Bekaert S.A./N.V.

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Bekaert S.A./N.V.

President Kennedypark 18
Kortrijk, B-8500
Belgium
Telephone: (32 056) 23 05 11
Fax: (32 056) 23 05 43
Web site: http://www.bekaert.com

Public Company
Incorporated: 1880
Employees: 18,500
Sales: EUR 3.2 billion ($2.51 billion) (2006)
Stock Exchanges: Euronext Brussels
Ticker Symbol: BEKB
NAIC: 331222 Steel Wire Drawing; 541611 Administrative Management and General Management Consulting Services

Bekaert S.A./N.V. is the world's leading producer of steel wire and steel wire-based products. The Kortrijk, Belgium-based company produces a wide range of products through four primary divisions: Advanced Wire Transformation; Fencing Systems Europe; Advanced Materials; and Advance Coatings. The company's wire transformation division is the number one producer of steel cord for radial tire reinforcement, holding a 50 percent share of the global market. This division also produces a range of other products for the automotive industry, including cable wires, welding wires, and spring wires.

The company is also a world-leading producer of steel products for the construction industry, including steel fibers for reinforced concrete, plastering mesh, steel reinforcement cables and fibers for elevator lifting systems, and the like. The Advanced Wire division encompasses a range of products, such as cards, carding wires and other products for the textiles industry, anchor cables for the offshore oil industry, wire reinforcement for flexible pipes, and wires for the telecommunications industry. This division is also Bekaert's largest, generating 91 percent of its sales of more than EUR 3.3 billion ($4 billion) in 2006. This figure includes the company's Fencing Systems Europe division, which produces wire fencing for the agricultural and other sectors. The company has begun to phase out these operations, however; in 2006, the company sold its barbed wire division, which represented Bekaert's original product line. In its place, Bekaert has been expanding its expertise in the production of Advanced Materials, which extends the company's expertise into the production of fibers for filters, burners, and combustion systems, and to Advance Materials, including diamond-like coatings for the automotive industry, and window films and other treatments for the construction and automotive industries. These divisions contributed 5 and 4 percent, respectively, to the company's sales.

Bekaert has long been operated on an international level, with sales extending to more than 120 countries worldwide. These sales are support by a global network of production facilities, including in the Netherlands, Belgium, the Czech Republic, the United Kingdom, France, Germany, Slovakia, Spain, Canada, the United States, Brazil, China, India, Japan, Indonesia, Singapore, and Turkey.

Europe provides 31 percent of the group's sales, while South America accounts for 35 percent, North America for 20 percent, and Asia for 12 percent. Bekaert is listed on the Euronext Brussels stock exchange and is led by chairman Paul Buysse and CEO Bert De Graeve. The founding Bekaert family members remain major shareholders in the company.

BELGIAN BARBED WIRE PIONEER IN THE 19TH CENTURY

Into the late 19th century, farmers remained faced with the difficulties of fencing in their livestock, both in order to keep the animals within their enclosures, and in order to prevent the entry of predators. In Belgium, farmers often relied on the use of thorn bushes and bramble to create natural barriers. This method was imperfect, however, and the keeping of livestock remained a labor-intensive activity.

The first development of barbed wire fencing began during the second half of the century, as steel wire became more and more available. By the 1870s, a number of competing barbed wire systems had been developed in Europe and in the United States. In Belgium, Leo Leander Bekaert, a young owner of a general goods store in Zwevegem, near Kortrijk, recognized the potential for supplying barbed wire to the region's farmers. In 1879, Bekaert acquired the right to produce and sell the new barbed wire fencing. Bekaert's first production consisted of twisting three strands of wire around nails spaced 10 to 20 centimeters apart, creating what was then called "artificial thorns."

Bekaert's fence production quickly became his primary business as demand for the new product grew. Starting from a small workshop, Bekaert quickly expanded his manufacturing capacity, shifting to industrial production by the 1890s. The company also moved toward a more vertically integrated structure, adding its own machinery to produce wire rod in 1894. In this way the company not only gained control of the basic materials for its barbed wire production, it was also able to diversify its product line into other fencing and wire types. Nevertheless, wire production remained the company's core (and for the most part unique) focus throughout the century to come.

Bekaert's company grew steadily in the years leading up to World War I. The German occupation of Belgium proved difficult for the company as the German army requisitioned Bekaert's production to support its own military campaign. Later, the retreating Germans removed much of the company's production equipment.

The company rebuilt quickly after the war. As Leo Bekaert launched a new career as a politician (becoming mayor of Zwevegem) his son Leon took over the leadership of the company. The arrival of this new generation proved significant for the company, which quickly expanded to a national level. By the end of the 1920s, the company had also launched its first international expansion effort. For this the company focused primarily on the European market. By the 1930s, Léon Bekaert, who emerged as a prominent political figure in his own right, had firmly placed his mark on the company. In 1935, he renamed the company Tréfileries Léon Bekaert. The outbreak of World War II cut short further international growth; nonetheless, under the German occupation, the company was able to continue and even modernize and expand its production throughout the war years. This led the company to come under investigation for economic collaboration following the war; Bekaert was ultimately cleared, however.

COMPANY PERSPECTIVES

Better Together. Delivering Results. Better together, the baseline we use to sum up Bekaert's approach to cooperation with its stakeholders, was introduced in 2005. This concept has been instrumental in driving us toward a more customer-focused business culture. Better together came alive all around the world in 2006. Something that started as an ideal vision of the driving force behind our business has come more and more to reflect the way we work together with our customers, our partners, local authorities and our colleagues within Bekaert. That is precisely what Bekaert meant by better together. More than just a fashionable slogan, it is a substantive concept that enables us to raise quality and cooperation to an even higher level. The concept works.

EMBRACING THE RADIAL TIRE IN 1951

Following the war, Bekaert was quick to recognize the opportunities presented by the newly emerging radial tire. In 1951, the company made the strategic decision to launch production of steel cord (a mesh of steel wires) used as the inner core for radial tires. The company built a dedicated production facility for this in 1952. While the initial years of production were somewhat rocky, as the radial tire had not yet been fully perfected, Bekaert's early entry into this market enabled it to establish itself as a major player in what was soon to become the automotive industry tire standard. The fast-growing economies in Europe and elsewhere during the 1950s and the rapid adoption of the automobile throughout Europe during this period helped the company become one of Belgium's major industrial groups.

By the time of his death in 1961, Leon Bekaert had transformed the family-owned company into a world leader in its field. Under son Antoon Bekaert, the company continued to expand strongly, establishing itself as a leading player in the Latin American market in the 1960s. At the start of the 1970s, the company entered the North American market, rapidly becoming a major player there.

In support of this new expansion effort, Bekaert went public in 1972, listing its shares on the Brussels Stock Exchange. The Bekaert family nonetheless remained majority shareholders of the company then and into the next century.

Bekaert had established its first operations in Asia during the 1970s. Japan was the company's first target in that region, and the company gained entry there by forming a joint venture with Japan's leading tire maker, Bridgestone. This allowed the company to achieve a major share of what quickly grew into one of the world's largest automotive markets.

RESPONDING TO TIRE INDUSTRY CONSOLIDATION IN THE NINETIES

By the early 1980s, however, Bekaert, hard hit by the successive oil crises and economic recessions of the 1970s, appeared to be running out of steam. In order to rekindle its expansion, Bekaert turned to Karel Vinck, who became the company's first chief executive from outside of the Bekaert family in 1983. While Vinck was tempted and even encouraged to diversify the company, his first effort went toward revitalizing the company's core steel wire production. Over the new several years, Vinck led Bekaert on a companywide restructuring, including modernizing its existing production facilities to set a new industry standard. Bekaert also launched an expansion of its international production network during this time, building nearly a dozen new factories, including plants in Brazil, Turkey, Australia, and the United States, as well as in Belgium and Germany.

These efforts helped carry Bekaert's operations through the 1980s, before the economic crisis at the start of the 1990s hit the company. At the same time, Bekaert, which had come to rely heavily on its steel cord production, found itself squeezed by the massive consolidation of the global tire market. By early 1992, the tire sector had been reduced to just five major players, down from ten just three years before. As a result, Bekaert found itself under heavy pricing pressure, forcing it to lower it prices by some 15 percent. At the same, Bridgestone's acquisition of Firestone in the United States caused Bekaert to lose its position in Japan temporarily. Following the Firestone acquisition, Bekaert pulled out of its Japanese joint venture in order to not to appear to favor Bridgestone over the other four major tire makers. The company signed a noncompete clause with Bridgestone that locked it out of the Japanese market; nonetheless, Bekaert took over the joint venture's U.S. operations, expanding its position in that market.

Bekaert found itself forced to adapt as it moved toward the new century. By the early 1990s, the company's wire products production had expanded to include hundreds of items, including champagne cork holders, springs and staples, and nails and reinforcement wires for the construction industry. Nonetheless, the company launched a review of its product list in order to identify the products providing the most value-added potential. As a result, the company dropped several lines, including the production of nails.

KEY DATES

1880:: Leo Leander Bekaert begins producing barbed wire from a workshop in Zwevegem, Belgium.
1894:: Bekaert launches steel wire rod production.
1935:: Reincorporation as Tréfileries Léon Bekaert.
1951:: Production of steel cord for radial tire production begins.
1972:: Bekaert goes public on Brussels Stock Exchange.
1983:: The first CEO from outside of the Bekaert family is named.
1992:: First joint venture production company is formed in China.
2005:: Construction of first wholly owned manufacturing complex in China begins.

Instead, Bekaert began investing in developing expertise in new technologies, such as the manufacture of thin metal fibers used for filters and antistatic applications, among others. The company also began developing the technology to product "sputtered" film, used to create reflective windows and other products. Another area of interest for the company was the production of synthetic resins and coatings, used in conjunction with the company's steel wires and fibers.

GLOBAL LEADER IN THE NEW CENTURY

Through the 1990s, Bekaert adjusted its manufacturing network to match its strategic objectives. As part of this process, the company increasingly focused on modernizing its production capacity and raising the international profile of its operations. In 1992, for example, after closing a number of older plants in Belgium and Germany, the company acquired a 50 percent stake in the wire division of Mexico's Hylsa. This was followed by the acquisition of Poland's wire mesh producer Polymex, and Endes, based in the United States, in 1993. Other acquisitions in the 1990s included Germany's Rosler Draht and Chile's Productos de Acero in 1994; Zelezarnya Dratovny Bohumin in the Czech Republic in 1995; the United Kingdom's Twil Group in 1997; and the Netherlands' Combustion Component Holding in 1999. In 2001, the company bought a majority stake in Titan Steel and Wire in the United Kingdom.

By the late 1990s, Bekaert had developed a clear strategy devoted to increase its global market share. The company's expansion into the mainland Chinese market played a key role in carrying out that strategy. Bekaert had long established a presence in China's import market, supplying the country's major tire manufacturers through the 1980s. In 1992, the company set up a joint venture with Fasten Group in the Jiangsu Province, which began production in 1995. By 1998, the company had added a second joint venture in Shenyang with the Shenyang Wire Rod Co. These efforts had given the company control of approximately 40 percent of the Chinese steel cord market by the beginning of the 2000s.

Bekaert moved to secure its position in China while also boosting its overall share of the global market in 2005, launching construction of a wholly owned plant in Shenyang. The new structure, which cost $100 million, gave the company a state-of-the-art 120,000-square-meter production facility and added 500,000 tons of steel wire production capacity. The plant was completed in 2006. Also in that year, the company moved to streamline its overall wire business, selling its barbed wire production unit.

As it moved toward the future, Bekaert continued to seek to expand its horizons. In April 2007 the company bought full control of Titan in the United Kingdom. Bekaert then turned to Russia, launching a bid to acquire Uralcord, in Magnitogorsk. By then, Bekaert had established itself as the world's leading producer of steel cord for the tire industry with a market share of 50 percent. Bekaert had also raised itself to the number two position in the overall steel wire market, posting revenues of EUR 3.3 billion in 2006. Bekaert represented one of Belgium's most prominent industrial success stories in the new century.

M. L. Cohen

PRINCIPAL SUBSIDIARIES

Aluheat BV (Netherlands); Bekaert Advanced Coatings; Bekaert Binjiang Steel Cord Co. Ltd. (China); Bekaert Bohumin SRO (Czech Republic); Bekaert Carding Solutions Ltd. (United Kingdom); Bekaert Carding Solutions Pvt Ltd. (India); Bekaert CEB Technologies Canada Ltd.; Bekaert Corporation (United States); Bekaert Dymonics GmbH (Germany); Bekaert Hlohovec AS (Slovakia); Bekaert Progressive Composites S.A. (Spain); Bekaert Sistemas de Combustao e Tecnologia (Brazil); Bekaert Specialty Films LLC (United States); Bekaert Toko Metal Fiber Co. Ltd. (Japan); Bekinit KK (Japan); Cold Drawn Products Ltd. (United States); PT Bekaert Indonesia; Shanghai Bekaert-Ergang Co. Ltd. (China); Solaronics S.A. (France); Sorevi SAS (France); Titan Steel & Wire Co. Ltd. (Canada).

PRINCIPAL COMPETITORS

ArcelorMittal; POSCO; ThyssenKrupp Steel AG; Kromberg es Schubert Kft.; Ovako Steel AB; Delphi Deutschland GmbH; Wiremold Co.; Badische Stahlwerke GmbH; Duferco La Louviere S.A./NV; ZND Draad B.V.