital offset printing systems – Integrated services and software products for all printing needs
Diesel EnginesMAN B&W Diesel is the »birthplace« of the Diesel engine and a globally leading manufacturer of large Diesel engines with works in Germany, Denmark, England and France. – World market leader for two-stroke propulsion engines and designer
of the world’s most powerful Diesel engine– Worldwide leading supplier of large four-stroke Diesel engines for
marine propulsions, power plants and railways
TurbomachinesMAN TURBO is one of the worldwide leading manufacturers and service providers for compressors and industrial turbines.– Manufacturing and erection of single machines and entire machine trains– Compressors for industrial processes– Gas and steam turbines for drive systems and power generation
COMMERCIAL VEHICLES€ million
2004 2003
Order intake 7,589 6,772
Sales 7,409 6,707
Operating profit 342 203
EBT 260 121
Employees* 33,810 34,094
INDUSTRIAL SERVICES€ million
2004 2003
Order intake 3,508 2,738
Sales 3,185 2,880
Operating profit 72 73
EBT 62 65
Employees* 4,679 6,689
PRINTING SYSTEMS€ million
2004 2003
Order intake 1,885 1,575
Sales 1,620 1,516
Operating profit 3 (26)
EBT (8) (37)
Employees* 9,026 9,465
DIESEL ENGINES€ million
2004 2003
Order intake 1,872 1,460
Sales 1,421 1,312
Operating profit 55 58
EBT 40 44
Employees* 6,731 6,625
TURBOMACHINES€ million
2004 2003
Order intake 675 658
Sales 659 567
Operating profit 36 29
EBT 30 23
Employees* 2,472 2,494
*number at 31 Dec. 2004 and 31 Dec. 2003
1 Contents
MAN Ferrostaal Annual Report 2004
02 … Supervisory Board03 … Executive Board
Executive Vice President
04 … Report of the Supervisory Board
06 … The MAN Ferrostaal Group at a Glance
08 … Management Report09 … Orders10 … Facility Construction and Contracting10 … DSD Steel Construction10 … Industrial Equipment and Systems11 … Steel Trading and Logistics11 … Earnings11 … Profit transfer11 … Asset and financial structure12 … Risk management14 … Important developments15 … Employees16 … A word of gratitude to our employees16 … Outlook
20 … MAN Ferrostaal partnership
28 … From the segments28 … Facility Construction and Contracting32 … Industrial Equipment and Systems38 … Steel Trading and Logistics
44 … Selected consolidated companies of the MAN Ferrostaal Group
46 … Consolidated financial statements for the MAN Ferrostaal Group division for the fiscal year 2004 (see separate table of contents)
80 … Our Main Subsidiaries
2
Dr.-Ing. E. h. Rudolf RupprechtChairmanMunichChairman of the Executive BoardMAN Aktiengesellschaftuntil December 31, 2004
Dipl.-Ing. Håkan SamuelssonChairmanMunichChairman of the Executive BoardMAN AktiengesellschaftSince January 01, 2005
Dr. jur. Karl-Hermann LoweVice ChairmanMunichMember of the Executive BoardAllianz Versicherungs-AG
Brigitte Amamoo*OberhausenCertified Translator
Dr.-Ing. Burckhard BergmannChairman of the Executive BoardE.ON Ruhrgas AG,Member of the Executive Board E.ON AG
Stefan Breuer*EssenAuthorised Representative
Jürgen Hahn*EssenAuthorised Representative
Karlheinz HornungMember of the Executive BoardMAN Aktiengesellschaftsince October 01, 2004
Dr. rer. pol. Klaus von MengesMülheim an der Ruhr
Klaus M. PatigFrankfurt (Main)Member of the Executive BoardCommerzbank Aktiengesellschaft
Dr.-Ing. E. h. Heinrich WeissHilchenbachChairman of the Management ofSMS GmbH, Düsseldorfuntil March 15, 2004
Dr. jur. Philipp J. ZahnMunichMember of the Executive BoardMAN Aktiengesellschaftuntil September 30, 2004
* elected by employees
Supervisory Board
3 Supervisory Board, Executive Board and Executive Vice President
MAN Ferrostaal Annual Report 2004
Dr. jur. Matthias MitscherlichMülheim an der RuhrChairman
Jens GesinnEssenFinance, Accounting and Controlling
Helmut JuliusBottrop-KirchhellenSteel Trading and Logistics, Industrial Equipment and Systems
Dr.-Ing. Axel WippermannEssenFacility Construction and Contracting
Executive Vice President
Udo VölkerEssenProject Development Eastern Europe
Executive Board
4
In the fiscal year 2004, the Supervisory Board was continuously and comprehen-sively informed by the Executive Board of MAN Ferrostaal AG about all majorbusiness results and projects of the Company on the one hand and about thefinancial state of the MAN Ferrostaal Group on the other hand. The SupervisoryBoard was informed in writing on a quarterly basis about the current course ofbusiness. At two meetings, the Executive Board expressed its view in detail onimportant subjects, such as the future corporate strategy and opportunitiesfor growth. The committee for Executive Board and Personnel matters met once.
The annual financial statements as at December 31, 2004 of MAN FerrostaalAktiengesellschaft and the partially consolidated financial statements preparedvoluntarily along with the annual report have been audited by the auditing com-pany BDO Deutsche Warentreuhand Aktiengesellschaft, Düsseldorf, and issuedwith an unconditional audit report. Additionally, the auditor examined the riskmanagement system existing at the Company, taking account of the key areas ofexamination defined by us, and ascertained that the Executive Board has takenall required measures, particularly for setting up a system of supervision. Thesystem of early risk detection existing at the MAN Ferrostaal Group is funda-mentally suitable for detecting, at an early stage, developments jeopardising thecontinued existence of the companies.
We have approvingly taken note of the result of the audits. Following the finalresult of our own audit of the annual financial statements of MAN FerrostaalAktiengesellschaft and the annual report for the fiscal year 2004, we also have noobjections to raise. We approve the annual financial statements prepared by theExecutive Board, which are therefore adopted.
Report of the Supervisory Board
Dipl.-Ing. Håkan Samuelsson, Chairman
5 Report of the Supervisory Board
MAN Ferrostaal Annual Report 2004
Dr.-Ing. E.h. Rudolf Rupprecht retired from his office as a member and chairmanof the Supervisory Board on December 31, 2004. In his more than 8 years aschairman of our Supervisory Board, he dedicated himself with great commit-ment to the success of the company and gave important impulses. We thank Dr.-Ing. E.h. Rudolf Rupprecht for his meritorious activities.
At an extraordinary shareholders’ meeting on December 23, 2004, Dipl.-Ing.Håkan Samuelsson was appointed as a member of the Supervisory Board of MANFerrostaal AG in place of Dr.-Ing. E.h. Rudolf Rupprecht with effect as of January 1,2005. He was subsequently elected by the Supervisory Board as its chairman.
After almost 7 years as a member of the Supervisory Board, Dr.-Ing. E.h. HeinrichWeiss resigned from office on March 15, 2004. Dr.-Ing. Burckhard Bergmann waselected onto the Supervisory Board of MAN Ferrostaal Aktiengesellschaft by theshareholders’ meeting of the same day.
Dr. jur. Philipp J. Zahn resigned from membership of the Supervisory Board onSeptember 30, 2004 after 8 years in office. At an extraordinary shareholders’meeting on September 29, 2004, Mr. Karlheinz Hornung was elected onto theSupervisory Board as successor to Dr. jur. Philipp J. Zahn with effect as of October 1, 2004.
We should like to express our thanks to Dr.-Ing. E.h. Heinrich Weiss and Dr. jur. Philipp J. Zahn for their meritorious services and great commitment tothe company.
We also thank the members of the Executive Board and all employees of theMAN Ferrostaal Group for their hard work and dedication and the employee-representatives for the businesslike and constructive collaboration in the interestof the Company.
Essen, March 10, 2005Chairman of the Supervisory Board
Håkan Samuelsson
6
The MAN Ferrostaal Group at a Glance
MAN Ferrostaal is a subsidiary of MAN Aktiengesellschaft and offers its customers
industrial services. With its three business segments of Facility Construction and
Contracting, DSD Steel Construction, Industrial Equipment & Systems and Steel
Trading and Logistics, MAN Ferrostaal is a partner to customers and suppliers
throughout the world.
Facility Construction and ContractingIn its Facility Construction and Contracting business segment, MAN Ferrostaal opera-
tes on a worldwide basis as a general contractor and as a partner in consortiums. We
specialise in the financing, planning, supply, assembly and commissioning of indus-
trial plants. Our competence lies in particular in the project development, project
management and provision of funding and marketing concepts for industrial plants.
We are also specialists in the supply of components for the chemical, natural gas and
oil industries and as well as the energy supply and manufacturing industry sectors. In
these areas, we are able to offer our customers tailor-made, supplier-independent
solutions.
DSD Steel ConstructionThe Steel Construction business focuses on engineering and project handling as well
as on assembly and maintenance services for the structural steel engineering, bridge
construction and hydraulic steelwork markets.
Industrial Equipment and SystemsThe Industrial Equipment and Systems business segment encompasses the global sale
and service of plants for the production of mechanical components, machines for the
graphical arts industry, individual machines and packing machinery as well as com-
pressors and diesel engines. A further key focus of this segment is the planning and
implementation of infrastructure projects of all kinds as well as the supply of road
and rail transport and traffic equipment.
Another important activity of this segment is the sale of naval vessels as part of the
German Naval Group. In this field, working jointly with our partner ThyssenKrupp
Marine Systems AG and in particular its HDW GmbH subsidiary, we are the world lea-
ders in the sale of conventional submarines and related offset activities. We also ope-
rate in the construction and supply of merchant vessels, ship’s equipment packages as
well as port and shipyard equipment.
7 The MAN Ferrostaal Group
MAN Ferrostaal Annual Report 2004
Steel Trading and LogisticsThe Steel Trading and Logistics segment handles the international procurement and
marketing of steel products and non-ferrous metals, including all related trading func-
tions such as transport and financing. We also specialise in industrial services for the
planning, management, operation and control of logistical systems for the just-in-
time and just-in-sequence supply of German and foreign automotive industry manu-
facturers with steel, bought-in parts and pre-assembled systems. A further key activity
is the supply of components, pipes and piping accessories to the oil, gas and petroche-
mical industry, as well as the provision of all related services.
MAN Ferrostaal Group – Facts With around 4,700 employees in over 60 countries, we design innovative services
that are tailored to the individual needs of our customers.
As suppliers of industrial services, our special strength is in the combination of
technical and financial engineering.
We are leaders in project development, i.e. in the design and realisation of
industrial plants.
We have grown into one of Germany’s most successful and most profitable
contractors.
Together with our industry partners, we are one of the world’s biggest methanol
producers.
Our Industrial Equipment and Systems segment with its IPP GmbH subsidiary is
the largest manufacturer-independent dealer and system supplier of machines for
the graphical arts industry in the southern hemisphere.
In cooperation with ThyssenKrupp Marine Systems AG, we are the world market
leader in the field of conventional submarines.
We hold a leading position in the performance of offset transactions.
With its steel trading activities, our Steel Trading and Logistics segment ranks
among the world’s five biggest producer-independent steel trading enterprises for
the international and supra-regional market.
MAN Ferrostaal Industrie- und System-Logistik GmbH is the leading company in
Europe in the supplier-independent system business for the automotive industry.
MAN Ferrostaal recorded a positive developmentin the fiscal year 2004. Both order intake and sales substantially exceeded the levels of the previous year.
At the same time, the process of concentration onour core businesses continued, with suspension ofactivities that do not promise sustained and long-term profitability.
In light of these measures, we view the prospectsfor the year 2005 with optimism.
Management Report
8
9 Management Report
MAN Ferrostaal Annual Report 2004
In 2004, we continued our strategy of profitable growth and uncompromising focus
on profitable fields of business. While 2003 was a year of challenges for MAN Ferrostaal,
the operating environment in 2004 was much improved, thanks to a recovery in the
global economy. The fiscal year under review was therefore more than successful for
MAN Ferrostaal, enabling us to consolidate or, in many cases, further expand our
already strong position in the most important markets.
In 2004, the intake of new orders at MAN Ferrostaal reached a record level. New
orders in the fiscal year 2004 grew by 28 %, from € 2,738 million in the previous year
to € 3,508 million.
A change in the group of consolidated companies had an additional positive effect
on the order intake level for 2004. The first-time consolidation of Intermesa Trading
Ltda., Rio de Janeiro (steel trading), contributed € 179 million to the growth in intake
of new orders. Set against this was the sale of major DSD Steel Construction activities,
which accounted for an order volume of € 94 million, so that changes in the group of
consolidated companies resulted in net growth of € 85 million in the intake of new
orders.
Sales of MAN Ferrostaal in the year under review amounted to € 3,185 million, an
increase of 11 % on the previous year (€ 2,880 million). At the end of the fiscal year
2004, orders on hand stood at € 2,259 million, compared to € 2,186 million in the
previous year (+ 3%).
10
Because of the restructuring measures carried out within the business segments in
2004, last year’s figures have been adjusted and can be compared to the figures of
the Annual Report 2003 only on a limited scale. The individual business segments of
MAN Ferrostaal developed in the fiscal year 2004 as follows:
Facility Construction and ContractingOrder intake in Facility Construction and Contracting in the year under review reached
a volume of € 844 million. This was a fall of 25 % below the level of the previous year
(€ 1,127 million). Sales were also down, from € 1,145 million in 2003 to € 888 million in
2004. As at December 31, 2004, the order books in this business segment stood at
€ 870 million, compared to € 969 million at the end of 2003.
DSD Steel ConstructionMajor activities of the Steel Construction business were sold with effect as of July 1, 2004
to the Pirson Group of Belgium. This segment recorded an order intake of € 110 million
in the year under review (previous year: € 222 million). Sales fell from € 229 million in
2003 to € 127 million last year. Orders on hand stood at € 46 million on December 31,
2004 (previous year: € 236 million). In view of the deconsolidation of DSD Steel
Construction, it will not be reported on in detail in the further course of this report.
Industrial Equipment and SystemsAt € 529 million, the intake of new orders in the Industrial Equipment and Systems
segment in 2004 was up 28 % on the previous year (€ 413 million). Sales increased in
the year under review by 2 % to € 445 million (previous year: € 436 million). Orders on
hand amounted to € 891 million on December 31, 2004, compared to € 804 million on
December 31, 2003.
11 Management Report
MAN Ferrostaal Annual Report 2004
Steel Trading and LogisticsIn the fiscal year 2004, the intake of orders in Steel Trading and Logistics rose from
€ 977 million in the previous year to € 2,025 million, i.e. an increase of 107 %. Sales
also grew in 2004 by 61 % to € 1,725 million (previous year: € 1,070 million). On
December 31, 2004, the order books stood at € 452 million (compared to € 177 million
on December 31, 2003).
EarningsFor the fiscal year 2004, the MAN Ferrostaal Group’s consolidated earnings amounted
to € 62 million before taxes.
Profit transferOut of the net income of € 96 million achieved by MAN Ferrostaal AG, a total of
€ 91 million were transferred to MAN AG and € 5 million were allocated to reserves
retained from earnings.
Asset and financial structureThe financial standing of the MAN Ferrostaal Group remains sound. With € 69 million,
the cash earnings are at about the same high level as in the previous year (€ 65 million).
12
Because of the newly introduced balance sheet structure according to maturity (IAS 1),
prepayments received are no longer deducted from inventories, but shown on the lia-
bilities side. This results in an increase in the balance sheet total of the MAN Ferrostaal
Group of € 675 million to € 2,214 million (December 31, 2003: increase of € 586 million
to € 2,151 million). Shareholders’ equity (€ 307 million) therefore accounts for a share
of around 14 % (December 31, 2003: 15 %) of the balance sheet total of € 2,214 million.
Risk managementMAN Ferrostaal’s risk policy is aligned to our strategy of pursuing profitable growth
and increasing our operating result while at the same time avoiding risks or limiting
them to the greatest extent possible. The risk management system employed by us
is a major factor for the trust placed in the MAN Ferrostaal Group by MAN AG and
its shareholders. For this reason, active risk management is an integral part of the
planning and conduct of our business activities, and is subject to direct monitoring
by the Executive Board.
The risk management system operated at MAN Ferrostaal is closely tied to that of
MAN AG and is continuously optimised and adjusted in line with changing conditions.
It is regularly reviewed for appropriateness and effectiveness both by the internal
auditors of MAN AG and by external auditors. All major subsidiaries are included in
this process.
13 Management Report
MAN Ferrostaal Annual Report 2004
Because of its diversified fields of operation and its international activities, MAN
Ferrostaal is exposed to constantly changing political, legal and social circumstances.
We seek to limit this risk by keeping the political and economic environment in the
regions of our business partners under close observation and by trying to anticipate
market developments.
MAN Ferrostaal is also exposed to operating risks. These risks typically include tech-
nical difficulties or disruptions to the value added chain through problems affecting
our partners. To counter these risks, we submit our worldwide suppliers and subcon-
tractors to strict quality controls and comprehensive and regular review of their credit
standing.
One of the key competencies of MAN Ferrostaal is in the financing of major projects.
In this context, we are exposed in particular to credit and investment risks. We keep
such risks to a manageable level by making allowance for them at an early stage in our
cost calculations and by working closely with institutions such as the KfW Banking
Group or Euler Hermes Kreditversicherungs-AG. We also exclude a large part of the
risk through the terms of the contracts concluded by us.
As a result of its operating activities, MAN Ferrostaal Group is also exposed to cur-
rency, interest rate and price change risks. We manage these risks by closely observing
the worldwide financial and commodity markets, taking account of possible changes
in the exchange rate of foreign currencies at any early date in our cost calculations
and, where appropriate, hedging against risks through financial derivatives.
The development of the US Dollar as our most important trading currency and price
increases on the international commodity markets in particular, represent potential
risks. The persisting weakness of the US Dollar constitutes a not inconsiderable disad-
vantage for us in competition with companies domiciled in the US Dollar area. Addi-
tionally, rising raw material prices and transport costs are a cause for some potential
customers to defer or at least reduce their investments.
The risk management system operated by MAN Ferrostaal assists in providing the per-
sonnel and the Executive Board with full and timely information on actual and poten-
tial risks. As a consequence of our risk management policy, orders are consistently
refused by MAN Ferrostaal if the opportunities and risk they represent are not asses-
sed as being in reasonable balance.
14
Important developments
Uniform corporate design for the MAN companiesIn the course of the fiscal year under review, MAN AG updated its public image. Since
the middle of last year, all MAN companies have borne the same logo, demonstrating
that we are a group with a common history, a common vision and common goals.
At the same time, a further important change took place for MAN Ferrostaal. Since
July 1, 2004, we have operated under the name “MAN Ferrostaal Aktiengesellschaft”,
thus more strongly underscoring our membership of the MAN Group. While this
has no effect on our independence as a worldwide industrial service provider, we are
convinced that as MAN Ferrostaal, and hence as a clearly recognisable member of the
MAN Group, we will be able to position ourselves even more strongly in the competi-
tive marketplace.
Disposal of DSD Steel Construction A further major step was taken in 2004 under MAN Ferrostaal’s policy of focusing on
profitable and promising fields of activity. The major activities of DSD Steel Construction
and its subsidiaries in Germany, Luxembourg, France and Egypt were sold with effect
as of July 1, 2004 to the Pirson Group of Belgium. Altogether 1,416 employees were
affected by the sale of DSD Steel Construction. The divestment did not include DSD
Industrieanlagen GmbH and in particular its power plant activities. This company will
continue to be operated as part of the MAN Ferrostaal Group.
Employee developmentA crucial factor in the future development of MAN Ferrostaal is the performance of its
employees. Highly qualified and committed personnel are one of the preconditions
for MAN Ferrostaal’s ability to succeed as a supplier of complex industrial and logistical
services. Personnel development therefore plays a major role at our company and was
once again pursued in 2004.
To ensure our ability to match and outbid our competitors in the market, we attach
great importance to high standards in the field of personnel development. This is
reflected in our system of standardised annual staff appraisals, potential assessments
and coaching processes. Once again in the year under review, foreign personnel were
included in our management development process.
15 Management Report
MAN Ferrostaal Annual Report 2004
At MAN Ferrostaal, we attach great weight to international competence, professional
and personal mobility and job rotation of our employees. Consequently, we developed
a process in 2004 which will significantly enhance the exchange of knowledge and
experience between our employees.
In the field of junior staff recruitment and qualification, the main focus is on univer-
sity graduates. We used the past year to intensify our cooperation with selected uni-
versities, such as Aachen Technical University, as well as to renowned international
business schools.
Optimisation of sales activitiesIn 2004, we further improved the organisation of our international sales structure.
This particularly related to the sales activities of MAN Ferrostaal in Latin and Central
America and Asia, where we now have a more flexible, stronger and more efficient
structure. We will intensively push ahead the uncompromising orientation of the
individual activities to local market needs in the coming fiscal year.
EmployeesAt December 31, 2004, the MAN Ferrostaal total workforce numbered 4,679 employees
(previous year: 6,689). The difference being largely due to the changes arising from
divestment of the DSD Steel Construction activities.
16
A word of gratitude to our employeesThe Executive Board would like to express its gratitude to all employees for a successful
fiscal year. With their high level of commitment, they all contributed to our success
in achieving our ambitious goals. Our thanks also go to the employee’s representatives,
with whom the company was once again able to work in a spirit of constructive co-
operation and mutual trust.
OutlookFor the coming year, we expect the worldwide economic upswing to continue and there-
fore look forward to an altogether stronger willingness on the part of our customers to
invest.
In Europe, we anticipate growth on about the same level as in the past year. Also in the
coming years, the countries of Central and Eastern Europe can be expected to enjoy
high growth rates, with interesting investment opportunities. We will therefore
expand our business activities there within the scope of the given possibilities.
For the countries of the former Soviet Union, we see considerable potential, but
also continuing obstacles to investment, with the result that we expect only modest
growth there for the time being. In this region, we are concentrating our efforts
primarily on the markets of Russia, Turkmenistan, Kazakhstan and Ukraine.
In the Asian region, we are continuing to focus on South-East Asia, where we reckon
with substantial growth in future. This refers in particular to Indonesia, Thailand and
Malaysia.
17 Management Report
MAN Ferrostaal Annual Report 2004
18
19 Management Report
MAN Ferrostaal Annual Report 2004
We also anticipate a positive economic development in the Near and Middle East. The
high oil price, investments aimed at improving the infrastructure and hence also a
strong demand for machinery and industrial plants are initial indications that the
successful growth policy already in place there will continue. In view of our long-
standing presence and strong position in these markets, we hope to enjoy an above-
average share in this development.
On the African continent, we see strong potential in particular for South Africa. A
gradual improvement in the economic and political conditions in some other African
countries has also taken place. Libya is seen as one of the pioneers in this process and,
because of the lifting of the UN embargo, can be expected to experience an economic
boom. We will expand our activities there and, through infrastructure projects, contri-
bute towards the modernisation of the country. The situation is also similar in Algeria
and Angola, both of which offer great potential and where we intend to intensify our
activities in future.
We believe that in 2005, the countries of Latin America will continue on their growth
course of the last few years. We are confident of being able to profit from this positive
development, and also in the coming years will focus on the key markets of Brazil,
Chile and Venezuela.
For MAN Ferrostaal, we look forward to a good fiscal year 2005. We are optimistic to be
able to further strengthen the competitive position we have already achieved and, in
the mid-term, to also further increase the level of our earnings before taxes as recorded
in the last few years. The Executive Board of the MAN Ferrostaal Group will persist in
its strategy of ensuring a lean organisation and of focusing on business fields that
promise sustainable profitability in the future. To achieve this, we will concentrate our
efforts on building further on our proven business fields. MAN Ferrostaal will intensify
its sales partnerships with affiliated companies of the MAN Group and make best use
of the existing opportunities for growth.
20
We view our customers as partners. They are part
of our team. Mutual understanding, human warmth
and the enormous personal commitment of our
personnel on the ground build strong relationships –
and generate an infectious, motivating enthusiasm
for our projects.
Through comprehensive feasibility studies, detailed
and clearly defined processes and the greatest possible
transparency, we give our customers the security
they need.
In return, our business partners give us their trust –
the most essential prerequisite for successful project
handling.
Partnership
21 MAN Ferrostaal – Industrial ServicesTurning Ideas into Reality
MAN Ferrostaal Annual Report 2004
22
“The partnership with MAN Ferrostaal has not only turned Trinidad &Tobago into a global player on the petrochemical market, but has alsogiven the local people jobs and outstanding prospects for their future. We are making further plans with MAN Ferrostaal.”Bob York, Yorke Structures LTD., Trinidad
23 MAN Ferrostaal – Industrial ServicesTurning Ideas into Reality
MAN Ferrostaal Annual Report 2004
The new N2000 ammonia plant in Trinidad with a capacity of 640,000 MTPY.
24
76 generally overhauled tramcars for Budapest public transport.
25 MAN Ferrostaal – Industrial ServicesTurning Ideas into Reality
MAN Ferrostaal Annual Report 2004
“76 modernised tramcars were supplied to Hungary, to the com-plete satisfaction of the Budapest public transport service. Thesevehicles will make a major contribution to fulfilling the growingmobility needs of the Hungarian capital.”Péter Vág, director, Budapest public transport, Hungary
26
“Business relations have existed between CST in Brazil and MAN Ferrostaalfor more than 20 years. We have worked together successfully on projectsfor the enlargement of smelting plants and also in the field of steel trading.MAN Ferrostaal has always shown itself to be a sound and reliable businesspartner towards CST.”Benjamin M. Baptista Filho, member of the executive board, CompanhiaSiderúrgica de Tubarão, Brazil
27 MAN Ferrostaal – Industrial ServicesTurning Ideas into Reality
MAN Ferrostaal Annual Report 2004
New blast furnace No. 2 at CST with a capacity of 1.2 million tonnes per year.
28
In our Facility Construction and Contracting busi-ness segment, we operate both as general contrac-tor and as a consortium partner in the worldwidefinancing, project development, project manage-ment, supply, construction and commissioning ofindustrial plants and facilities.
We are partners above all to the energy, steel and aluminium production and petrochemicalindustries.
We are also specialists in the supply of componentsfor the chemicals, natural gas and oil industries as well as for the energy supply sector and manu-facturing industry.
In these areas, we offer our customers tailor-made,supplier-independent solutions.
Facility Construction and Contracting
29 From the SegmentsFacility Construction and Contracting
MAN Ferrostaal Annual Report 2004
Order situation In the year 2004, the Facility Construction and Contracting segment recorded an
intake of new orders amounting to € 844 million. This was 25 % less than in the year
2003 (€ 1,127 million). Sales fell to € 888 million, compared to € 1,145 million in the
previous year. As at December 31, 2004, the order books for the segment stood at
€ 870 million, compared to € 969 million at the close of 2003.
At the start of the fiscal year 2004, we received a contract from an Iranian customer
for the supply and installation of 56 natural gas service stations. MAN Ferrostaal,
together with its partners, is responsible for the engineering, the supply of compo-
nents and the local production of the technical equipment. We are also responsible
for supervising proper installation and commissioning as well as for training the
personnel.
Wuppertaler Stadtwerke AG placed an order with us for the turnkey expansion and
modernisation of the Barmen power and heating plant. The scope of supply under this
contract comprises the planning, supply, erection and commissioning of three gas
compressors, two gas turbines, two exhaust waste heat boilers and all the necessary
ancillary equipment.
In the year under review, we were able to put a contract for the expansion of a power
plant in Venezuela into force. This relates to the turnkey upgrade of a 300 megawatt
gas turbine power plant into a combined gas and steam turbine plant with a total out-
put on completion of 475 megawatts.
Order intake Orders on hand
FACILITY CONSTRUCTION AND CONTRACTING
2003 2004 2003 2004 2003 2004
1,127
844
1,145
888969
870
Sales
million €
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
30
MAN Ferrostaal also completed the engineering and most of the supplies for the
construction of the planned M5000 methanol plant in Trinidad. The construction
and erection is proceeding to plan. Mechanical completion and commissioning are
scheduled for the first half of 2005.
Also in Trinidad, an ammonia plant was handed over to our customer in the second
half of 2004. Together with our construction partner, Proman, and the customer’s
operating team, we succeeded in completing this plant and putting it into operation
well before the scheduled date and in a record time of less than two years. Thanks to
the early completion, our customer is able to take advantage of the currently very
favourable market conditions for the product, which is intended chiefly for the North
American market. With this second ammonia plant completed in Trinidad, we have
been able to gain an important reference for other projects in this sector.
The aluminium smelter Alscon in Ikot Abasi, Nigeria, already mentioned at this
section in the previous years could be finally accounted in the fiscal year under
review due to an agreement between the main shareholder and the customer.
In the course of last year, the enlargement of existing oil production and water
injection plants in Libya for our customer Veba Oil was able to make good progress.
As things stand at present, this lump-sum turnkey project will be completed in
mid-2005.
Additionally, it was possible for 54 turnkey water treatment facilities for CO2 removal
and manganese and iron reduction from 560,000 m3/day of fossil water for the Great
Man Made River Authority (GMRA) in Libya to be put into operation. At the present
time, 200,000 m3/day of drinking water is being treated in trial operation.
31 From the SegmentsFacility Construction and Contracting
MAN Ferrostaal Annual Report 2004
05
01 Semi-mobile crusher with a capacity of 8,500 tonnes of copper ore per hour, Collahuasi, Chile02 N2000 Ammonia plant in Trinidad03 Modernisation of the gas and steam power and heating plant in Wuppertal-Barmen04 Enlargement of the blast furnaces at CST in Brazil05 Pumping stations for fossil groundwater from the Libyan desert06 Heavy goods transport for the Methanol M5000 contract in Trinidad – Converter during transport on the Danube
01
03
02
06
04
32
The Industrial Equipment and Systems segmentspecialises in the planning, consultancy, sale andtechnical service for machines, components andsystem lines.
In addition, we provide comprehensive advice for our customers in all matters of financing andintegration. We also provide services in connectionwith infrastructure and transport systems.
A further key activity is the supply of naval andmerchant vessels, nautical equipment and asso-ciated activities.
Industrial Equipment and Systems
33 From the SegmentsIndustrial Equipment and Systems
MAN Ferrostaal Annual Report 2004
Order situation in Industrial Equipment and SystemsThe Industrial Equipment and Systems segment enjoyed a successful fiscal year 2004.
The intake of new orders rose to € 529 million, an increase of 28 % on the previous year
(€ 413 million). Sales were up 2 %, from € 436 million in 2003 to € 445 million in 2004.
At the end of the fiscal year 2004, orders on hand stood at € 891 million (previous
year: € 804 million). This was equivalent to an increase of 11 % over the fiscal year
2003.
Graphic Arts IndustryThe Graphic Arts Industry business received new orders worth € 187 million. This
figure was 26 % above that for the previous year of € 149 million. At € 176 million, sales
were up 18 % on the previous year’s figure of € 149 million.
The world market for printing and packing machines stabilised in the course of the
year. The trade fair “Drupa”, which took place in May 2004 and is seen as the world’s
most important indicator for the industry, provided positive impulses. Brazil and
Argentina have recently both seen a significant upturn in their markets. The growing
advertising budgets of many companies should prove a positive factor for the future.
34
01
03
01 Signalling and safety equipment for Croatian Railways02 Supply of components for buses in Mexico03 Central control panel in an electronic signalling box04 COLORMAN rotary offset newspaper printing machine from MAN Roland
02
04
35 From the SegmentsIndustrial Equipment and Systems
MAN Ferrostaal Annual Report 2004
The intake of new orders for the printing and packing machines business improved in
line with the positive development on the market as a whole. Altogether, we succeeded
in selling 270 printing units in the sheet-fed offset sector and 224 units of the firm of
Nilpeter A/S, Denmark, (label printing). In the agency business, orders with a total
volume of € 140 million were concluded for rotary offset machines. These included
three Colorman printing machines from our group affiliate MAN Roland Druck-
maschinen AG to the Times of India.
Among the most important sales regions during the last year were Australia and Latin
America. In Australia, we successfully implemented our strategy of operating as an
independent system supplier by offering not only machines for the pre-press, print
and post-press production stages, but now also consumption materials, such as
printing plates from the Japanese company Fuji.
Industrial Manufacturing divisionThe intake of new orders in this division in 2004 amounted to € 163 million, i.e. a
shortfall of 26 % on the previous year’s figure of € 220 million. However, sales in 2004
rose 30 % to € 164 million (previous year: € 126 million).
In the year under review, the Industrial Manufacturing business area was completely
restructured in order to take account of changes in market conditions. Unprofitable
activities were disposed of and the organisation significantly streamlined. As a result
of this restructuring, Industrial Manufacturing now focuses on system lines for in-
dustrial production, infrastructure and transport and traffic technology.
In Croatia, we were able to book a follow-up order for the supply of signalling equip-
ment and other components to our customer HZ Croatian Railways.
Additionally, we received an order from a customer in Colombia for a production
plant for denim fabrics.
In China, we were able to conclude contracts for the supply of two machining centres
for diesel engines, and in Ghana an order for a cocoa processing plant.
Our bus activities in Mexico are continuing to develop positively. These relate to the
assembly of bus chassis for our group affiliate Neoman, which are then provided with
bodies in cooperation with local partners. In the year 2004, 120 buses were sold.
36
Maritime SystemsIn the Maritime Systems division, we work in close cooperation with ThyssenKrupp
Marine Systems AG and are the worldwide sales and marketing partner for their
conventional submarines. In the merchant shipbuilding business, we independently
design and sell merchant vessels throughout the world.
This division recorded a new order intake of € 179 million. This was equivalent to
an increase of 306 % over the previous year (€ 44 million). Sales fell by 34 %, from
€ 160 million in 2003 to € 105 million in the last fiscal year.
In April 2004, after a 15-year project phase, we received a contract from the Portu-
guese government for the supply of two type 209 PN submarines (+ option for 1
vessel) powered by fuel cells. Together with our consortium partner ThyssenKrupp
Marine Systems AG, we succeeded in winning this contract against a French compe-
titor after demanding negotiations.
The decision of the Portuguese government was in large part due to our convincing
overall concept. MAN Ferrostaal offered the Portuguese government state-of-the-art
conventional submarine technology, a Eurostat-neutral financing model, plus an
offset package which reflects the wide diversity of Portuguese industry. The offset
obligations mostly comprise agency activities for the placing of contracts, technology
transfer and modernisation measures for the Portuguese shipbuilding, automotive,
defence and IT industries. Of our offset obligations which total € 1.2 billion, we had
already fulfilled 22 % as at December 31, 2004.
In the course of 2004, the Merchant Shipping business area was able to conclude a
contract with a German shipping line for two further chemical tankers and to increase
the fleet of SCOT Class tankers to 8 units. In addition, an order received in the previous
year for the construction of a 100 tonne tugboat was successfully completed. Moreover,
a further two out of the series of six 1100 TEU container vessels were delivered to the
customer.
37 From the SegmentsIndustrial Equipment and Systems
MAN Ferrostaal Annual Report 2004
01
01 Double-hulled SCOT (Safety Chemical Oil Tanker) Class tanker with a capacity of 8,000 tonnes02 Class 209 submarine, type1400
02
38
The Steel Trading and Logistics segment operatesthroughout the world in the trading, transportand financing of steel products and non-ferrousmetals, as well as the planning, implementationand operation of complete logistical and serviceconcepts.
Among other things, for instance, the segmentcarries out the pre-assembly of parts into com-plete modules and systems for major customersin the international automotive industry.
It also supplies pipes and piping accessories aswell as components for the oil, gas and petro-chemical industry, including all related services.
Steel Trading and Logistics
39 From the SegmentsSteel Trading and Logistics
MAN Ferrostaal Annual Report 2004
Order situation For Steel Trading and Logistics, 2004 was the most successful year in its history. The
intake of new orders increased by 107 %, from € 977 million in the previous year to
€ 2,025 million in 2004. Sales in the year under review rose by 61 % to € 1,725 million
(previous year: € 1,070 million). As at December 31, 2004, orders on hand stood at
€ 452 million (compared to € 177 million on December 31, 2003).
The substantial growth in both new orders and sales was due to the strength of the
steel market, with considerable price increases due to the worldwide rise in demand.
The abolition of major barriers to trade and competition in the USA also contributed
to a stimulation in steel trading activities. Additionally, the stable development in our
activities in the field of MAN Ferrostaal Industrial and System Logistics and the very
good success in expanding our MAN Ferrostaal Piping Supply activities played a major
role in the positive development of this segment in the year under review.
Steel Trading divisionIn the year 2004, the worldwide output of crude steel amounted to around 1.05 billion
tonnes. This meant that the 1 billion tonne mark was exceeded for the first time ever,
continuing the growth trend of the previous years. The main driver for this develop-
ment is Asia, and in particular China, where production grew in 2004 to approx. 270
million tonnes (+23 % compared to 2003), equivalent to a world market share of 26 %.
The heavy demand from Asia and the consistently high demand for steel in the other
parts of the world resulted in global shortages of the raw materials needed for steel
production, including iron ore, coke and scrap.
40
01
03
01 Only tested quality leaves our assembly plants02 Highly motivated and working accurately just-in-time03 Just-in-time steel deliveries for the presses of the automotive industry
02
41 From the SegmentsSteel Trading and Logistics
MAN Ferrostaal Annual Report 2004
This development led to sharp price increases, with the result that in the course of the
year the prices for iron ore (+19 %), coke (+111 %) and scrap (+79 %) temporarily rose to
record levels. This all produced massive increases in the prices for steel products. The
price per tonne of hot wide strip in Europe, for instance, rose in some cases by 100 %
and in the USA by as much as 110 %. Certain products, for example shipbuilding plates,
were in some cases not available at all. Price increases on this scale in such a relatively
short time are historically unprecedented.
Our Steel Trading division was able to benefit from this positive development. The
intake of new orders in the year under review amounted to € 1,671 million. This was
equivalent to a rise of 104 % over the previous year (€ 820 million). Sales were also up
sharply, increasing by 63 % from € 910 million in 2003 to € 1,460 million in the year
under review.
Altogether, we were able to sell 3 million tonnes of steel and around 800,000 tonnes
of raw materials in 2004. An additional volume of € 886 million was moved through
agency deals. Of total steel sales in the year under review, 37 % were accounted for by
flat products, 25 % by long products and 24 % by semi-finished products. Pipes made
up another 8 % of sales, and quality steels 4 %. With 34 % of the total tonnage, the
most important procurement market for international steel trading were the Euro-
pean countries outside of the EU. The second biggest market was the EU25 with 27 %,
followed by Asia with a share of 16 %. Latin America supplied another 15 % of the ton-
nage, and North America and Africa 4 % each. The most important sales market in
2004 was once again North America, taking 37 % of the total tonnage sold. The second
most important sales markets were the EU25 and Latin America, with a share of 26 %
each. Asia bought 7 %, and Europe (excluding the EU) 4 %.
At our subsidiaries MAN Ferrostaal Inc. in the USA and MAN Ferrostaal Metals Ltd. in
Canada, the intake of new orders increased by 190 % to € 844 million, and sales by 72 %
to € 676 million.
LogisticsIn the past year, the automotive industry was once again an important pillar of the
overall European economy. In Western Europe, new car registrations numbered nearly
14.5 million in 2004, equivalent to an increase of 2 % over the previous year.
However, the weakness on the German automobile market persisted in the year under
review. At 3.3 million, the number of new vehicle registrations was only up by about 1 %
compared to 2003. Moreover, the German manufacturers once again saw their share
of the market fall slightly, especially in favour of Japanese brands. New volume models
such as the Volkswagen Golf V or Opel Astra were only partially able to fulfil the high
expectations placed in them, and had to be sold in some cases at considerable discounts.
42
Despite this weak development, MAN Ferrostaal Industrie- und System-Logistik GmbH
still had a successful fiscal year. Sales grew from € 109 million in the previous year to
€ 113 million in 2004. This was primarily due to the fact that we broadened the range
of activities at our existing locations. Additionally, we were able to cushion the effects
of the relocation of production of certain models to plants in other countries by
moving there with our own activities. Moreover, after previously declining, deliveries
from our steel stocks increased again in the previous year, to 1.7 million tonnes.
Piping Supply divisionIn 2004, the Piping Supply division succeeded in increasing its intake of new orders
by 404 % to € 242 million (previous year: € 48 million). Sales also rose by 198 % to
€ 152 million (previous year: € 51 million).
The main reason for these substantial increases in both new orders and sales was
the uncompromising concentration of our activities on promising fields of business.
Consequently, MAN Ferrostaal Piping Supply has grown from being a supplier purely
of pipes and piping accessories for petrochemical plants into a supplier of complete
pipelines, with the ability to cover all requirements for major projects. In particular,
MAN Ferrostaal Piping Supply undertakes the procurement functions on behalf of
our international customers. As a result, the division was able to win numerous new
orders in 2004 for the supply of oil and gas pipelines for the Caspian region as well as
material for the construction of complete petrochemical facilities in Iran.
43 From the SegmentsSteel Trading and Logistics
MAN Ferrostaal Annual Report 2004
01
01 Reactors destined for Banda Iman, Iran, being shipped in Antwerp 02 Rizaho power plant, China, equipped with piping material from MAN Ferrostaal Piping Supply03 MV Lena with 450-tonne converter in Japan (Moij Port) for Razi Amonia Iran04 Refinery in Rotterdam with pipes and piping accessories from MAN Ferrostaal Piping Supply
03 0402
44
1) The shares are held by MAN AG, Munich2) The shares are held by MAN Capital Corporation, New York.*) Sales and employees inclusive of operatively managed subsidiary companies
SELECTED CONSOLIDATED COMPANIES OF THE MAN FERROSTAAL GROUPValid December 31, 2004
DSD Industrieanlagen GmbH, Essen, Germany 100 121 400
MAN Ferrostaal Industrieanlagen GmbH, Geisenheim, Germany 100 213 257
DSD de Venezuela, C.A., Caracas, Venezuela 100 15 97
DSD Construcciones y Montajes S.A., Santiago, Chile 100 32 95
MAN TAKRAF Fördertechnik GmbH, Leipzig, Germany *) - 1) 123 395
Intergrafica Print & Pack Australia Pty. Ltd., Alexandria, Australia 100 30 63
Graphic Systems Australasia Pty. Ltd., Silverwater, Australia 100 19 42
Intermesa Trading Ltda., Rio de Janeiro, Brazil *) 48.5 216 32
MAN Ferrostaal Incorporated, Houston, USA *) - 2) 676 105
MAN Ferrostaal Industrie- und System-Logistik GmbH, Essen, Germany *) 100 113 1,058
MAN Ferrostaal Piping Supply GmbH, Essen
B.V., Hooge Zwaluwe, Netherlands, and N.V., Antwerpen, Belgium 100 158 77
Equity held Employees on
December 31, 2004
Sales
in million €
45
MAN Ferrostaal Annual Report 2004
MAN Ferrostaal Consolidated Financial Statement
46
according to IFRS for the fiscal year 2004
48 … Income statement49 … Balance sheet50 … Cash flow statement51 … Statement of changes in equity
Notes52 … General principles
54 … Methods of consolidation
57 … Accounting and valuation principles
61 … Notes to the consolidated income statement
64 … Notes to the balance sheet
72 … Other information
76 … Audit certificate78 … Seven-year financial summary
47 Group division: Consolidated financial statementsContents
MAN Ferrostaal AG Annual Report 2004
Contents
48
MAN Ferrostaal Group division:Income statementfor the fiscal year from January 01 to December 31, 2004
million €
Notes 2004 2003
Net sales (1) 3,185 2,880
Costs of sales – 2,777 – 2,545
Gross margin 408 335
Other operating income (2) 93 80
Selling expenses – 123 – 139
General administrative expenses – 97 – 105
Other operating expenses (3) – 197 – 107
Other income from investments (4) – 12 9
Net interest result (5) – 10 – 8
Earnings before tax 62 65
Income taxes (6) – 7 – 25
Net income 55 40
Minority interests – 6 – 1
Net income after minority interests 49 39
49 Group division: Consolidated financial statementsFinancial statements
MAN Ferrostaal AG Annual Report 2004
MAN Ferrostaal Group division:Balance sheet as at December 31, 2004
ASSETSmillion €
Notes Dec. 31, 2004 Dec. 31, 2003
Intangible assets (7) 3 5
Tangible assets (8) 116 133
Financial assets (9) 4 4
Other investments (9) 35 40
Deferred tax assets (6) 91 89
Other non-current assets (12) 81 60
Non-current assets 330 331
Inventories (10) 690 469
Trade receivables (11) 416 475
Income tax receivables 10 18
Other current assets (12) 149 126
Short-term securities (13) 157 164
Cash and cash equivalents (13) 462 568
Current assets 1,884 1,820
2,214 2,151
LIABILITIESmillion €
Notes Dec. 31, 2004 Dec. 31, 2003
Capital stock 70 70
Additional paid-in capital 83 83
Reserves retained from earnings 75 120
Equity from unrealised profits/losses 10 6
Equity of MAN Ferrostaal AG shareholder 238 279
Minority interests 69 52
Equity (14) 307 331
Non-current financial liabilities (15) 2 2
Pension accruals (16) 232 235
Deferred tax liabilities (6) 60 68
Income tax liabilities 11 7
Other non-current accruals (17) 9 13
Non-current liabilities and accruals 314 325
Current financial liabilities (15) 21 21
Trade payables 577 652
Prepayments received 675 586
Other current accruals (17) 212 108
Other current liabilities (18) 108 128
Current liabilities and accruals 1,593 1,495
2,214 2,151
50
MAN Ferrostaal Group division:cash flow statement 2004
million €
2004 2003
Cash and cash equivalents at beginning of year 568 544
Earnings before tax 62 65
Statuory taxes – 23 – 39
Depreciation of tangible assets,
intangible assets and investments 34 33
Changes in pension accruals – 1 6
Other noncash expenses and income – 3 –
Cash earnings 69 65
Changes in inventories – 256 123
Changes in prepayments received 114 19
Changes in trade receivables 47 – 27
Changes in trade payables – 69 82
Changes in other accruals 95 5
Change in other assets 1 27
Change in other liabilities – 21 – 36
Elimination of result from the disposal of tangible assets,
intangible assets and investments – 4 – 13
Other changes in working capital 18 – 12
Flow/Outflow of funds in/from operating activities – 6 233
Investments in tangible and intangible assets – 15 – 20
Purchase of investments – 21 – 2
Income from the disposal of tangible assets,
intangible assets and investments 22 25
Cash outflow/inflow from investment activities – 14 3
Repayment of capital – – 40
Distribution of dividends – 93 – 60
Disposal (+) and purchase (-) of short-term securities 10 – 1
Redemption of financial liabilities – 5 – 115
Cash used in financing activities – 88 – 216
Net change in cash & cash equivalents – 108 20
Changes in cash and cash equivalent due to changed
consolidated companies 4 4
Effect of parity-related changes on cash and cash equivalents – 2 –
Cash and cash equivalents at end of period 462 568
Composition of net liquidity on December 31
Cash and cash equivalents 462 568
Short-term securities 157 164
Financial liabilities – 23 – 23
596 709
51 Group division: Consolidated financial statementsFinancial statements
MAN Ferrostaal AG Annual Report 2004
MAN Ferrostaal Group division:Statement of changes in equity 2004
million €
Balance at December 31, 2002 70 83 151 – 11 95 410
Repayment of capital – 40 – 40
Net income 2003 39 1 40
Withdrawal from reserves retained
from earnings – 21 21 –
Transfer of earnings – 60 – 60
Exchange rate effects – 6 – 4 – 10
Changes in unrealised gains/losses – 5 – 5
All other changes – 4 – 4
Balance at December 31, 2003 70 83 120 – 6 52 331
Net income 2004 49 6 55
Withdrawal from reserves retained
from earnings – 42 42 –
Transfer of earnings – 91 – 2 – 93
Exchange rate effects – 3 – 2 – 5
Changes in unrealised gains/losses 4 6 10
All other changes 9 9
Balance at December 31, 2004 70 83 75 – 10 69 307
Capital stock Additional
paid-in
capital
Reserves
retained
from
earnings
Net
earnings
Equity from
unrealised
profits/losses
Minority
interests
Total
52
Notes
General principlesMAN Ferrostaal Aktiengesellschaft is a subsidiary company of MAN Aktiengesellschaft,
Munich, and is included in the financial statements of the MAN Group.
The present consolidated financial statements of the MAN Ferrostaal Group for the fiscal
year from January 1 to December 31, 2004 have been prepared on a voluntary basis. The
financial statements are in compliance with the International Financial Reporting Stan-
dards (IFRS) being applicable at the balance sheet date. They comprise the International
Accounting Standards (IAS) and the new International Financial Reporting Standards
(IFRS) of the International Accounting Standards Board (IASB), London. The version of the
IFRS in force on December 31, 2004 has been applied. The following new or revised IFRS
have been applied prematurely as at December 31, 2004: IFRS 2 (Share-based Payment),
IFRS 3 (Business Combinations), IFRS 5 (Non-current Assets Held for Sale and Discontinued
Operations). We have also applied the amended IAS 36 (Impairment of Assets), IAS 38
(Intangible Assets) as well as standards amended under the Improvement Project, namely
IAS 1 (Presentation of Financial Statements), IAS 2 (Inventories), IAS 8 (Accounting Policies,
Changes in Accounting Estimates and Errors), IAS 10 (Events after the Balance Sheet Date),
IAS 16 (Property, Plant and Equipment), IAS 17 (Leases), IAS 21 (Effects of Changes in For-
eign Exchange Rates) and IAS 27 (Consolidated and Separate Financial Statements). All
interpretations of the International Financial Reporting Interpretations Committee (IFRIC)
valid for the fiscal year 2004 as well as former interpretations of the Standing Interpreta-
tions Committee (SIC) have been applied. Except for IFRS 2, all the standards applied in
preparation of the financial statements are accepted by the EU and have been adopted.
In view of the inclusion of MAN Ferrostaal AG as a business segment in the consolidated
accounts of MAN AG and in the close integration of MAN Ferrostaal in the MAN Group in
respect of taxes and derivative financial instruments, IAS 12 (Income Taxes) and IAS 39
(Financial instruments) have not been fully applied at the level of MAN Ferrostaal in
respect of disclosure requirements. Disclosure of such matters is not necessary in terms
of presenting a true picture of the asset, financial and earning situation of the Group divi-
sion and would not enhance the information content of the consolidated financial state-
ment of the Group.
Subject to the exceptions below, the accounting and valuation principles applied to and
underlying these IFRS consolidated accounts are equivalent to those permitted under the
German Commercial Code (HGB). These exceptions are:
– Accounting for long-term manufacturing contracts according to the percentage
of completion
– No accruals for deferred maintenance–Capitalisation of R&D costs for newly
developed products
– Valuation of financial instruments at market value
– Deferred tax assets shown separately from tax losses carried forward.
53 Group division: Consolidated financial statementsNotes
MAN Ferrostaal AG Annual Report 2004
Disclosures and explanations that IFRS and the German Commercial Code require to be
included in consolidated financial statements are provided either in the Balance
Sheet/Income Statement or in the Notes to the Financial Statements. In this respect we
pursue the precepts of clarity, transparency of presentation and materiality of disclosure.
Compared to the previous year, changes have been made to several items due to the new
balance sheet structure by maturity (IAS 1). The main change is the breakdown of assets,
liabilities and accruals into non-current and current items. Attribution of the balance
sheet items thereby depends on the one hand on their residual term (up to 1 year or over
1 year), and on the other on the business cycle (operating cycle) of a company.
These changes relate in detail to the following:
Balance sheet assets:
– Deferred tax assets and certain other non-current assets which were previously shown
as separate balance sheet items or in the current assets are now carried as non-current
assets.
– The Schedule of Intangible Assets and Tangible Assets shows the net book values. For the
value at the start of the fiscal year and the end of the fiscal year, the original purchase /
production costs and the accumulated depreciation is shown.
– Prepayments received are shown on the liabilities side and are no longer deducted from
the inventories.
Balance sheet liabilities:
– Liabilities and accruals are broken down into a non-current and current portion. In the
case of financial liabilities, the breakdown is done by residual term, and in the case of
the other accruals and liabilities by their attribution within the operating cycle.
Income statement
– An extraordinary result may no longer be shown. Results of this kind must be included
in other operating income or other operating expenses.
The previous year's figures have been presented in a similar way.
54
Methods of consolidationIn addition to MAN Ferrostaal Aktiengesellschaft, the consolidated financial statements
of the Group also include 23 German subsidiaries and 35 foreign subsidiaries in which
MAN Ferrostaal AG, either directly or indirectly, holds the majority of voting rights.
In comparison to the previous year, seven companies have been newly added to the
Group of consolidated companies.
On December 7 , 2004, MAN Ferrostaal AG transferred most of the steel construction busi-
ness pooled in its DSD Steel Group GmbH subsidiary to the Pirson Group of Belgium. The
sale price for a share of 51 % amounted to € 10.2 million, with a put and call option for the
remaining 49 % that can be exercised by Pirson in 2007 or later and by MAN Ferrostaal in
2010 or later.
The sale was implemented with economic effect on July 1, 2004. The figures for the
MAN Ferrostaal Group include the business figures for the divested DSD companies up to
June 30, 2004. The sale resulted in loss of annual sales volume of approx. € 94 million and
a reduction of 1,416 employees from the MAN Ferrostaal Group.
The subsidiaries which were consolidated according to IAS 27 are only of minor impor-
tance for the overall picture of the asset, financial and earning situation of the
MAN Ferrostaal Group division.
Group of consolidated
companies
NUMBER OF CONSOLIDATED COMPANIESGermany Abroad Total
Included as of December 31, 2003 26 32 58
Included for the first time in 2004 – 7 7
Deconsolidated in the fiscal year 2004 2 4 6
Included as of December 31, 2004 24 35 59
55 Group division: Consolidated financial statementsNotes
MAN Ferrostaal AG Annual Report 2004
The consolidated financial statements of the MAN Ferrostaal Group division are based
on the financial statements of the member companies, which have been prepared in
accordance with the uniform accounting and valuation principles of the MAN Group.
The financial statements of the companies included in the consolidated accounts of the
Group division were all audited by independent auditors, with the sole exception of some
small companies that are not subject to auditing requirements in Germany.
Capital consolidation has been done using the purchase method. For purchases after
January 1, 2004, IFRS 3 requires that the purchase costs of a company be allocated to
the identifiable assets, debts and contingencies of the purchased company. The acquired
assets, and in particular the intangible assets, must be reassessed for accounting purposes
and, under certain conditions, shown at the current fair value. Any remaining positive
difference between the purchase costs and the prorated equity is shown as goodwill and
must be subjected to an impairment test either annually or at any other time should need
arise. Should the impairment test indicate a diminution in value, irregular depreciation
must be taken.
Goodwill calculated before January 1, 2004 and accounted for in accordance with IAS 22
has been taken over at the book value on December 31, 2003 and subjected to an impair-
ment test. Regular depreciation is no longer taken.
In the case of deconsolidation, the residual goodwill is released to net income.
The reserves earned and not distributed after the relevant date of the initial consolidation
are shown in the reserves retained from earnings of the MAN Ferrostaal Group division or
the minority interests.
Minority interests held by nongroup parties in the equity of consolidated subsidiaries are
disclosed in a separate line within the Group's equity.
All intercompany profits, expenses and income, as well as receivables and payables
between consolidated companies are eliminated. Deferred taxes are calculated for consoli-
dation transactions recognised in net income.
Consolidation principles
56
Exchange rate at Average exchange rate
31.12.2004 31.12.2003 2004 2003
US Dollar 1.3621 1.2630 1.2424 1.1329
Pound Sterling 0.7051 0.7048 0.6795 0.6911
Danish Krone 7.4388 7.445 7.440 7.430
Swiss Franc 1.5429 1.558 1.5445 1.519
Singapore Dollar 2.2262 2.145 2.0997 1.975
Australian Dollar 1.7459 1.680 1.6912 1.747
Canadian Dollar 1.6416 1.623 1.6162 1.588
Egyptian Pound 8.2658 7.728 7.6860 6.671
Currency
conversion
In the consolidated financial statements of the Group division, the financial statements of
foreign companies from countries outside of the Euro zone have, as a matter of principle,
been converted according to the current rate method. Balance sheet items are converted
at the current rate, and income statement items at the annual average rates. Differences
deriving from currency conversion versus the prior year of balance sheet captions are
recognised in equity only. As a result, the equity shows a cumulative currency-related
reduction of € -25 million, including € -5 million from the fiscal year 2004.
The change in assets and accruals shows the value at the beginning and end of the fiscal
year as well as the change in the group of consolidated companies, with currency conver-
sion done at the rate on the balance sheet date. Conversion for the other items has been
done at the mean exchange rate over the year. The differences resulting from the use of
different exchange rates are shown separately as currency adjustment.
The Euro exchange rates of currencies of major importance for the MAN Ferrostaal Group
division are as follows:
57 Group division: Consolidated financial statementsNotes
MAN Ferrostaal AG Annual Report 2004
Buildings 20 to 50 years
Land improvements 8 to 20 years
Machinery and production plant 5 to 15 years
Factory and office equipment 3 to 10 years
Accounting and valuation principlesIndividually purchased intangible assets are capitalised at purchase cost. In accordance
with the application of IFRS 3 starting from the fiscal year 2004, intangible assets acquired
under a merger are valued at their current fair value at the time of acquisition. For subse-
quent valuation purposes, a distinction is made between intangible assets with a defin-
able useful life and those with an indefinable useful life. Intangible assets with a definable
useful life are amortised on a straight-line basis over the period of useful life, which is
usually at most ten years. Instead of regular depreciation, intangible assets with an inde-
finable useful life are subjected to an annual impairment test and, if necessary, written
down to the current fair value. If the current fair value of an asset which has previously
been subject to irregular depreciation should rise, the increase is shown as a write-up.
Pursuant to IAS 38, R&D costs are expensed, except for those expenses incurred for the
development of new products in the service sector, which are capitalised, if and when the
technical realisation of the new development and its future success in the market have
been ensured. The regular depreciation is performed on a straight-line basis over the
respective expected useful life of four years.
Tangible assets are valued at purchase or production cost, reduced by regular or, if appro-
priate, irregular depreciation. The production costs of internally manufactured tangible
assets comprise the directly attributable production costs as well as prorated indirect pro-
duction costs. Repair costs and interest costs on third-party capital are expensed in the
period in which they are incurred.
Tangible assets are depreciated according to the straight-line method over their estimated
useful lives. Low-value assets are written off in full in the year of purchase.
Regular depreciation is taken on the basis of useful lives which are specified uniformly
throughout the Group as follows:
In accordance with IAS 36, irregular depreciation is taken on tangible assets where both
the sale value and the useful value have fallen below the book value.
Intangible assets
Tangible assets
58
Other investments are shown at the lower of the acquisition cost or the current fair value.
Short-term securities are valued at market values, if they have – as usual – been classified
in the category "available for sale". Changes in the market value of short-term securities
are, after allowance for deferred tax, included in equity, i.e. with no effect on income;
where there are substantial indications for a diminution in value, an appropriate write-
down is made.
Inventories are valued at the lower of purchase or production cost or at current fair value.
Production cost includes all direct costs as well as reasonable portions of necessary indi-
rect materials and indirect labour costs, and also production-related depreciation. Selling
and general administrative expenses and interest on third-party capital are not capi-
talised. Raw materials and merchandise are valued at the average purchase cost. Adequate
allowance is made for risks resulting from longer storage or reduced utility of inventories,
as well as for uncompleted contracts with impending losses.
Pursuant to IAS 11, long-term manufacturing or construction contracts are recognised
according to the percentage of completion method by apportioning pro rata temporis the
agreed revenues earned from, and costs incurred for, contract progress and showing such
net sales, after deduction of customer prepayments, as trade receivables. Such progress or
percentage of completion is determined either on the basis of the ratio between the costs
incurred up to the balance sheet day and the expected total contract loss, or on the basis
of agreed milestones.
If the result of a long-term manufacturing or construction contract is not yet sufficiently
secured, the revenues are only recorded in the amount of the order costs incurred ("short-
ened percentage of completion method"). The share of the result will only be realised, if
and when the completion of the order has progressed so far that the revenues still to be
earned and the costs still to be incurred can be estimated on a reliable basis.
Receivables and other assets are carried at amortised purchase costs. Appropriate specific
allowances are made for receivables which are exposed to identifiable risks. For the gen-
eral collection risk, allowance is made on the basis of empirical values of the past. The
original values are reinstated wherever the grounds for any depreciation in prior periods
no longer exist.
Financial assets which have been classified in the category "available for sale", are reported
at market value in the balance sheet. The difference between the purchase cost carried for-
ward and the market value are shown under equity as unrealised profits/losses, with
allowance for deferred taxes.
Inventories
Long-term
manufacturing
or construction
contracts
Receivables
other assets
Short-term securities
Investments
59 Group division: Consolidated financial statementsNotes
MAN Ferrostaal AG Annual Report 2004
In compliance with IAS 19, accruals for pensions are made in accordance with the pro-
jected unit credit method, taking due account of expected future payroll and
pension trends.
Other accruals are made for warranty obligations, outstanding costs of contracts already
invoiced, impending losses resulting from pending transactions, obligations towards
employees, and for all other recognisable risks and uncertain obligations in the amount of
their probable occurrence. Accruals that include an interest portion are discounted
accordingly.
Liabilities are, as a matter of principle, shown at the repayment amount in the
balance sheet.
Pursuant to IAS 12, tax deferrals are made for different valuations of assets and equity &
liabilities in the IFRS balance sheet, the commercial balance sheet and the tax balance
sheet and for consolidation matters affecting net income. Capitalised deferred taxes are
only shown in so far as the tax reductions connected thereto will probably be forthcom-
ing. Capitalised deferred taxes also comprise losses carried forward, if a taxable income is
to be expected in future which will be sufficient for the realisation of the deferred taxes.
The tax rate for German companies has remained unchanged from the previous year, i.e.
39.4 %.
The companies of the MAN Ferrostaal Group always hedge their interest and currency risks
at fair-market conditions via the central Group division treasury of MAN Ferrostaal AG.
For the MAN Ferrostaal Group these are for the most part forward exchange transactions.
They are assessed at market value. At the end of the fiscal year, the market value of the
sale of foreign currencies amounted to € 35 million (previous year: € 40 million), and the
market value of the purchase of foreign currencies to € -14 million (previous year:
€ -5 million).
In the case of derivative financial investments which are connected with hedging, the
reporting in the balance sheet is determined by changes in the market value according to
the nature of the hedge. A fair value hedge exists, if a forward exchange transaction serves
to secure an existing underlying transaction, especially an order not yet completed or a
customer claim in a foreign currency. In this case, a change in the market value of the for-
ward exchange transaction leads to a counterchange in the market value of the underly-
ing transaction. In the balance sheet, the changes in the market value are reported under
the respective balance sheet item of the underlying transaction, in particular under trade
receivables, under inventories and under trade payables. In the income and earned sur-
plus statement, the changes in the market value of the hedge and the underlying transac-
tion are as for the balance not affecting the income.
Cash flow hedges include in particular upstream exchange rate hedges for future sales
revenues from series manufacture and for high-probability customer projects (as well as
interest rate hedges for the refinancing of customer financing). In this case, any change in
the fair value of the hedging transaction is, after the deduction of deferred tax, shown
under equity as unrealised profit/loss.
Deferred taxation
Financial derivatives
and hedges
Accruals, liabilities
60
Sales are recognised as and when the underlying products or goods have been delivered or
the services rendered, in each case net after deduction of discounts, customer bonuses
and allowances. Sales revenues from long-term manufacturing or construction contracts
are recognised on a percentage of completion basis.
Operating expenses are recorded when the underlying products or services are utilised,
while expenses for advertising and sales promotion as well as other sales-related expenses
are recognised when incurred. Accruals for warranties are formed at the time the products
are sold. Interest and other costs of debt are expensed during the period.
The preparation of consolidated financial statements of the Group division requires
assumptions or estimates for some items, namely for the assessment in the balance sheet,
for the disclosure of contingent liabilities and for the presentation of income, gains,
expenses and losses. The actual values may deviate from these estimates.
If the basis on which the original estimate changes, the balance sheet is changed accord-
ingly, with a corresponding effect on income.
Income, gains,
expenses and losses
Estimates
61 Group division: Consolidated financial statementsNotes
MAN Ferrostaal AG Annual Report 2004
(1) Net sales
(3) Other
operating expenses
(2) Other
operating income
Notes to the consolidated income statement
Other operating income includes, among others, income deriving from the release of
accruals, the disposal of assets, the cancellation of downward value adjustments in respect
of receivables, and onward invoicing of expenses and other financial instruments.
Other operating expenses include the expenses which have not been allocated to func-
tional costs. Included therein is also that part of expenses for R&D representing neither
order-related production costs nor capitalised development costs, as well as additions to
accruals, value adjustments on current assets, expenses for structural measures and
losses from asset disposals. The total R&D expenses amounted to
€ 15 million (previous year: € 18 million).
SALES BY REGIONSmillion €
2004 2003
Germany 490 502
EU without Germany 324 321
Other Europe 320 201
Africa 214 222
Asia 322 456
Australia 59 30
North America 648 378
Latin America 808 770
3,185 2,880
SALES BY BUSINESS SEGMENTSmillion €
2004 2003
Facility Construction and Contracting 888 1,145
Steel Construction 127 229
Industrial Equipment and Systems 445 436
Steel Trading and Logistics 1,725 1,070
3,185 2,880
62
million €
2004 2003
Income from profit & loss transfer agreements – 3
Income from other investments 2 2
Depreciation of investments – 12 – 2
Result from the sale of investments – 2 6
– 12 9
million €
2004 2003
Current taxes 23 39
Deferred taxes – 16 – 14
7 25
For tax purposes MAN Ferrostaal Aktiengesellschaft forms part of MAN Aktiengesellschaft
and does not therefore incur any direct tax liabilities. Current taxes include an apportion-
ment of MAN AG in respect of corporate income tax and trade tax on income in Germany
in the amount of € 9 million (previous year: € 2 million).
(4) Other income
from investments
(5) Net interest result
(6) Income taxes
million €
2004 2003
Other interest and similar income 19 24
Interest and similar expenses – 16 – 18
Interest portion of provision for pension accruals – 13 – 14
– 10 – 8
Both interest income and interest expenses relate to the liquidity items included in cash
and cash equivalents, short-term securities and financial liabilities. The interest income
includes an amount of € 6 million (previous year: € 7 million) received from associated
companies while interest expenses include € 2 million (previous year: € 1 million) from
associated companies.
63 Group division: Consolidated financial statementsNotes
MAN Ferrostaal AG Annual Report 2004
The tax load ratio – income taxes in relation to the result before taxes – amounts to 11 %
(previous year: 39 %). Based on the domestic corporate income tax, a tax rate of 26.4 % is
anticipated. The difference between the expected tax rate and actual tax rate is due in
particular to tax-free income.
Deferred taxes are to be allocated to the following balance sheet items:
million €
31.12.2004 31.12.2003
Deferred tax assets
Pension accruals 12 11
Inventories and receivables – 13 4
Other accruals 19 5
Losses carried forward 69 65
Other 4 4
91 89
Deferred tax liabilities
Non-current assets 9 18
Inventories and receivables 20 47
Other accruals 28 1
Other 3 2
60 68
64
(7) Intangible assets
Notes to the balance sheetIntangible assets include concessions acquired by the Group, EDP software and similar
rights and assets as well as R&D costs. As at December 31, 2004 and December 31, 2003,
there was no goodwill arising from capital consolidation.
million €
Gross values on Dec. 31, 2002 15 3 18
Accumulated depreciation – 10 – – 10
Balance at Dec. 31, 2002 5 3 8
Change in group of consolidated companies 1 – 1
Additions 1 – 1
Depreciation – 4 – 1 – 5
Balance at Dec. 31, 2003 3 2 5
Gross values on Dec. 31, 2003 11 4 15
Accumulated depreciation – 8 – 2 – 10
Balance at Dec. 31, 2003 3 2 5
Additions 1 – 1
Disposals – 1 – – 1
Depreciation – 1 – 1 – 2
Balance at Dec. 31, 2004 2 1 3
Gross values on Dec. 31, 2004 9 4 13
Accumulated depreciation – 7 – 3 – 10
Regular depreciation on licences, software, similar rights and assets and on development
costs is included in the function costs, especially the costs of sales. Irregular depreciation
is included in the other operating expenses.
Licenses, soft-
ware and similar
rights
Development
costs
capitalised
Intangible
assets
65 Group division: Consolidated financial statementsNotes
MAN Ferrostaal AG Annual Report 2004
(9) Investments
million €
Gross values on Dec. 31, 2002 197 92 107 2 398
Accumulated depreciation – 95 – 70 – 86 – – 251
Balance at Dec. 31, 2002 102 22 21 2 147
Change in group of consolidated companies 2 4 – – 6
Additions – 6 11 2 19
Transfers – – 1 4 – 3 –
Disposals – 6 – 1 – 2 – – 9
Depreciation – 10 – 6 – 11 – – 27
Currency adjustments – 1 – 1 – 1 – – 3
Balance at Dec. 31, 2003 87 23 22 1 133
Gross values on Dec. 31, 2003 186 89 103 1 379
Accumulated depreciation – 99 – 66 – 81 – 246
Balance at Dec. 31, 2003 87 23 22 1 133
Change in group of consolidated companies – 1 – 3 – 1 – 1 – 6
Additions 1 4 7 2 14
Transfers – – 1 – 1 –
Disposals – 4 – 1 – 1 – – 6
Depreciation – 6 – 6 – 8 – – 20
Currency adjustments 1 – – – 1
Balance at Dec. 31, 2004 78 17 20 1 116
Gross values on Dec. 31, 2004 101 65 97 1 264
Accumulated depreciation – 23 – 48 – 77 – – 148
The regular depreciation on tangible assets is included in the function costs, especially
the costs of sales. Irregular depreciation is included in the other operating expenses. It
amounted to € 5 million (previous year € 3 million).
Irregular depreciation was taken on investments in an amount of € 12 million (previous
year: € 2 million).
(8) Tangible assets
Land and build-
ings
Plant and
machinery
Other factory
and office
equipment
Prepayments
and con-
struction in
progress
Tangible
assets
66
(10) Inventories
(11) Trade receivables
million €
31.12.2004 31.12.2003
Raw materials and supplies 6 12
Work in process and finished products 444 317
Merchandise 164 73
Prepayments made 76 67
690 469
million €
31.12.2004 31.12.2003
Future receivables due from long-term manufacturing and
construction contracts 51 108
Receivables due from customer 347 354
Receivables due from associated companies 10 10
Receivables due from investments 8 3
416 475
million €
31.12.2004 31.12.2003
Production costs including order results of long-term
manufacturing and construction contracts 963 903
Less milestones capitalised as WIP – 9 – 20
Future receivables due from long-term manufacturing
and construction contracts before prepayments received 954 883
Less prepayments received thereon – 903 – 775
51 108
The book value of inventories written down to their fair value amounts to € 38 million
(previous year: € 33 million). The amount of the writedown of inventories with effect on
the results income in the fiscal year under review amounted to € 4 million (previous year:
€ 3 million).
Future receivables due under long-term manufacturing contracts are recognised accord-
ing to the percentage of completion (PoC) method are as follows:
Sales from long-term production orders amounted to € 656 million (previous year:
€ 714 million). Orders and parts thereof already billed to the customer are shown as other
receivables due from customers.
The trade receivables include € 101 million (previous year: € 91 million) with a remaining
term of more than one year.
67 Group division: Consolidated financial statementsNotes
MAN Ferrostaal AG Annual Report 2004
(12) Other assets
(13) Short-term
securities, cash and
cash equivalents
(14) Equity
million €
31.12.2004 31.12.2003
Derivative financial instruments 35 40
Sundry other assets 195 146
230 186
million €
31.12.2004 31.12.2003
Short-term securities 157 164
Due under intragroup financing from associated companies 321 429
Cash on hand and in bank 141 139
619 732
The sundry other assets mainly comprise shares in project and operator companies as
well as other financial investments at home and abroad.
Included in the receivables due from financial transactions with associated companies are
receivables due from MAN AG in the amount of € 274 million.
Short-term securities are held as liquidity investments, recognised at market value.
The capital stock of MAN Ferrostaal AG amounts to € 70,000,000. It is divided into
70,000,000 shares that are indirectly and directly held 100 % by MAN Aktiengesellschaft,
Munich.
Over and above the retained earnings of MAN Ferrostaal AG, the reserves retained from
earnings include the differential amounts booked on initial consolidation, the Group's
share of earnings accrued by subsidiary companies after the date on which they were first
consolidated, as well as the equity share of other consolidation transactions. The "other
changes" contain essentially – over and above the other changes due to equity consolida-
tion that have no effects on results – currency adjustments and changes in holdings.
million €
31.12.2004 31.12.2003
Other non-current assets 81 60
Other current assets 149 126
Included in the receivables due from financial transactions with associated companies
are also claims and liabilities from profit and loss transfer agreements, dividends and tax
contributions.
Disclosure in the balance sheet
68
The MAN Group's pension scheme is mainly based on direct defined benefit obligations.
As a rule, the actual future pension amounts depend on the length of service with the
Group and the pensionable pay. The pension scheme is financed by making appropriate
accruals, in case of some foreign subsidiaries also by contributions to pension funds.
The pension accruals are valued on an actuarial basis in accordance with the projected
unit credit method, taking due account of future trends.
(15) Financial liabilities
(16) Pension accruals
million €
31.12.2004 31.12.2003
Due to banks 23 21
Liabilities from financial transactions – 2
23 23
million €
31.12.2004 31.12.2003
Non-current financial liabilities with a residual
term of more than one year 2 2
Current financial liabilities with a residual term
of up to one year 21 21
Disclosure in the balance sheet
The equity share from unrealised profits/losses is mainly a result of the market assess-
ment of short-term securities of current assets.
The "minority interests" relate to MAN TAKRAF Fördertechnik, Leipzig and MAN Ferrostaal
Inc., Houston. The shares of these companies are held, respectively, by MAN AG, Munich,
and MAN Capital Corp., New York.
Of the shares in Intermesa Trading Ltda., Rio de Janeiro, 48.5% are held by Intermarketing
Ltda. and 3 % by JOCAL Ltda., both of which are domiciled in Rio de Janeiro.
In accordance with the control and profit transfer agreement concluded with
MAN Aktiengesellschaft, MAN Ferrostaal AG transferred € 91 million of its net income
during the fiscal year to MAN Aktiengesellschaft.
69 Group division: Consolidated financial statementsNotes
MAN Ferrostaal AG Annual Report 2004
For German companies of the Group, the expected salary and pension increases are based
on the following assumptions:
During the fiscal year under review, pension scheme-related expenses amounted to
€ 19 million (previous year: € 18 million).
Pension accruals included in the balance sheet are derived as follows from the value
of obligations:
million €
31.12.2004 31.12.2003
Balance at Jan. 1 235 230
Expenses for additional pension claims accrued
in the fiscal year 4 4
Interest cost 13 14
Pension payments – 15 – 14
Effects from changes of Group of consolidated
companies, currency and others – 5 1
Balance at December 31 232 235
million €
31.12.2004 31.12.2003
Current value of pension entitlements of the defined
benefit obligations financed by accruals 260 254
Adjustment amount due to actuarial
gains (+) and losses (-) – 28 – 19
Balance at December 31 232 235
%
31.12.2004 31.12.2003
Payroll trend 2.5 2.5
Pension trend 1.5 1.5
Interest rate 5.0 5.5
For foreign companies, these assumptions are modified in accordance with
local circumstances.
Pension accruals developed as follows during the fiscal year under review:
The current value of pension entitlements of the benefit obligations shows the defined
benefit obligations to employees at the balance sheet date.
70
(17) Other accruals million €
Business obligations 34 – 1 – 16 115 – 8 124
Structural measures 21 – – 16 15 – 1 19
Obligations to employees 9 – 1 – 3 2 – 1 6
Other accruals 57 7 – 17 29 – 4 72
121 5 – 52 161 – 14 221
Disclosure in the balance sheet
million €
31.12.2004 31.12.2003
Non-current accruals 9 13
Current accruals 212 108
The accruals in respect of business obligations comprise mainly warranty and suretyship
obligations, products or services yet to be provided under contracts already invoiced and
impending losses from pending transactions. Accruals in respect of structural measures
comprise indemnification payments to employees, as well as expenses in connection with
capacity adjustments and reorganisation of value creation structures.
The obligations to personnel consist of future payments for anniversaries, early retire-
ment and pre-retirement part-time working.
The other accruals cover a range of identifiable special risks.
Balance at
Dec. 31,
2003
Change in group
of consolidated
companies,
currency
adjustments
Utilisation Provision Retransfers Balance at
Dec. 31,
2004
71 Group division: Consolidated financial statementsNotes
MAN Ferrostaal AG Annual Report 2004
18) Other liabilities million €
31.12.2004 31.12.2003
Liabilities to personnel 35 36
Currency and interest hedges 14 5
Liabilities for other taxes 9 26
Remaining sundry liabilities 50 61
108 128
million €
31.12.2004 31.12.2003
Current liabilities 108 128
Disclosure in the balance sheet
The liabilities to personnel comprise wages, salaries and social security contributions not
yet due at the balance sheet date, accrued vacation as well as special year-end payments.
million €
2004 2003
Expenses of raw materials, supplies
and merchandise 2,050 1,826
Cost of services purchased 157 390
2,207 2,216
72
Other information on the financial statementsThe cost of sales includes the following costs of materials:Other notes to the
income statement
Contingencies
million €
2004 2003
Wages and salaries 211 273
Social security contributions and pension expenses 49 63
260 336
million €
31.12.2004 31.12.2003
Guarantees and suretyship 179 56
Guarantees for third-party liabilities 85 47
Notes endorsed and discounted 2 15
The personnel expense break down as follows:
On average, the Group employed 5,633 people during the year
(previous year 7,009 persons).
The guarantees for third-party liabilities in an amount of € 53 million are secured by the
pledging of short-term securities (previous year: € 41 million).
73 Group division: Consolidated financial statementsNotes
MAN Ferrostaal AG Annual Report 2004
Other financial obligations consist of agreements for rent of land and buildings and
leasing contracts. Future payments to be made during the minimum period these
agreements remain in force will fall due as follows:
For purposes of the cash flow statement the payments flows are divided into the three
areas, namely operating activities, investment activities and financing activities. The
effect of changes in the group of consolidated companies has been eliminated from the
respective items.
In the cash outflow from operating activities, the noncash operating expenses and
income and the income from the disposal of assets are eliminated.
"Cash earnings" are shown separately; They reveal the change in cash resulting from the
results for the year. Interest income in the amount of € 19 million (previous year: € 24 mil-
lion), interest expenses in the amount of € 16 million (previous year: € 18 million) and
the income tax paid in the amount of € 5 million (previous year: € 12 million) have been
allocated to operating activities.
A significant affect on the cash outflow from operating activities resulted from the net
funds tied up in inventories, customer prepayments received, and receivables. During the
fiscal year under review these developed as follows:
Other financial
obligations
Cash flow statement
million €
31.12.2004 31.12.2003
Within one year 14 15
After more than one but within five years 38 42
After more than five years 37 44
89 101
million €
31.12.2004 31.12.2003
Inventories 690 469 – 35 -256
Trade receivables 416 475 – 12 47
Prepayments received from customer – 675 – 586 25 114
431 358 – 22 – 95
The financial obligations towards third parties from investment projects commenced but
not completed were within the normal business scope. Leasing contracts mostly relate to
the leasing of land and buildings and motor vehicles.
First-time
consolidation/
Deconsolidation/
Currency adjustments
Liquidity
effect
74
The investments shown for investment activities include the additions to intangible
assets and tangible assets – in case of investments in financial assets – also payments for
the acquisitions of holdings and additional purchases that were eliminated from the
fixed-asset schedule in connection with the consolidation of the holdings.
Also included in investment activities is the income from sales of fixed assets and invest-
ments as well as the cash and resources taken over in connection with the acquisition of
investments.
The cash outflow from financing activities includes in particular the distribution of divi-
dends and the change in short-term securities of the current assets as well as the financial
debts.
Cash and resources include cash at banks, cheques, cash on hand and receivables due from
financial transactions with associated companies.
The total remuneration of the members of the Supervisory Board amounted to 182 T€
(previous year: 182 T€) and those for the members of the Executive Board to 2,122 T€ (pre-
vious year: 2,934 T€), including 816 T€ (previous year: 1,349 T€) as fixed emoluments and
1,306 T€ (previous year: 1,585 T€) as emoluments depending on performance.
With effect as of July 1 of each of the years 2000, 2001, 2003 and 2004, the MAN Group
implemented a company value growth scheme. Under this, the Executive Board members
and management officers of MAN Group companies are given a certain number of value
growth rights, which after a blocking period of two years can be converted within the fol-
lowing five years into taxable emolument in a value depending on the share price devel-
opment of MAN ordinary shares. In the fiscal year 2004, expenses for accruals in the
amount of 597 T€ (previous year: 85 T€) were incurred in this connection.
The emoluments of former Executive Board members and their surviving dependants
amounted to 1,056 T€ (previous year: 604 T€). A total amount of 6,597 T€ (previous year:
6,984 T€) was allocated to accruals to cover pension obligations for former members of
the Executive Board and their surviving dependents.
Total remuneration of
the Supervisory Board
and the Executive Board
75 Group division: Consolidated financial statementsNotes
MAN Ferrostaal AG Annual Report 2004
The members of the Supervisory Board and the Executive Board are listed on pages 2
and 3 of the Annual Report.
Essen, February 14, 2005
MAN Ferrostaal Aktiengesellschaft
The Executive Board
76
Unqualified audit certificate for a consolidated financial state-ment voluntarily prepared in accordance with IFRS
To the Executive Board of MAN Ferrostaal Aktiengesellschaft, Essen
We have audited the consolidated financial statements – consisting of Income Statement,
Balance Sheet, Cash Flow Statement, Statement of Equity Changes and Notes - prepared
by MAN Ferrostaal Aktiengesellschaft, Essen, for the fiscal year from January 1 to Decem-
ber 31, 2004. The preparation and contents of the consolidated financial statements of the
Group division according to the International Financial Reporting Standards (IFRS) are the
responsibility of the Executive Board of the Company. Our task is to audit the consoli-
dated financial statements of the Group division and, on the basis of this audit, to ascer-
tain whether or not the said financial statements comply with the IFRS.
We have carried out our consolidated financial statements of the Group division audit in
accordance with the German auditing regulations and in keeping with the German princi-
ples established by IDW, the German Institute of Auditors, for good accounting practise.
According to these, the audit is to be planned and carried out in such manner as to enable
the auditors to judge with reasonable certainty whether the Group division's consolidated
financial statements are free of any substantial misleading statements. In deciding on our
actual auditing activities, we took due account of our knowledge concerning operating
activities and the economic and legal environment of the Ferrostaal Group division and
our expectations of possible errors. In the course of our audit we assessed the documenta-
tion underlying the valuations and information in these consolidated financial state-
ments by means of random sample checks. The audit comprises the assessment of the
accounting principles employed and the main assessments of the Executive Board and
appraises whether the consolidated accounts constitute a fair representation of the Group
division. We are of the opinion that the audit carried out by us constitutes an adequate
reliable basis for making these assessments.
It is our conviction that the consolidated financial statements of the Group division are in
conformity with the IFRS and convey a picture of the asset, financial and income situation
of the Group division and also of its cash flows during the fiscal year under review that
correspond to the Group division's effective situation.
Our audit, which also covered the Review of Business of the Group division of
MAN Ferrostaal Aktiengesellschaft prepared by the Executive Board for the fiscal year
from January 1, to December 31, 2004, did not give rise to any objections on our part. It is
our opinion that the Review of Business of the Group division of MAN Ferrostaal
Aktiengesellschaft provides an overall correct view of the situation of the Group company
and outlines appropriately the risks associated with future developments.
Düsseldorf, February 24, 2005
BDO Deutsche Warentreuhand
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft
Harnacke Horn
Auditor Auditor
77 Group division: Consolidated financial statementsAudit certificate
MAN Ferrostaal AG Annual Report 2004
78
MAN Ferrostaal Group division: Seven-year financial summary
1998/99 1999/00 SFY 20001) 2001 2002 2003 2004
Orders in million €
Order intake 2,228 2,927 1,359 2,737 3,178 2,738 3,508
Germany 700 604 280 546 441 460 524
Abroad 1,528 2,323 1,079 2,191 2,737 2,278 2,984
Sales 2,668 2,541 1,410 2,855 2,916 2,880 3,185
Germany 665 598 365 636 573 502 490
Abroad 2,003 1,943 1,045 2,219 2,343 2,378 2,695
Orders on hand as of June 30/Dec. 31 1,978 2,458 2,414 2,263 2,459 2,186 2,259
Germany 591 599 571 457 302 230 207
Abroad 1,387 1,859 1,843 1,806 2,157 1,956 2,052
Employees at home and abroad
As of June 30/Dec. 31 – number 6,811 7,145 7,545 7,230 6,598 6,689 4,679
On an annual average – number 6,952 7,312 7,478 7,485 6,768 7,009 5,633
Personnel expenses per capita in € 44,275 46,195 23,410 45,898 46,706 47,995 46,149
Capital expenditures and funding in million €
Investments in tangible and intangible assets 28 23 20 42 17 20 15
Purchase of financial assets 9 23 7 4 6 2 21
Depreciation 26 25 15 26 24 33 34
Cash Earnings 57 64 51 90 76 65 69
Key ratios (%)
Equity ratio 25.3 28.6 28.2 28.9 24.0 15.4 13.9
Equity-to-fixed-assets ratio 191.8 225.0 200.4 228.8 202.0 181.9 194.3
Aftertax return on equity 8.5 9.2 11.82) 8.8 12.2 12.1 17.9
Pretax return on sales 2.7 3.0 3.0 3.7 2.9 2.3 1.9
Return on capital employed 15.5 14.9 16.22) 20.2 14.8 15.0 15.8
Cash Earnings in relation to sales 2.1 2.5 3.6 3.2 2.6 2.3 2.2
1) Short fiscal year from July 1, to December 31, 20002) Linearly extrapolated to 12 months
79 Group division: Consolidated financial statementsSeven-year financial summary
MAN Ferrostaal AG Annual Report 2004
80
DSD Industrieanlagen GmbH
Baumstraße 25
45128 Essen
Phone: +49.201. 818-50
Fax: +49.201. 818-5209
DSD Stahlbau GmbH
Henry-Ford-Straße 110
66740 Saarlouis / Germany
Phone: +49.6831. 18-0
Fax: +49.6831. 18-2416
(until June 30, 2004)
MAN Ferrostaal Industrieanlagen GmbH
Industriestraße 13
65366 Geisenheim / Germany
Phone: +49.6722. 501-1
Fax: +49.6722. 501-221
Intergrafica Print & Pack GmbH
Druckmaschinenvertrieb
Hohenzollernstraße 24
45128 Essen
Phone: +49.201. 818-08
Fax: +49.201. 818-3970
MAN Ferrostaal Industrie-
und System-Logistik GmbH
Hohenzollernstraße 24
45128 Essen
Phone: +49.201. 818-2500
Fax: +49.201. 818-3500
MAN Ferrostaal Piping Supply GmbH
Hohenzollernstraße 24
45128 Essen
Phone: +49.201. 818-2535
Fax: +49.201. 818-3930
Our Main Subsidiaries
This annual report is printed on chlorine-free »Galaxi Supermat« paper produced by Papier Union, using anMAN Roland four-color sheet-fed offset press.
MAN Ferrostaal AG
Hohenzollernstraße 2445128 Essen/GermanyPhone +49. 201. 8 18-01Fax +49. 201. 8 18-28 22www.manferrostaal.com
A memberof the MAN Group
2004