ACERINOX, S.A. AND SUBSIDIARIES Condensed Interim Consolidated Financial Statements (Condensed Annual Accounts) for the first six months of 2012

(1)

(2)

ACERINOX, S.A. AND SUBSIDIARIES

Condensed Interim Consolidated Financial Statements (Condensed Annual Accounts) for the first

six months of 2012

30 June 2012

(Free translation from the original in Spanish. In the event of

discrepancy, the Spanish-language version prevails)

(3)

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. CONDENSED INTERIM CONSOLIDATED BALANCE SHEET

(Expressed in thousands of Euros at 30 June 2012 and 31 December 2011)

Note 30-June-12 31-Dec-11 ASSETS

Non-current assets

Goodwill 7 69.124 69.124

Other intangible assets 7 6.319 7.205

Property, plant and equipment 8 2.019.437 1.985.720

Equity-accounted investees 0 60

Available-for-sale financial assets 10 11.697 12.387

Deferred tax assets 178.148 164.562

Other non-current financial assets 10 12.869 12.380

TOTAL NON-CURRENT ASSETS 2.297.594 2.251.438

Current assets

Inventories 9 1.211.343 1.119.428

Trade and other receivables 10 649.265 510.167

Other current financial assets 10 27.630 17.253

Current tax assets 9.861 8.305

Cash and cash equivalents 111.793 164.631

TOTAL CURRENT ASSETS 2.009.892 1.819.784

TOTAL ASSETS 4.307.486 4.071.222

The condensed notes 1 to 20 form an integral part of the condensed interim consolidated financial statements.

(4)

(Expressed in thousands of Euros at 30 June 2012 and 31 December 2011)

Nota 30-June-12 31-Dec-11 EQUITY AND LIABILITIES

Equity

Subscribed capital 62.326 62.326

Share premium 81.403 106.334

Reserves 1.534.715 1.558.792

Profit for the year 40.162 73.726

Translation differences -6.242 -55.256

Interim dividend 0 -24.930

EQUITY ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE

PARENT 1.712.364 1.720.992

Non-controlling interests 160.118 160.200

TOTAL EQUITY 1.872.482 1.881.192

Non-current liabilities

Deferred income 6.224 5.490

Loans and borrowings 10, 11 1.011.177 707.197

Non-current provisions 12.966 13.991

Deferred tax liabilities 242.551 241.529

Other non-current financial liabilities 10 34.847 20.111

TOTAL NON-CURRENT LIABILITIES 1.307.765 988.318

Current liabilities

Loans and borrowings 10 315.143 344.030

Trade and other payables 10 792.897 843.660

Current tax liabilities 1.227 2.637

Other current financial liabilities 10 17.972 11.385

TOTAL CURRENT LIABILITIES 1.127.239 1.201.712

TOTAL LIABILITIES 4.307.486 4.071.222

(5)

2. CONDENSED INTERIM CONSOLIDATED INCOME STATEMENT

(Expressed in thousands of Euros at 30 June 2012 and 2011)

Note 30-June-12 30-June-11

Revenues 17 2.419.146 2.560.475

Other operating income 17 6.737 28.242

Self-constructed non-current assets 17 11.340 8.368

Changes in inventories of finished goods and work in progress 51.410 23.869

Supplies -1.825.468 -1.901.562

Personnel expenses -192.618 -182.927

Amortisation and depreciation 7, 8 -74.449 -73.282

Other operating expenses -305.485 -279.277

RESULTS FROM OPERATING ACTIVITES 90.613 183.906

Finance income 2.127 2.035

Finance costs -32.422 -30.775

Exchange gains 9.531 5.390

Revaluation of financial instruments at fair value -9.945 -3.892

Share in profit/(loss) of equity-accounted investees -63 -29

PROFIT FROM ORDINARY ACTIVITIES 59.841 156.635

Income tax 14 -23.177 -56.390

Other taxes -15 -12

PROFIT FOR THE YEAR 36.649 100.233

Attributable to:

NON-CONTROLLING INTERESTS -3.513 -1.562

NET PROFIT ATTRIBUTABLE TO THE GROUP 40.162 101.795

Basic and diluted earnings per share (in Euros) 0,16 0,41

(6)

3. INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Expressed in thousands of Euros)

STATEMENT OF RECOGNISED INCOME AND EXPENSE ^30-June-12 ^30-June-11

A) PROFIT FOR THE YEAR 36.649 100.233

INCOME AND EXPENSES RECOGNISED DIRECTLY IN EQUITY

I. Measurement of financial instruments

1. Available-for-sale financial assets -691 -3.686

2. Other income/expenses

II. Cash flow hedges -12.513 -3.818

III. Translation differences 52.214 -153.846

IV. Actuarial gains and losses and other adjustments

V. Tax effect 4.184 2.475

B) TOTAL INCOME AND EXPENSES RECOGNISED DIRECTLY IN EQUITY 43.194 -158.875

TRANSFERS TO THE INCOME STATEMENT

I. Measurement of assets and liabilities 1. Measurement of financial instruments 2. Other income/expenses

II. Cash flow hedges -164 9.939

III. Translation differences

IV. Actuarial gains and losses and other adjustments

V. Tax effect 48 -2.765

C) TOTAL TRANSFERS TO THE INCOME STATEMENT -116 7.174

TOTAL RECOGNISED INCOME AND EXPENSE 79.727 -51.468

a) Attributable to the Parent company 79.809 -37.690

b) Attributable to non-controlling interests -82 -13.778

(7)

4. CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Movement for the period is as follows:

Subscribed capital Share premium

Reserves (including profit

for the year )

Translation differences

Interim

dividend TOTAL

Total equity 31/12/2011 62.326 106.334 1.632.518 -55.256 -24.930 1.720.992 160.200 1.881.192

Total comprehensive income 0 0 30.795 49.014 0 79.809 -82 79.727

Dividend for 2011 -87.257 24.930 -62.327 -62.327

Distribution of share premium -24.931 -24.931 -24.931

Other movements -1.179 -1.179 -1.179

Total equity 30/06/12 62.326 81.403 1.574.877 -6.242 0 1.712.364 160.118 1.872.482

Equity attributable to equity holders of the Parent

Non-controlling interests

TOTAL EQUITY

Movement for the same interim period of the prior year is as follows:

Subscribed capital Share premium

Reserves (including profit

for the year )

Translation differences

Interim

dividend TOTAL

Total equity 31/12/2010 62.326 131.264 1.666.635 -57.258 -24.930 1.778.037 145.701 1.923.738

Total comprehensive income 0 0 103.437 -141.127 0 -37.690 -13.778 -51.468

Dividend for 2010 -87.257 24.930 -62.327 -62.327

Distribution of share premium -24.930 -24.930 -24.930

Acquisition from non-controlling interests 0 -52 -52

Contribution from non-controlling interests 0 11.607 11.607

Other movements 3.943 3.943 3.943

Total equity 30/06/11 62.326 106.334 1.686.758 -198.385 0 1.657.033 143.478 1.800.511

Equity attributable to equity holders of the Parent

Non-controlling interests

TOTAL EQUITY

(8)

5. CONDENSED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

(Expressed in thousands of Euros at 30 June 2012 and 2011)

30-June-12 30-June-11 CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax 59.841 156.635

Adjustments for:

Amortisation and depreciation 74.449 73.282

Impairment -746 24.037

Changes in provisions 2.723 -2.286

Grants taken to income -109 -1.410

Gains/losses on disposal of non-current assets -311 -44

Changes in fair value of financial instruments -11.984 14.269

Finance income -2.127 -2.035

Finance costs 32.462 30.890

Share in profit/loss of associates 63 29

Other income and expenses 24.348 -17.657

Changes in working capital:

(Increase)/decrease in trade and other receivables -131.649 -92.217

(Increase)/decrease in inventories -81.781 -108.500

Increase/(decrease) in trade and other payables -96.534 -108.279

Other cash flows from operating activities

Interest paid -28.315 -29.152

Interest received 1.969 1.821

Income tax paid -38.369 -34.855

NET CASH USED IN OPERATING ACTIVITIES -196.070 -95.472

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of property, plant and equipment -64.491 -91.657

Acquisition of intangible assets -110 -901

Acquisition of subsidiary, net of cash received -64

Acquisition of other financial assets -353 -601

Proceeds from disposal of property, plant and equipment 1.976 421

Proceeds from disposal of other financial assets 143 142

Dividends received 158 179

NET CASH USED IN INVESTING ACTIVITIES -62.677 -92.481

CASH FLOWS FROM FINANCING ACTIVITIES

External financing received 509.959 184.240

Repayment of interest-bearing liabilities -257.887 -4.680

Dividends paid -49.861 -49.861

Contribution from non-controlling interests 11.607

NET CASH FROM FINANCING ACTIVITIES 202.211 141.306

NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS -56.536 -46.647

Cash and cash equivalents at beginning of the year 164.631 113.569

Effect of exchange rate fluctuations 3.698 -6.167

CASH AND CASH EQUIVALENTS AT YEAR END 111.793 60.755

(9)

CONTENTS: NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – GENERAL INFORMATION

9

NOTE 2 – STATEMENT OF COMPLIANCE

9

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

9

NOTE 4 – ACCOUNTING ESTIMATES AND JUDGEMENTS

9

NOTE 5 - SEASONALITY OR CYCLICAL NATURE OF TRANSACTIONS

9

NOTE 6 – SIGNIFICANT EVENTS IN THE FIRST SIX MONTHS OF 2012

10

NOTE 7 – INTANGIBLE ASSETS

12

NOTE 8 – PROPERTY, PLANT AND EQUIPMENT

13

NOTE 9 - INVENTORIES

14

NOTE 10 – FINANCIAL INSTRUMENTS

15

NOTE 11 - LOANS AND BORROWINGS

16

NOTE 12 – DIVIDENDS PAID

17

NOTE 13 - CHANGES IN THE CONSOLIDATED GROUP

17

NOTE 14 – INCOME TAX

17

NOTE 15 - LITIGATION

18

NOTE 16 - CONTINGENT ASSETS AND LIABILITIES

18

NOTE 17 – SEGMENT REPORTING

18

NOTE 18 – AVERAGE HEADCOUNT

20

NOTE 19 – RELATED PARTY TRANSACTIONS

20

NOTE 20 - EVENTS AFTER THE REPORTING DATE

22

(10)

6. NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – GENERAL INFORMATION

Acerinox, S.A. (hereinafter the Company) was incorporated with limited liability in Spain on 30 September 1970. Its registered offices are located at Calle Santiago de Compostela, no. 100, Madrid, Spain.

The condensed interim consolidated financial statements include the Company, its subsidiaries and its associates.

The approved annual accounts for 2011 are available for consultation at the Company's head offices and on the Group's website www.acerinox.es.

The condensed interim consolidated financial statements were authorised for issue by the Company's board of directors on 24 July 2012.

NOTE 2 – STATEMENT OF COMPLIANCE

The condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard (IAS) 34 - Interim Financial Statements. These financial statements do not include all the information required for complete financial statements and should be read and interpreted in conjunction with the Group's published annual accounts for the year ended 31 December 2011.

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

The condensed interim consolidated financial statements for the first six months of 2012 have been prepared using the same accounting principles (EU-IFRS) as for 2011, except for the standards and amendments adopted by the European Union, the application of which is mandatory as of 1 January 2012, which have not had a significant impact on the Group.

New standards and interpretations have been published at the date of preparing the annual accounts which will be effective in the coming years and which have not been applied prospectively by the Group.. Taking into account the activity carried out by the companies comprising the Group, the directors of the Company do not consider that the application of these standards will have a significant effect on the Group’s consolidated annual accounts.

NOTE 4 – ACCOUNTING ESTIMATES AND JUDGEMENTS

The accounting estimates and judgements used by the Group during this interim period have been applied on a consistent basis with those employed to prepare the approved annual accounts for 2011.

NOTE 5 - SEASONALITY OR CYCLICAL NATURE OF TRANSACTIONS The activities carried out by the Acerinox Group are not subject to seasonal effects.

(11)

NOTE 6 – SIGNIFICANT EVENTS IN THE FIRST SIX MONTHS OF 2012 1. Business performance

The stainless steel market continues to be affected by the international economic crisis and its performance reflects the intensity of the crisis in each geographical region.

The market recovered in the first quarter, but was hit again in the second quarter by macroeconomic factors which aggravated the effects of the weak performance of nickel. This rapid adjustment impeded surplus deliveries and the replenishment of inventories.

Stainless steel manufacturers are adjusting their production to market conditions without generating stock increases within the industry. Inventories in end customers and distributors have fallen to historic lows across the globe, leading the Company to anticipate a rapid recovery as soon as the current economic turmoil subsides and visibility and confidence improve.

The North American market continues to be the most robust, consolidating the levels of recovery achieved since the third quarter of 2011. This robustness allowed for a rise in prices in January and April, although the risk represented by imports and the weakness of other markets prevented new price increases, creating tensions in this respect.

The European market reflects the severity of the economic crisis and the lack of liquidity, visibility and confidence, which combined with the fierce competition between manufacturers has led to a general decline in prices.

The Asian market continues to perform well in terms of sales but prices, affected by the global economic situation and the presence of strong competitors, are very low. China continues to be the driver of growth, with an increase in production in the first six quarter of the year of approximately 10% (source ISSF).

Acerinox's steel production for the period, amounting to 1,177,398 tonnes, is up 10.6% compared with the first six months of the prior year, primarily as a result of the strength of the North American market. The Group has utilised 89% of its total capacity to achieve these production levels. This increase in the utilisation of the Group's capacity has affected all of its factories, and particularly North American Stainless, which is working at close to full capacity.

The Group's revenues, which amount to Euros 2,419 million, are down 5.5% on the same period of the prior year despite the higher volume of tonnes sold.

EBITDA for the first six months, amounting to Euros 165.9 million, is down 35% compared with the first half of 2011, although it is double the amount obtained in the second half of 2011.

Profits after tax and net of the balance attributable to non-controlling interests total Euros 40.6 million. This result reflects an improvement of Euros 68 million compared with the second half of 2011, although it is down 60.5%

compared with the first six months of that year.

2. Bahru Stainless

The start-up of Phase I has been highly satisfactory due to the sound quality of its production and the good performance of the equipment chosen. Production is on the increase and at 30 June totals 25,790 tonnes of cold rolled steel.

Bahru Stainless is already receiving regular deliveries of hot rolled coils from the rest of the Group at its own docks.

The construction of Phase II is continuing at a good pace. Equipment has already been received and the start-up of the installations is expected for the end of the first quarter of 2013.

3. Liquidity and syndicated loan in the US

Acerinox has increased its financing facilities to Euros 2,413 million. The Group's total debt amounts to Euros 1,214 million at 30 June.

(12)

In view of the international financial crisis the Group has opted to increase its long-term financing, which has risen by Euros 304 million (+43%) to a total of Euros 1,011 million at 30 June 2012.

The main transaction carried out during the period was the contracting of a syndicated loan in the US, which was signed in January with ten US banks for a total of USD 482 million. The loan was contracted by Acerinox S.A. and North American Stainless Inc. ("NAS"; a fully-owned North American subsidiary of Acerinox, S.A.), with 80%

comprising a loan for Acerinox S.A. and the remaining 20% a revolving credit facility for NAS. The final maturity date of the loan is in February 2017, although it is subject to repayment on a quarterly basis. The Group achieved three objectives through this transaction: to reduce its exposure to European bank risk; to lower its average finance costs and to extend the maturity periods of its debt.

4. Human resources

Acerinox, S.A.

At the general meeting held on 7 June the shareholders endorsed the decision adopted by the board of directors to freeze the remuneration of the directors, senior management and all other Company personnel.

Acerinox Europa

On 21 June the employees of the Campo de Gibraltar plant agreed a new, three-year collective labour agreement, which was signed on 5 July.

The aforementioned agreement represents a step forward in the understanding between employees and management and is a clear demonstration of their shared commitment to the future of the Company and the achievement of common goals. In this respect the linking of pay increases to productivity and profits has been of crucial importance, having added a greater flexibility to production, which is essential to adapting to an environment as volatile as the current market.

Roldán, S.A.

On Friday 22 June 2012 Roldan, S.A. submitted a further temporary workforce restructuring plan for the Ponferrada factory, which will allow it the necessary flexibility to adapt its production to demand. The plan will be applied on the basis of the orders received, and could affect up to 86% of the headcount for a maximum period of 15 days per month. The plan is for an eight-month period running from July 2012 to February 2013.

Sales network

During April the Group adjusted the headcount of the Spanish sales network to bring it into line with the current conditions of the local market. This measure has affected 73 employees.

(13)

NOTE 7 – INTANGIBLE ASSETS

Details of movement in intangible assets are as follows:

COST Emission rights Industrial

property

Computer software and other assets

SUBTOTAL Goodwill

Balance at 1 January 2011 7.002 24.312 22.631 53.945 69.124

Acquisitions 3.874 0 644 4.518

Transfers 0 0 138 138

Disposals -2.330 0 -30 -2.360

Translation differences 0 0 -704 -704

Balance at 31 December 2011 8.546 24.312 22.679 55.537 69.124

Acquisitions 1.742 0 116 1.858

Transfers 0 0 0 0

Disposals -2.380 0 -6 -2.386

Translation differences 0 0 47 47

Balance at 30 June 2012 7.908 24.312 22.836 55.056 69.124

ACCUMULATED AMORTISATION AND

IMPAIRMENT LOSSES Emission rights Industrial property

Balance at 1 January 2011 140 23.532 20.726 44.398 0

Amortisation charge 0 743 739 1.482

Impairment losses 3.117 0 0 3.117

Transfers 0 0 -25 -25

Disposals 0 0 -30 -30

Translation differences 0 0 -610 -610

Balance at 31 December 2011 3.257 24.275 20.800 48.332 0

Amortisation charge 0 31 341 372

Disposals 0 0 -6 -6

Translation differences 0 0 39 39

Balance at 30 June 2012 3.257 24.306 21.174 48.737 0

CARRYING AMOUNT Emission rights Industrial property

Cost at 1 January 2010 7.002 24.312 22.631 53.945 69.124

Accumulated amortisation and impairment losses -140 -23.532 -20.726 -44.398

Carrying amount at 1 January 2011 6.862 780 1.905 9.547 69.124

Cost at 31 December 2011 8.546 24.312 22.679 55.537 69.124

Accumulated amortisation and impairment losses -3.257 -24.275 -20.800 -48.332

Carrying amount at 31 December 2011 5.289 37 1.879 7.205 69.124

Cost at 30 June 2012 7.908 24.312 22.836 55.056 69.124

Accumulated amortisation and impairment losses -3.257 -24.306 -21.174 -48.737

Carrying amount at 30 June 2012 4.651 6 1.662 6.319 69.124

Impairment

The Company has not had to recognise any impairment in respect of intangible assets.

(14)

NOTE 8 – PROPERTY, PLANT AND EQUIPMENT

Details of movement in property, plant and equipment are as follows:

COST Land and buildings

Technical installations and

machinery

Other property, plant and equipment

Under

construction TOTAL

Balance at 1 January 2011 644.427 2.866.261 103.425 272.082 3.886.195

Additions 3.680 17.367 6.079 137.621 164.747

Transfers 18.732 49.306 20.144 -70.647 17.535

Disposals -323 -6.754 -3.164 0 -10.241

Translation differences 1.687 -35.369 -577 -2.578 -36.837

Balance at 31 December 2011 668.203 2.890.811 125.907 336.478 4.021.399

Additions 2.610 14.163 11.198 46.494 74.465

Transfers 236 4.909 617 -5.762 0

Disposals -1.376 -2.120 -6.948 0 -10.444

Translation differences 9.828 43.257 896 8.752 62.733

Balance at 30 June 2012 679.501 2.951.020 131.670 385.962 4.148.153

ACCUMULATED DEPRECIATION AND

IMPAIRMENT LOSSES Land and buildings

machinery

Under

Balance at 1 January 2011 228.877 1.595.221 82.793 0 1.906.891

Depreciation charge 14.305 124.575 6.423 0 145.303

Transfers -22 23 24 0 25

Disposals -237 -5.822 -2.274 0 -8.333

Translation differences 1.749 -9.768 -188 0 -8.207

Balance at 31 December 2011 244.672 1.704.229 86.778 0 2.035.679

Depreciation charge 6.995 62.844 4.238 0 74.077

Transfers -10 8 2 0 0

Disposals -145 -1.939 -1.533 0 -3.617

Translation differences 2.359 19.503 715 0 22.577

Balance at 30 June 2012 253.871 1.784.645 90.200 0 2.128.716

CARRYING AMOUNT Land and buildings

machinery

Under

Cost at 1 January 2011 644.427 2.866.261 103.425 272.082 3.886.195

Accumulated depreciation and impairment losses -228.877 -1.595.221 -82.793 0 -1.906.891

Carrying amount at 1 January 2011 415.550 1.271.040 20.632 272.082 1.979.304

Cost at 31 December 2011 668.203 2.890.811 125.907 336.478 4.021.399

Carrying amount at 31 December 2011 423.531 1.186.582 39.129 336.478 1.985.720

Cost at 30 June 2012 679.501 2.951.020 131.670 385.962 4.148.153

Carrying amount at 30 June 2012 425.630 1.166.375 41.470 385.962 2.019.437

Commitments

At 30 June 2012 the Group has signed contracts for the acquisition of new equipment and installations for Euros 166,743 thousand (Euros 157,226 thousand at 31 December 2011), of which Euros 134,567 thousand reflects investments contracted for the new plant in Malaysia. The company Bahru Stainless has invested an amount of Euros 41,015 thousand during the six-month period.

(15)

NOTE 9 - INVENTORIES

Details of this balance sheet caption are as follows:

At 30 June 2012

At 31 December

2011

Raw materials and other supplies 332.972 306.805

Work in progress 234.334 206.477

Finished goods 623.883 592.592

By-products, waste and recoverable products 19.887 13.013

Advances 267 541

TOTAL 1.211.343 1.119.428

The adjustment recognised at 30 June 2012 to restate inventories at their net realisable value amounts to Euros 14,761 thousand (Euros 15,549 thousand at 31 December 2011).

(16)

NOTE 10 – FINANCIAL INSTRUMENTS

At 30 June 2012 and 31 December 2011 the Group's financial assets, except for investments in associates, are as follows:

Type

Category 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011

Loans and receivables 12.869 12.380 651.915 510.355

Held-to-maturity investments Available-for-sale financial assets

- at fair value 11.683 12.373

- at cost 14 14

Financial assets at fair value through profit or loss

- Held for trading 16.952 17.039

- Other

Hedging derivatives 0 8.028 26

TOTAL 11.697 12.387 0 0 12.869 12.380 0 0 0 0 676.895 527.420

Non-current financial instruments Current financial instruments

Equity instruments Debt securities Loans, derivatives and

other Equity instruments Debt securities Loans, derivatives and other

At 30 June 2012 and 31 December 2011 the Group's financial liabilities are as follows:

Type

Category 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011

Debts and payables 1.011.177 707.197 2.354 2.250 315.143 344.030 792.897 843.660

Financial liabilities at fair value through profit or loss

- Held for trading 17.563 10.627

- Other

Hedging derivatives 32.493 17.861 409 758

Non-current financial instruments Current financial instruments

Loans and borrowings

Bonds and other marketable

securities

Payables, derivatives and other

Loans and borrowings

Bonds and other marketable

securities

Payables, derivatives and other

(17)

Derivative financial instruments

The Group has increased the volume of derivative hedging instruments contracted, both for interest rates and exchange rates, primarily due to the growth in commercial activity at its plant in Malaysia (Bahru Stainless), and the increase in long-term financing through the USD 482 million syndicated loan obtained. Due to the uncertainty in the financial markets the Group has insured the interest rate applicable to its non-current debt.

These financial instruments meet the terms to be considered as cash flow hedging instruments.

NOTE 11 - LOANS AND BORROWINGS

At 30 June 2012 the Acerinox Group has financing facilities with financial institutions amounting to Euros 2,412 million, up 12.60% compared with 31 December 2011 (Euros 2,142 million).

During the first six months of 2012 Acerinox, S.A. received a five-year syndicated loan in the United States amounting to USD 482 million, and a three-year loan of Euros 20 million from Caixabank. Additionally, the maturities of the Euros 30 million and Euros 45 million loans received from Banco Santander and Banesto, respectively, have both been extended until 2014. During the current period, Acerinox, S.A has repaid the Euros 30 million loan received from Banca March and the Euros 50 million loan received from Banco Sabadell ahead of schedule, contracting new loans for the same amounts which mature in 2015. The interest rate risk of most of these loans is covered by interest rate swaps.

The Acerinox Group has repaid its debts upon their maturity.

Debt covenants

In recent years the Acerinox Group has contracted six non-current loans that are subject to compliance with certain ratios:

1.- In February 2011 Acerinox S.A. contracted a Euros 76.1 million with Banco Santander, which falls due in 2020.

This loan is subject to compliance with certain consolidated financial ratios every six months: Net financial debt / EBITDA, Net financial debt / Equity and EBITDA / Net finance expenses. At 30 June 2012 the Company has achieved the stipulated ratios.

2.- Two loans contracted by Acerinox S.A. with the Spanish Official Credit Institute in 2007 and 2008 for original amounts of Euros 400 million and USD 160 million, respectively, subject to annual compliance, based on the audited consolidated annual accounts, with certain financial ratios: net financial debt / EBITDA and net financial debt / equity. During the six-month period ended 30 June 2012 the Group has repaid USD 8.2 million of the second loan. At 30 June 2012 the amortised cost of these two loans is Euros 319.6 million and Euros 74.5 million, respectively.

3. Columbus Stainless contracted a three-year loan of Rand 300 million form Standard Bank in February 2011.

This loan is subject to half-yearly compliance with two ratios: the first relating current assets to current liabilities and and the second relating net financial debt to equity. At 30 June Columbus Stainless has complied with these ratios.

4.- In 2009 Columbus Stainless contracted a five-year loan of Rand 397 million with IFC (World Bank Group), which is subject to compliance with a ratio of current assets to current liabilities. At 30 June the company has achieved this ratio.

5.- In January 2012 Acerinox, S.A. contracted a five-year syndicated loan of USD 482 million. This loan is subject to quarterly compliance with two ratios regarding the financial data of the Group company North American Stainless. The first ratio is adjusted debt to adjusted capitalisation and the second relates to the debt service coverage of the loan principal and interest. The company had achieved these ratios at both 30 March and 30 June.

(18)

NOTE 12 – DIVIDENDS PAID

At the general meeting held on 7 June 2012, the shareholders approved the following distribution of the Parent's profits:

(Expressed in Euros)

2011 Basis of distribution:

Profit for the year 92.633.313

Reserves 0

Share premium 24.930.455

Distribution:

Dividends to shareholders 112.187.046

Voluntary reserves 5.376.722

Dividend per share 0,45

At the board meeting held on 15 December 2011 the Company's directors agreed a first dividend of Euros 0.10 gross per share, subsequently agreeing a second dividend of Euros 0.10 gross per share at the meeting held on 28 February 2012. In addition to these two interim dividends, both of which were for 2011, the shareholders also approved the distribution of a supplementary dividend of Euros 0.15 gross per share, payable on 5 July 2012, with a charge to profit for 2011.

The shareholders also approved the reimbursement of contributions with a charge to the share premium account, at an amount of Euros 0.10 per share which will be paid on 5 October 2012.

NOTE 13 - CHANGES IN THE CONSOLIDATED GROUP

At 30 June 2012 the only change in the consolidated Group has been the incorporation of the subsidiary Corporación Acerinox Perú, S.A.C. through the conversion of the Group's former branch in Peru into a company. The statutory activity of this new subsidiary is the commercialisation of stainless steel products from any of the Group's five factories. The share capital of this company totals PEN 307 thousand.

There were no changes in the consolidated Group during the same period of the prior year.

NOTE 14 – INCOME TAX

The tax rate applicable to the income statement of the consolidated Group for the interim period from 1 January to 30 June is 38.8%, compared with 36% for the same period of the prior year.

All significant changes in taxation during the period relate to Spanish legislation, and could therefore affect the Spanish tax group. Among the measures adopted in Royal Decree-law 12/2012 of 30 March 2012, the Group could be affected by the following:

- Limitation of the deductibility of finance costs to 30% of operating profits. The Group considers that it might be able to deduct its finance expenses for the period established.

- Adjustment of the minimum amount of deferred payments. Although this measure will not affect the Group’s income tax expense it will affect the payments to be made to the taxation authorities.

(19)

The inspection commenced in the Group subsidiary Acerinox Deutschland Gmbh. in 2011 is still ongoing and no order or procedure has been issued that would require the recognition of any adjustment.

The Group subsidiary Acerinox France, S.A.S. was inspected during the period. The completion of this inspection did not result in any significant adjustments.

The inspection in Italy relating to taxes for 2007, 2008 and 2009 is pending completion as the final tax assessments have yet to be received. While it is probable that the inspection will give rise to an adjustment with regard to transfer pricing on transactions between Acerinox Italia and the Group's manufacturing companies, as most of these transactions are with the companies domiciled in Spain, Acerinox SA and Roldán, S.A., all adjustments relating to transfer prices are protected by Convention 90/436/EEC on the elimination of double taxation in connection with the adjustment of profits of associated enterprises. The aforementioned convention ensures the elimination of double taxation deriving from transfer pricing adjustments within the European Union.

On 31 May 2012 the Group contested the assessments issued upon the conclusion of the partial inspection of anti- dumping duties commenced in 2011, and of the inspection of import taxes, VAT on imports and anti-dumping duties for 2009, 2010 and 2011 commenced on 13 March 2012. These assessments include certain adjustments in respect of the anti-dumping duties inspected, against which the Company has lodged the corresponding appeals with the taxation authorities. The additional taxes raised in respect of these adjustments comprise anti-dumping and customs duties of Euros 1.2 million and VAT of Euros 676 thousand. Due to the errors and criteria included in the assessments, the Company considers that the declarations presented it its appeals will be taken into consideration in the final tax settlement proceedings.

NOTE 15 - LITIGATION

The Company has not been involved in any other significant litigation proceedings during the period.

NOTE 16 - CONTINGENT ASSETS AND LIABILITIES

The Group has no significant contingent assets or liabilities at 30 June 2012.

NOTE 17 – SEGMENT REPORTING

As described below, the Group is organised internally by operating segments, which are its strategic business units. The strategic business units have different products and services and are managed separately. Group management review internal reports for each unit at least monthly.

The operating segments presented by the Group, associated with the types of products it sells, are as follows:

 Flat stainless steel products: slabs, coils, plates, flats, circles and sheets.

 Long stainless steel products: bars, angles, wire and wire rod.

 Others: comprising other stainless steel products not included in the above segments.

Unallocated results reflect activities carried out by the holding company or activities that cannot be attributed to a specific operating segment. This segment was created in 2011 as a result of the spin-off of the industrial and commercial line of business of Acerinox, S.A. Until December 2011 these activities were included within the flat product stainless steel operating segment, but the Group has restated the figures at 30 June 2011 to make them comparable with those for the current period.

Segment results include all items directly or indirectly attributable to a segment.

(20)

Inter-segment sales prices are established in accordance with normal commercial terms and conditions governing non-related third parties.

17.1 Operating segments

Details of revenues by operating segment are as follows:

Revenue from external

customers

Revenue between segments

Total revenue

Revenue from external customers

Revenue between segments

Total revenue

Flat products 2.074.838 125.317 2.200.155 2.246.087 66.546 2.312.633

Long products 352.037 11.246 363.283 311.434 11.004 322.438

Other stainless steel products 10.348 10.348 39.564 39.564

(-) Adjustments and eliminations of

revenue between segments -136.563 -136.563 -77.550 -77.550

TOTAL 2.437.223 0 2.437.223 2.597.085 0 2.597.085

30-jun-12 30-jun-11

Details of consolidated results by operating segment are as follows:

At 30 June 2012

At 30 June 2011

Flat products 63.590 126.603

Long products 25.167 43.863

Other stainless steel products -182 1.741

Total results of segments reported 88.575 172.207

(+/-) Unallocated results -28.734 -15.572

(+/-) Elimination of internal results (between segments) (+/-) Other results

PROFIT BEFORE TAX 59.841 156.635

(21)

17.2 Geographical segments

Revenue from geographical segments is presented based on where customers are located.

Details of revenues by geographical area at 30 June 2012 and 2011 are as follows:

At 30 June 2012

At 30 June 2011

Spain 192.616 250.454

Rest of Europe 700.463 765.702

Americas 1.217.907 1.139.049

Africa 151.274 156.798

Asia 151.507 233.664

Other 5.378 14.808

TOTAL 2.419.146 2.560.475

NOTE 18 – AVERAGE HEADCOUNT

The average headcount of the Group for the first six months of 2012 was 7,307 (7,438 for the first six months of 2011). At 30 June 2012 the Group has 7,261 employees (7,445 at 30 June 2011).

NOTE 19 – RELATED PARTY TRANSACTIONS

 Identity of related parties

The consolidated financial statements include transactions with the following related parties:

- equity-accounted associates,

- key Group management personnel and members of the boards of directors of Group companies, as well as their related parties,

- significant shareholders of the Parent.

Transactions between the Company and its subsidiaries, which are related parties, are carried out within the normal course of business of the Company and have been eliminated on consolidation. Therefore, they are not disclosed in this note.

All transactions between related parties are carried out under market conditions.

Details of transactions with related parties are as follows:

 Transactions with Group companies and associates

The Group has not carried out any transactions with associates during this interim period or the same period of 2011.

(22)

 Transactions with significant shareholders

At 30 June 2012 the Group has contracted the following operations with Banca March, part of the March Group (shareholder of Corporación Financiera Alba), all of which are under market conditions:

- Long-term loan for Euros 30 million, fully drawn down and covered by an interest rate hedge.

- Credit facilities with a limit of Euros 20 million, of which Euros 8.81 million has been drawn down - Guarantees amounting to Euros 0.489 million.

- Exchange rate insurance with a limit of Euros 10 million, of which Euros 0 million has been drawn down.

- Collection management facilities of Euros 7 million, of which Euros 1.26 million has been drawn down.

- Confirming (reverse factoring) facilities of Euros 5 million, of which Euros 0.356 million has been drawn down

At 30 June 2011 operations with this entity were as follows:

- Long-term loan of Euros 30 million, fully drawn down.

- Credit facilities with a limit of Euros 2.21 million, of which Euros 0.009 million had been drawn down - Guarantees up to a limit of Euros 13 million, of which Euros 9.98 million had been drawn down

- Exchange rate insurance with a limit of Euros 15 million, of which Euros 0 million had been drawn down

- Collection management facilities of Euros 4 million, of which Euros 1.97 million had been drawn down.

- Confirming (reverse factoring) facilities of Euros 4 million, of which Euros 1.12 million had been drawn down

The amounts of the transactions carried out with Banca March are as follows:

At 30 June 2012

At 30 June 2011

Financial interests 612 645

Bank services 1 22

TOTAL 613 667

The Acerinox Group has also carried out the following transactions with its shareholders Metal One, Nisshin or other companies belonging to the same groups:

At 30 June 2012

At 30 June 2011

Management or collaboration agreements 128 36

Services received 1.171 457

Purchase of goods 6.186

Sale of goods 3.578 6.525

Acerinox, S.A has also received dividends of Euros 158 thousand from Nisshin Steel (Euros 179 thousand in the same period of 2011).

 Members of the board of directors and key management personnel

Remuneration received by the five members of senior management that do not hold positions on the board of directors of Acerinox, S.A. amounts to Euros 1,434 thousand at 30 June 2012 (Euros 1,720 thousand received by the five members at 30 June 2011). Of this amount, Euros 529 thousand reflects salaries (Euros 624 thousand in

(23)

At 30 June 2012, members of the board of directors of Acerinox, S.A., including those that hold key management positions and sit on the boards of other Group companies, had received Euros 1,174 thousand (Euros 1,432 for the same period of 2011) for fixed remuneration, allowances for attending board meetings and fixed and variable salaries, of which Euros 570 thousand related to salaries and fixed remuneration of board members (Euros 579 thousand in 2011), Euros 175 thousand to allowances (Euros 178 thousand in 2011) and Euros 429 thousand to other items (Euros 675 thousand in 2011).

Long-term commitments with members of senior management personnel have been accounted for correctly and are adequately covered through insurance contracts. At 30 June 2012 no loans or advances have been extended to members of the board or senior management.

All transactions carried out between members of the board of directors and the Company or Group companies during the first six months of 2012 have been ordinary transactions under market conditions.

NOTE 20 - EVENTS AFTER THE REPORTING DATE

New tax measures approved

Royal-Decree Law 20/2012 on measures to guarantee budgetary stability and encourage competitiveness was approved on 13 July 2012. This law includes, inter alia, the following amendments, which will primarily bear an impact on the cash of the Spanish companies of the Acerinox Group:

- Amendments to value added tax.

- Limits on the application of tax loss carryforwards.

- Amendment of the basis for the calculation of the amount of deferred payments, through the inclusion of 25% of the dividends and foreign income to which the exemption established in article 21 of the Revised Spanish Income Tax Law is applicable.

- Increase in the percentages of deferred payments and minimum payments.

(24)

Acerinox | Interim management report year 2012

(25)

First half-year results 2012



Profits after taxes and minorities total Euros 40.2 million. This result reflects an improvement of Euros 68 million compared with the second half of 2011, although it is down 60.5% compared with the first six months of that year.



EBITDA for the first six months, amounting to Euros 165.9 million, is down 35% compared with the first half of 2011, although it is double the amount obtained in the second half of 2011.



The current Acerinox financial structure guarantees the liquidity position of the Group for the coming years.



The strength of the North-American market and the good performance of North American Stainless has enabled us to post these results despite the weak European market and the tense prices on the Asian market.



Inventories on all markets are at very low levels which will help to reactivate demand once the economic and financial uncertainties have been clarified.



The start-up of Phase 1 at Bahru Stainless is proving to be highly satisfactory and the construction of Phase II continues at a good pace.

Results after taxes and minorities Million euros

10 71

16 25

68

34

1

-29 29

11

-50 0 50 100

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

2010 2011 2012

Million €

(26)

Stainless Steel Market

The stainless steel market continues to be affected by the international economic crisis and its performance reflects the intensity of the crisis in each geographical region.

The market recovered in the first quarter, but was hit again in the second quarter by macroeconomic factors which aggravated the effects of the weak performance of nickel. This rapid adjustment impeded surplus deliveries and the replenishment of inventories.

Stainless steel manufacturers are adjusting their production to market conditions without generating stock increases within the industry. Inventories in end customers and distributors have fallen to historic lows across the globe, leading the Company to anticipate a rapid recovery as soon as the current economic turmoil subsides and visibility and confidence improve.

Nickel on the London Metal Exchange underwent a price correction of 26% from the peak reached on 8 February. The current price levels are under the yield threshold of many of the new nickel projects.

Official nickel Price in the LME Years 2011 – June 2012

J F M A M J J A S O N D J F M A M J J A S O N D 0

5,000 10,000 15,000 20,000 25,000 30,000 35,000

Average price cash / three months (USD/Mt. Ni.)

(27)

Raw material prices in the LME Year 2012 (until 29 June)

1,500 1,750 2,000 2,250 2,500

15,000 17,500 20,000 22,500 25,000

6,000 7,000 8,000 9,000 10,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Nickel Copper Aluminium Zinc

The North American market continues to be the most robust, consolidating the levels of recovery achieved since the third quarter of 2011. This robustness allowed for a rise in prices in January and April, although the risk represented by imports and the weakness of other markets prevented new price increases, creating tensions in this respect.

The European market reflects the severity of the economic crisis and the lack of liquidity, visibility and confidence, which combined with the fierce competition between manufacturers has led to a general decline in prices.

The Asian market continues to perform well in terms of sales but prices, affected by the global economic situation and the presence of strong competitors, are very low. China continues to be the driver of growth, with an increase in production in the first six quarter of the year of approximately 10% (source ISSF).

Daily figures, three months (USD/Mt. Ni.)

(28)

Production

Acerinox's steel production for the period, amounting to 1,177,398 tonnes, is up 10.6% compared with the first six months of the prior year. The Group has utilised 89% of its total capacity to achieve these production levels.

Evolution of the Acerinox melting production Thousand Mt

536 559

493 472 572

492 452 505

612 565

0 100 200 300 400 500 600 700 800 900

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

2010 2011 2012

Thousand Mt

Cold rolling production (736,886 tons) was up by 12.6% compared wih the first half year of 2011.

Acerinox production Thousand Mt

2011

1Q 2Q 3Q 4Q Accumulated Jan - Jun

Melting shop 612.2 565.2 1,177.4 1,065.0

Hot rolling shop 539.0 490.5 1,029.5 938.3

Cold rolling shop 379.2 357.7 736.9 654.2

Long product (Hot rolling) Thousand Mt 60.2 62.6 122.8 103.2

2012

This increased use of the Group’s capacity was the case at all the plants, but was particularly notable at

North American Stainless, which was running close to full capacity.

(29)

Acerinox melting production Thousand Mt

1st Q. 12 2nd Q. 12 3rd Q. 12 4th Q. 12 2012 % over 2011

Acerinox Europa ^200.2 ^181.3 ^381.6 ^13.5%

NAS ^270.7 ^262.0 ^532.7 ^11.0%

Columbus ^141.2 ^121.9 ^263.1 ^5.8%

Acerinox Group ^Th ^612.2 ^565.2 ^1,177.4 ^10.6%

ousand Mt

Results

The Group's revenues, which amount to Euros 2,419 million, are down 5.5% on the same period of the prior year despite the higher volume of tonnes sold. Prices were down by 15% and had been greatly hit by the drop in the nickel price and the international economic situation.

The North American market in the first half year consolidated its position as the most important for Acerinox Group with over half of the sales.

The ongoing drop in nickel prices and the resulting downturn in alloy surcharges meant that inventory adjustments to net realizable value were carried out to the tune of Euros 14.8 million at 30 June.

EBITDA for the first six months, amounting to Euros 165.9 million, is down 35% compared with the first half of 2011, although it is double the amount obtained in the second half of 2011.

Condensed profit & loss account Million euros

Million € 1º Q. 11 2º Q. 11 2012 2011 Variation

Net sales 1,230.42 1,188.72 2,419.15 2,560.48 -5.5%

Gross margin 341.86 320.85 662.71 718.65 -7.8%

% over sales 27.8% 27.0% 27.4% 28.1%

Gross operating

result / EBITDA 96.62 69.29 165.90 257.39 -35.5%

% over sales 7.9% 5.8% 6.9% 10.1%

EBIT 60.00 30.61 90.61 183.91 -50.7%

% over sales 4.9% 2.6% 3.7% 7.2%

Result before taxes

45.80 14.05 59.84 156.64 -61.8%

Result after taxes and minorities

29.36 10.80 40.16 101.79 -60.5%

Depreciation 36.89 37.56 74.45 73.28 1.6%

Net cash flow 66.25 48.36 114.61 175.08 -34.5%

January- June