During the second half of 2005 the stainless steel market has suffered an unprecedented worldwide drop in prices due to:

During the second half of 2005 the stainless steel market has suffered an unprecedented worldwide drop in prices due to:

· The high raw materials prices, never maintained at said levels for such a long time before, caused a re-built in inventories in the year 2004 and first quarter of 2005, and afterwards a “vertigo” feeling in the market due to the level of prices, which created a sudden retraction of demand, and led to a drop in prices unprecedented in the history of the stainless steels.
As a result of this situation, the consumption of the stainless steel flat products decreases by 9.2% in Europe and by 10.5% in USA.

· The start up of new production capacities, mainly in China, that the market was unable to absorb.

· The slowdown of the World Economy.

In this context, in year 2005 Acerinox Group has obtained a Melting Shop production of 2.24 million Mt, which has positioned the company as the second stainless steel producer in the world. The Cold Rolling Shop production, 1.47 Mt, increases by 7.6%, as a result of the strategic investments made in last years to obtain higher value added products.

ACERINOX, S.A. in its factory of Campo de Gibraltar with a Melting Shop production of 909,101 Mt. (-1%), has increased its cold rolled production to 609,999 tonnes (+7%). With a net sales totalling 1,603 million Euros (-7%), the company has achieved a result after taxes of 71.5 million Euros, 30.7% lower than the figure obtained in 2004.

NORTH AMERICAN STAINLESS (NAS) stands out again as the company with more influence in the Group. It has increased its Melting Shop production to, 767,624 Mt, (+11%), and its cold rolled output, 537,429 Mt., (+13%). With net sales amounting to 1,981 million USD (+16%), the company has obtained a net result of 134 million USD (-21%).

The Kentucky factory enlargements move forward according to the planned schedule of start up, the No.4 Sendzimir Mill in March 2006, and the No.2 Electric furnace in September 2006. In order to be closer and give better service to warehouses and final customers, NAS has opened a service centre of California; NAS CANADA Inc has been established and it will have a service centre in Toronto. The construction of another service centre in Atlanta has already begun which will join the Chicago service centre in operation since 2002.

COLUMBUS STAINLESS has been the company of the Group more damaged by the market sharp fall, due to the fact that it is more exposed to the sale of semi-products, and the continuous appreciation of the rand. Middelburg Melting Shop production totalled 564,877Mt, (-21%) and the Cold Rolling Shop produced 322,550 Mt (+1%). With an invoicing figure of 911 million Euros (-15%), the company has achieved a net result of –11,7 million Euros.

Our long products subsidiary company, ROLDAN, S.A, and our wire subsidiary company, INOXFIL,S.A. have evolved well in a downward market, very damaged by the imports from Asia.

Our trading companies have been very affected by the price plunge that is so damaging for the companies with stocks.

The Group has carried out extraordinary provisions on account of year 2005 for an amount of 41.6 million Euros to adjust the inventories value to the net realization value.

Year 2006 begins with the stocks already returned to normal and very low prices all over the world. Nevertheless, demand begins to show an evident upward trend, which results in price increases for the months of February, March and April.

The Board of Directors, in his meeting held on the 22nd February, has resolved to give out a second interim dividend on account of Year 2005 of 0.07 euros per share, identical to the dividend of the same period of the previous year, which will be effective on 4th April.