- Consolidated Annual Accounts 39

AF CUBIERTAS ACERINOX ingles.ind1 1 26/5/07 13:55:25

The ACERINOX Group in fi gures ... 4 Letter from the Chairman ... 6

1.- Directors’ Report of the Consolidated Group 10

1. Productions 12

2. Capacities 13

3. Raw Materials 14

4. Markets 17

5. Sales 19

6. Human Resources 21

7. Financial Report 22

8. Stock Exchange Market Report 24

9. Investments 28

10. Economic Report 29

11. Board of Directors 33

12. Important events after the year-end closing and their foreseeable development 33

2.- Financial Statements of the Consolidated Group ... 34

- Auditors´ Report 36

- Consolidated Annual Accounts 39

3.- ACERINOX, S.A. and other Group Companies Directors’ Report ... 96

1. ACERINOX, S.A. 98

1.1 Factory 98

1.2 Environment 100

1.3 Research and Development (R+D) 101

1.4 Sales 102

1.5 Investments 102

1.6 Economic Report 103

1.7 Proposal for application of results 103 2. NORTH AMERICAN STAINLESS (NAS) 104 3. COLUMBUS STAINLESS PTY. LTD. 108

4. ROLDAN, S.A. 110

5. Domestic Trading Companies 112 6. Foreing Trading Companies 113 4.- Board of Directors, Committees and Senior

Management ... 114

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per share the Issue Premium Refund of the last quarter. Consequently, the yearly total payment to shareholders will amount to 0.45 euros per share, increasing by 32.4% with regard to the payment of the two previous years, or, if compared with the last five years, it would be 57.9% increase.

Our excellent positioning in Spain, United States and South Africa, together with the experience and commitment of our personnel, make us feel very optimistic regarding the future.

With the Year 2006 I leave the company in a position in which you are likely to receive many satisfactions. To end, I would like to thank you sincerely for the support and trust you have always given me and I can tell you that without them I would have never been able to carry out my job during these thirty seven years.

Victoriano Muñoz Cava Chairman and C.E.O

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With NAS 2nd electric furnace, which came into service in the last quarter 2006, yearly capacity of ACERINOX GROUP amounts to 3,089,000 Mt for the melting shop, 2,888,000 Mt for fl at products hot rolling, 1,746,000 Mt for cold rolling and 312,000 Mt for long products.

An investment program totalling 437 million euros has been approved for years 2007-2008, which will result in the following production capacities :

• 3.5 million Mt/year in the melting shop • 3.1 million Mt/year of fl at products, out

of which cold rolling will account for 2.1 million Mt.

• 400,000 Mt/year of long products.

More than a half of the investment program amount will be allocated in the US factory, where the following equipments have already been contracted: a second AOD converter of 150 Mt and ladle furnace, the fi fth ZM cold rolling mill for 1,500 mm width coils and an annealing and pickling line with 1,126,000 Mt capacity, which will be the biggest worldwide. Consequently, the cold rolling mill capacity will total 846,000 Mt. Furthermore, new fi nishing equipment for long products are being contracted. After these investments, NAS will strengthen its leadership as the most integrated stainless steel mill worldwide.

Our South African Subsidiary, COLUMBUS, has just contracted a fourth ZM cold rolling mill, which will increase its production by 100,000 Mt to 545,000 Mt /year. This will be another important step so as to balance the production capacities of this competitive plant, which yearly melting capacity already amounts to 1 million Mt.

In April 2007 the Campo de Gibraltar factory will carry out important improvements in the hot coil annealing and pickling line, which will allow to increase production capacity by 10% and will involve a substantial reduction of acid consumption.

It will also start on a total modernization and enlargement of No. 3 annealing and pickling line, which will increase its capacity by 20%. After these investments, the factory will be even more balanced and its annual capacity will amount to 1,089,000 Mt and will be much more competitive.

Other important investments will be undertaken so as to save energy and to reduce CO

emissions through the installation of oxygas burners for the melting shop and the most modern regenerative burners in the annealing lines, a boiler which will use the hot rolling mill exhaust fumes, etc. Water consumption and the subsequent hydric effl uents will be reduced and an underwater discharge outlet will be built. In addition, several investments will be devoted to health and safety at work, apart from the constant annual technological updating.

In the year of its 50th Anniversary, ROLDAN, S.A.

is carrying out a whole transformation of its hot rolling mills, which will allow to process billets of 2,400 kg. These improvements will result in outstanding productivity increases and signifi cant energy savings and cost reductions. A new pickling line will also be constructed and the yearly production capacity of this factory will increase to 200,000 Mt.

2. Capacities

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Offi cial Nickel price and inventory level in the L.M.E. Year 2006

10,000 12,000 14,000 16,000 18,000 20,000 22,000 24,000 26,000 28,000 30,000 32,000 34,000 36,000

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Inventories in the L.M.E.

Daily values (USD/Mt. Ni.) Thousand Mt.

The main reasons for this exceptional high level of prices are the following:

• High investments in metals by the hedge funds, because of the great liquidity existing worldwide.

• Consolidation within the nickel sector.

• 16.7% increase in the world stainless steel production, which according to ISSF, is far higher than the average increase of 6%

over the last 56 years.

• The Chinese stainless steel melting shops had very large capacity increases, with the subsequent creation of new safety stocks.

• Production increases of alloys with a high nickel content.

3.2 Ferrochrome

As usual, ferrochrome prices have followed the stainless steels evolution during 2006.

During the fi rst quarter, the downward trend of the 4

quarter 2005 continued, and it reached levels of around 64 ¢ USD/Lb. From the second quarter, quarterly increases were taking place and the year fi nished with a level of 78 ¢ USD/Lb, which is 14.7%

higher than the price at the end of 2005 (68 ¢ USD/

Lb in the fourth quarter 2005).

Ferrochrome Quarterly average prices (Metal Bulletin)

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US¢ / Lb. Cr.

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4. Markets

At the end of 2005, the stainless steel market had the weakest situation of all times due to the world production reduction of 1%, and very poor growth fi gures in all the developed markets. During 2006 there has been a strong recovery favoured by the following factors:

• Excellent growth of the world economy.

• Stocks levels unusually low at the beginning of the year in all the markets.

4.1 Europe

According to EUROFER, cold rolled products apparent consumption has increased by 17.6%compared to the 8.6% fall of in the year before. Hot rolled products apparent consumption also showed 29% increase, which has led to a recovery of base prices for austenitic grades by around 61% during the year, according to METAL

BULLETIN, despite the imports from Far East, which were particularly strong in the last quarter.

Wire rod apparent consumption grew by 18.2%

and cold bar apparent consumption showed 11.8%

increase. A fact creating great concern is the strong increase of imports from third countries, 28.5% for wire rod and 27.8% for cold bar, mainly coming from India.

4.2 Spain

Unlike the previous years, this year the Spanish market grew less than the European average, 9%

for cold fl at products (against 3.7% decrease in

the year before) and 14% for hot rolled products

(with 2% fall in the previous year). Spanish

market strengthens its position as the third largest

European market, after Germany and Italy.

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®

Net Sales of the Group, 5,637 million euros, is 34%

higher than 2005 all-time high. The invoiced fi gure has been increasing for the last fi ve years not only

because of prices but also due to the production increases and the higher added value of the products manufactured by the Group.

5. Sales

Evolution of net sales of ACERINOX GROUP

ACERINOX. S.A.

Trading companies

NAS

Consolidated Group

COLUMBUS

ROLDAN + INOXFIL

5,637

2,866 2,279 1,991 1,457

500 479 0 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000

97 98 99 00 01 02 03 04 05 06

Million €

Geographical distribution of ACERINOX GROUP net sales

EUROPE 45.1%

AMERICAS 39.1%

ASIA 11.2%

AFRICA 4.5%

OCEANIA 0.1%

EUROPE 42%

AMERICAS 38.5%

ASIA 14.3%

AFRICA 4%

OCEANIA 1.2%

YEAR 2006 YEAR 2005

20

Sales distribution by geographical areas show increases in percentage terms in Europe, America and Africa thanks to our local production presence and the price levels improvement at the expense of a reduction in Asia. Once more, the benefi ts of our production geographical diversifi cation becomes apparent and the versatility of our commercial network is an advantage in the markets showing a better behaviour at a given time.

In 2006 two service centres have been opened in North America: Guelph (Canada) and Atlanta (Georgia) and two warehouses in China: Shangai and Foshan and a third one in Houston (Texas).

This commercial network will continue expanding in 2007 with the coming into service of new warehouses in Warsaw, Oporto and Seville.

Commercial network of ACERINOX GROUP

Flat Products Facility (3) Long Products Facility (3) Service Centre (18)

Warehouse (31)

Warehouse under construction (1) Commercial Office (27)

As on 31st December 2006 ACERINOX Group staff totalled 7,204 workers, which means 509 more than at the end of 2005.

The staff distribution by companies and subsidiaries is the following:

6. Human Resources

The higher increase has been registered in ACERINOX, S.A., with 291 new workers, out of which, 280 have joined the staff of Campo de Gibraltar factory coming from the subcontracted companies which had been rendering auxiliary services to ACERINOX, S.A.. It also includes 134 workers under replacement contracts for early retirement.

In NORTH AMERICAN STAINLESS, 111 new workers have joined the staff, as a result of the starting of a new 4 ZM cold rolling mill, No. 2 Electric Furnace and production increases in other plant sections.

COLUMBUS STAINLESS has contracted 66 new trainees so as to meet the production increases.

Our commercial network expansion has involved the joining of 22 new workers in Spain and 18 in the foreign commercial subsidiaries.

2006 2005 Variation

ACERINOX, S.A. 2,678 2,387 12.2%

NAS 1,227 1,116 9.9%

COLUMBUS 1,762 1,696 3.9%

ROLDAN + INOXFIL 676 675 0.1%

Domestic trading companies 456 434 5.1%

Foreign trading companies 405 387 4.6%

TOTAL GROUP 7,204 6,695 7.6%

22

7.1 Returns paid to Shareholders

During 2006 ACERINOX has disbursed to its shareholders the following amounts on account on Year 2005 and the refund of the Issue Premium:

7. Financial Report

DATE ITEM EUROS / SHARE TOTAL AMOUNT

EUROS 4-01-06 1st Interim Dividend

Year 2005 0.07 18,165,000

4-04-06 2nd Interim Dividend

Year 2005 0.07 18,165,000

4-07-06 Complementary Dividend

Year 2005 0.12 31,140,000

5-10-06 Refund of Issue Premium 0.08 20,760,000

Total Year 2006 0.34 88,230,000

7.2 Payments to shareholders on account of Year 2006 (Paid in 2007)

ACERINOX, S,A, has disbursed the following amounts:

• 1

Interim dividend of year 2006, for 0.10 euros per share on the 4

January 2007.

• 2

Interim dividend of Year 2006, for 0.10 euros per share on the 4

April 2007.

Should the General Shareholders Meeting approve a complementary dividend of 0.15 euros per share and an Issue Premium of 0.10 euros per share to be paid in the last quarter, the return to shareholders on account of Year 2007 will be 0.45 euros per share, which is 32.4% higher with regard to years 2004 and 2005 or 57.9% higher if compared to years 2002 and 2003.

In 2006 ACERINOX, S.A. has paid a total amount per share of 0.34 euros, which means a yearly profi tability of 2.77% for those who purchased the

shares at a price of 12.29 euros per share, which

was December 2005 closing quotation.

Return to Shareholders

Dividend

Issue Premium refund

0.00 0.10 0.20 0.30 0.40 0.45

0.35

0.25

0.15

0.05 0.50

0.285

+57.9%

0.075

0.21

02 03 04 05 06

0.29 0.08

0.21 0.34 0.08

0.26 0.34

0.26 0.08

0.10

0.35 0.45

€ /Share

Last 30th October 2006 was the 20th anniversary since ACERINOX shares started to be quoted in Madrid Stock Exchange. During all these years we have been paying our shareholders regularly and steadily following the policy of consolidating the payment increases agreed in years with improved results. The whole of the amounts paid by ACERINOX since 1986 including dividends, refunds of issue premium and working capital reductions, make a total of 811,069,604.80 euros, which mean having paid out among our shareholders 12.50 times the amount of the current Share Capital of the Company.

The pay-out of Year 2006, including the Issue

Premium and dividend, will be placed at 83.2% for

ACERINOX,S.A. and at 23.2% for the Consolidated

Group.

24

Comparison of the main world indexes with ACERINOX Quotation

-20%

0%

20%

40%

60%

80%

100%

Jan Feb Mar Apr May Jan Jul Aug Sep Oct Nov Dec +87.6%

+31.8%

+16.3%

+15.1%

+13.2%

+6.6%

ACERINOX

IBEX-35

DOW JONES INDUSTRIALS EURO STOXX 50

FTSE 100 NIKKEI 300

YEAR 2006

During 2006 IBEX-35 has performed far better than the main global stock exchange indexes. IBEX- 35 has appreciated by 31.8% this year, clearly beating the Euro-Stoxx 50 appreciation, 15.1%, the

American index, Dow Jones Industrial, 16.3%, the British FTSE-100, 13.2% and the Japanese Nikkei- 300, 6.6%.

8. Stock Exchange Market Report

Among IBEX-35 stocks with good performance, ACERINOX, S.A. shares stand out. They have appreciated by 87.6% and it is the third best

performing stock of IBEX-35, only behind two real

estate stocks.

ACERINOX, S.A. share had a similar behaviour as that of IBEX-35 one until the 20th July, when the half-yearly results were published. From that date on, ACERINOX, S.A., share has beaten the Index of reference and reaching 51.3% appreciation on 7th

November, when, in view of the excellent results attained in the third quarter, the share increased achieving 87.6% appreciation at the end of the year.

Evolution of the stock exchange market year 2006

Daily percentage data

The Spanish Stock Exchange behaviour must be highlighted and particularly ACERINOX,S.A.

evolution, which is not taken place sporadically in 2006, but on the contrary, it has been usual during the last years. In the last years Ibex-35 has shown

68% appreciation, far higher than the remaining selective stocks but far lower than ACERINOX appreciation during this period, 145%.

Comparison of the main world indexes with ACERINOX Quotation

-30%

-10%

10%

30%

50%

70%

90%

110%

130%

150% +145.5%

+68.5%

+63.6%

+24.4%

+8.4%

+8.2%

ACERINOX

IBEX-35

DOW JONES INDUSTRIALS

EURO STOXX 50 FTSE 100 NIKKEI 300

YEARS 2002-2006

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

+31.8%

+87.6% ACERINOX

IBEX 35

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 30-12-05 29-12-06

ACERINOX 12.29 23.05 IBEX 35 10,734 14,147

8.1 Profi tability

The yearly profi tability achieved by ACERINOX shareholder, considering the stock exchange evolution and the returns to the shareholder, amounts to 90.32% in Year 2006. The long term

steadiness of ACERINOX profi tability is shown in the following table. In the past fi ve year period, ACERINOX profi tability has increased 161.8% ; in the ten year period, it has increased 354.3%.

26

Compound annual growth in % Profi tability at December, 31^th

Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Investment amde at December 31st

1996 22.97 -5.79 85.20 57.71 84.89 78.33 93.99 142.86 157.41 354.32

1997 -23.92 51.73 28.87 51.47 46.02 59.02 99.65 111.74 275.41

1998 103.32 72.10 102.98 97.52 113.29 168.78 185.30 408.86

1999 -15.66 -0.17 -3.91 5.00 32.83 41.11 153.23

2000 18.87 14.31 25.17 59.08 69.17 205.78

2001 -3.94 5.46 34.81 43.54 161.78

2002 10.09 41.58 50.96 177.85

2003 29.48 38.26 157.04

2004 6.94 100.93

2005 90.32

8.2 Market Capitalization

ACERINOX Stock exchange capitalization totalled the record fi gure of 5,981,475,000 euros at the end of 2006.

Market capitalization of ACERINOX, S.A. December, 31^st

0 1,000 2,000 3,000 4,000 5,000 6,000

2,302

2002 2003 2004 2005 2006

2,459

3,108 3,189

5,981

Million €

P/E value of ACERINOX share at 31st December was 11.89.

8.3 Share contracting

In 2006 ACERINOX shares were traded in the Continuous Market during the 254 sessions it was operative. A total amount of 576,988,966 shares were traded, equalling to 2.2 times the number of shares of the Share Capital. The total traded

capital amounted to 8,689,947,216.35 euros, with 32.7% rise if compared with the year before.

The daily average trading rate during year 2006 was 2,271,610 shares with a value of 34,212,390 euros.

8.4 Capital

At the closing of Year 2006, ACERINOX share capital amounts to 64,875,000 euros, which is represented by 259,500.000 ordinary shares of 0.25 euros face value each one.

On the 31st December 2006, a total amount of 138,560,014 shares, equivalent to 53.395% of the Share Capital, are directly represented in the Board of Directors.

According to the Securities Exchange Commission requirements, the shareholders with a stake equal or higher than 5% as on 31

December were CORPORACIÓN FINANCIERA ALBA, S.A., FEYNMAN CAPITAL, S.L (OMEGA CAPITAL GROUP), CASAGRANDE DE CARTAGENA, S.L, and NISSHIN STEEL CO, LTD.

Share contracting in year 2006

0 10 20 30 40 50 60 70 80

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

Million of shares

28

ACERINOX Group has carried out investments in fi xed assets for 177 million euros during 2006.

56.2% of this amount, 99.3 million euros, have been invested in the enlargement of Kentucky factory.

Likewise, 37.5 million euros have been invested in the improvements carried out in the Campo

de Gibraltar factory, mainly aimed to increase productivity, technological up-dating of facilities and environment and safety improvements. They exceed the depreciation of 28.6 million euros.

9. Investments

INVESTMENTS IN FIXED ASSETS

ACERINOX, S.A. 37,530 45,787

NAS 99,365 125,078

COLUMBUS STAINLESS 18,501 28,195

ROLDAN and INOXFIL 8,505 7,022

Domestic trading companies 2,923 4,349

Foreign trading companies 9,875 12,080

TOTAL 176,699 222,511

The outstanding results of year 2006 are not only three times the results achieved the year before, but also have exceeded the previous best ever

results of the Group, which were obtained in year 2004. Net profi t of this year, 503 million euros, is 66% higher than our previous record fi gure.

10. Economic Report

Evolution of the result after taxes and minorities ACERINOX GROUP

2002 2003 2004

2005

0 100 50 200 300 400 500

350

250

150 450 550

175.5

125.6

302.9

154.5

503.0

Spanish GAAP IAS

Million €

We have to stress the outstanding evolution along the year. In the fi rst quarter, the market started to recover from the dramatic weakness of year 2005.

In the second quarter, a stocking process began, and a net result of 78.4 million euros is obtained, which parameters begin to get closer to year 2004 and the fi rst half-year 2005. In the second half of year 2006, the dramatic increases in nickel price,

the economy in Germany and in the Euro Zone as

a whole, enhanced the stainless steel demand and

resulted in record net results of 170 million euros

and the third quarter and 232 million euros in the

fourth quarter. The second half alone is higher

than any other result ever achieved in the whole

year so far.

The right geographical diversifi cation of the Group factories and the investments carried out in the last years, allow ACERINOX not only to get profi ts

when the market is deeply depressed, as it occurred in 2005, but also to take full advantage of the best market conditions as has happened during 2006.

30

Quarterly evolution of the result after taxes and minorities ACERINOX GROUP

2001 20.1 21.725.4

19.2

44.848.159.0 23.5

38.639.3 26.5

21.2 55.7

81.9 85.4

79.9 76.881.6

37.9

-41.8 23.2

78.4 169.9

231.6

2002 2003 2004 2005 2006

-50 0 -25 50 25 100 75 150 125 200 175 250 225

Million €

(Thousand euros) YEAR 2006 YEAR 2005 VARIATION

Net Sales 5,637,227 4,213,559 33.8%

EBITDA 957,776 415,418 130.6%

EBIT 858,412 257,928 232.8%

Profi t before taxes and minorities 800,482 228,214 250.8%

Depreciation 131,776 111,774 17.9%

Gross Cash-fl ow 932,258 339,989 174.2%

Profi t after taxes 502,991 154,468 225.6%

Net Cash-fl ow 634,767 266,242 138.4%

The Group net sales in year 2006 have amounted to 5,637 million euros, which is 34% higher than the previous all-time record achieved in the year before.

Gross results, 800.5 million euros, are 3.5 times higher than 2005 fi gure and 63% higher than the gross results achieved in 2004.

The already mentioned Profi t after Taxes and

Minorities, 503 million euros, is a landmark in our

history so far

Contribution to the Result After Taxes and Minorities Consolidated Group

Acerinox. S.A.

26.8%

Spanish Trading Companies

5.4%

NAS Inc.

38.4%

Overseas Trading Companies

9.1%

Columbus Stainless Pty. Ltd.

16.9%

Roldán. S.A. and Inoxfil. S.A.

3.4%

YEAR 2006

The contribution to the consolidated net results is led by NORTH AMERICAN STAINLESS with 38.4%, lower than in the two previous years due to the increased contribution in percentage terms

from COLUMBUS and the commercial companies.

Immediately behind comes ACERINOX, S.A with 26.8% and COLUMBUS STAINLESS with 16.9%.

The main fi nancial indications obtained in the year and their comparison with the year before are the following:

YEAR 2006 YEAR 2005

Cash-fl ow per Share 2.45 1.03

Earning per Share 1.94 0.60

Gross Margin 33.0% 29.3%

EBITDA 17.0% 9.9%

EBIT 15.2% 6.1%

ROE 22.1% 7.5%

ROCE 24.3% 9.0%

GEARING 55.0% 40.4%

Net Debt / EBITDA 1.31 1.99

Book Value at 31 December 8.79 7.91

The return on equity of 22.1% and return on capital employed of 24.3% become again a reference in the metals industry, which, on the other hand, are much more usual in the technological fi eld.

The gearing ratio has increased by 36.2% as a result of the production and sales increases, but

particularly due to the exceptional increases in

raw material prices, which require higher fi nancing

needs of the working capital. Nevertheless, the net

debt is 1.3 times the E.B.I.T.D.A generated in the

year, which is very favourable for a company in our

sector.

The E.B.I.T.D.A, 958 million euros, is 50% higher than the previous record level, achieved in 2004.

This record fi gure, in absolute terms, means 17%

margin over sales. This margin is lower than the margin of the six previous years in our history, being 1995,1997 and 2000 the more recent. The margin

narrowing which has been taking place in the stainless steel sector has been offset by ACERINOX and we will continue doing it through investments aimed to increase and balance production capacities and to improve competitiveness.

32

Evolution of the consolidated group (E.B.I.T.D.A.) Consolidated Group

Average 1995-2006: 384.9 (16.8%) 0

200 400 300

100 600 800 1000

700

500 900

1995 373.7

(32.5)

(14.6) (17.7)

(12.9) (16.7)

(26.2)

(11.5) (16.3)

(10.7) (15.8)

(9.9) (17.0)

158.3 232.7

164.2 238.8

511.6

209.4 407.7

310.6 638.7

415.4 957.8

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

(NIIF) 2006 (NIIF)

Million € (% over sales)

The book value per share as on 31

December, 8.79 euros, has increased by 11.2%.

Due to the expiry of the statutory period for which they were appointed, the Board Directors Mr. Leslie Boyd, Mr. David Herrero, Mr. Rafael Naranjo and Mr. Santos Martínez Conde had to submit their resignation. After a report issued by the Appointments and Remunerations Committee, the Board of Directors proposed the re-election of the three latter and the appointment of Mr.

Mvuleni Geoffrey Qhena, Chief Executive Offi cer of Industrial Development Corporation (IDC) of South Africa to fi ll the vacancy left by Mr. Leslie Boyd.

Likewise, the General Shareholders Meeting ratifi ed the appointment by cooption, carried out in the Board of Directors Meeting held on the 9th June 2005 after the General Meeting, of Mr. Saburo Takada, after Mr. Susumu Komori had submitted his resignation.

Other matters regarding the Board of Directors are further explained in the Report of Corporate Governance.

The LME nickel quotations have continued increasing and have gone beyond 52,000 USD/

Mt. This fact will undoubtedly be very harmful for the austenitic stainless steels in the medium term. Nevertheless, in some applications with no demands regarding corrosion resistance, they are being replaced by ferritic types, with no nickel content.

The process of stocking has fi nished in year 2006 and the current levels are normal and clearly lower than the levels at the end of 2004 and in the fi rst half of 2005.

ACERINOX Group has undertaken an investment plan of 437 million euros, which will allow the Group to achieve a production capacity of 3.5 million tons at the end of 2008.

11. Board of Directors

12. Important events after the

year-end closing and their

foreseeable development.

i]Z8dchda^YViZY<gdje

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CONSOLIDATED ANNUAL ACCOUNTS

1. CONSOLIDATED BALANCE SHEET

(In thousands of Euros at 31 December 2006 and 2005)

(Free translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails)

40

ASSETS NOTE 2006 2005

Non-current assets

Goodwill 7 69,124 69,124

Other intangible assets 7 16,706 15,356

Property, plant and equipment 8 1,457,817 1,586,957 Investments accounted for using the equity method 9 3,261 2,149 Available-for-sale fi nancial assets 10 4,628 4,631

Deferred tax assets 24 46,169 25,156

Other non-current fi nancial assets 1,387 1,152

TOTAL NON-CURRENT ASSETS 1,599,092 1,704,525

Current assets

Inventories 11 2,138,525 1,292,098

Trade and other receivables 12 1,041,753 528,853

Other current fi nancial assets 10 35,759 30,856

Income tax receivable 600 9,366

Cash and cash equivalents 13 43,677 81,287

TOTAL CURRENT ASSETS 3,260,314 1,942,460

TOTAL ASSETS 4,859,406 3,646,985

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2. CONSOLIDATED INCOME STATEMENT

(Expressed in thousands of Euros)

(Free translation from the original in Spanish. In the event of discrepancy, the Spanish-language version prevails)

42

NOTE 2006 2005

NET SALES 20 5,637,227 4,213,559

Other operating income 20 29,828 11,633

Self constructed assets 20 4,908 4,551

Change in inventories of fi nished goods and work in progress 676,511 45,708

Supplies -4,452,347 -3,085,908

Personnel expenses 21 -326,000 -289,699

Amortisation and depreciation 7.8 -131,776 -111,774

Other operating income 22 -579,940 -530,143

OPERATING PROFIT 858,411 257,927

Financial income 23 6,870 4,500

Financial expense 23 -76,908 -51,464

Exchange gains 23 8,788 7,637

Measurement of fi nancial instruments at fair value 23 2,017 9,310

Share in profi ts of associates 23 1,304 305

PROFIT BEFORE INCOME TAX 800,482 228,215

Income tax 24 -269,000 -72,569

Other taxes -24 -2,751

PROFIT FOR THE YEAR 531,458 152,895

Attributable to:

MINORITY INTERESTS 28,467 -1,573

NET PROFIT ATTRIBUTABLE TO THE GROUP 502,991 154,468

Basic earnings per share (in Euros) 1.94 0.59

Diluted earnings per share (in Euros) 1.94 0.59

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