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ANNUAL REPORT2004

KEY FIGURES 2001 - 2004OF THE ANDRITZ GROUPFINANCIAL FIGURESin MEUR 2004 2003 2002 2001Order Intake 1,837 1,394 1,300 1,121Order Backlog as of 31.12. 1,439 1,054 904 740Sales 1,481 1,225 1,110 1,319EBITDA 1)115 84 81 95EBITA 2)93 63 59 68Operating Result (EBIT) 76 49 45 55Earnings before Taxes (EBT) 77 49 46 60Net Income after Minorities 53 29 26 34Cash flow from Operating Activities 208 5 76 72Capital Expenditure 3)29 21 23 24Employees as of 31.12. (excluding apprentices) 5,314 4,771 4,601 4,545Fixed assets 276 279 293 317Current assets 877 688 617 625Shareholders’ Equity 4)270 232 223 230Provisions 160 150 145 159Liabilities 717 577 536 544Balance sheet total 1,153 967 910 942EBITDA margin (%) 7.8 6.9 7.3 7.2EBITA margin (%) 6.3 5.1 5.3 5.2EBIT margin (%) 5.1 4.0 4.1 4.2Net profit after Minorities/Sales (%) 3.6 2.4 2.4 2.6ROE (%) 5)19.6 12.5 11.6 14.8Equity Ratio (%) 23.4 24.0 24.5 24.4EV 6) /EBITDA 4.4 5.2 2.4 2.1Depreciation/Sales (%) 1.5 1.7 2.0 2.0Amortization/Sales (%) 1.1 1.2 1.2 1.0STOCK EXCHANGE RELATED FIGURES 2004 2003 2002 2001Earnings per share (EUR) 4.13 2.26 2.04 2.82Dividend per share (EUR) 1.4 7) 1.0 0.9 0.9Payout ratio (%) 34.3 44.2 44.1 31.9Equity per share (EUR) 20.7 18.0 17.2 19.3Market Capitalization as of end of period (MEUR) 729.3 493.4 298.9 276.9Share price at year-end (EUR) 56.10 37.95 22.99 21.30Highest closing price (EUR) 56.50 37.95 28.00 23.50Lowest closing price (EUR) 35.00 21.00 19.40 20.52Notes:1) EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization of goodwill2) EBITA: Earnings Before Interest, Taxes, and Amortization of goodwill3) Additions to tangible and intangible assets4) Equity excl. minority interests5) ROE (Return On Equity): Net profit after minorities/shareholders’ equity6) Enterprise Value: market capitalization based on year-end closing price minus net liquidity7) Proposal to the Annual General MeetingFINANCIAL CALENDAR 200503.03.2005 Results for 200430.03.2005 Annual General Meeting04.04.2005 Ex-Dividend08.04.2005 Dividend payment09.05.2005 First Quarter of 200505.08.2005 First Half of 200508.11.2005 First three Quarters of 2005ANDRITZ 2004

ANDRITZ – GLOBAL PRESENCEEdmontonSaskatoonBellinghamLachineGlens FallsTualatin Janesville BrantfordWalpoleLenexaMuncy CanonsburgSpringfield ExtonScott DepotArlingtonAlpharettaPell City DecaturRoswellHoustonLakelandValenciaAMERICASSantiagoConcepciónPuerto MonttEunápolisSerraSão PauloCuritibaPomerodePorto Alegre/RSANDRITZ 2004

EUROPEBelperNewcastleunder-LymeHullRotterdamGeldropDorstenGennevilliers CologneVélizySt. Martin Le BeauScorbé-ClairvauxChâteaurouxBarcelonaMadridÖrnsköldsvikTampereHedemoraKarlstadHelsinkiStockholmVarkausSavonlinnaKotkaSt. PetersburgHollolaVäxjöEsbjergDen HelderMettmann WarsawHradec KrálovéSelbRegensburgGraz Vienna Spišská Nová VesRavensburgHemerKirchheim/TeckWohlenBrettenNew DelhiMoscowFoshanBeijingTianjinTokyoShanghaiTaipeiASIABangaloreChenneiBangkokSingapore>JakartaEdenvaleDurbanAFRICAAUSTRALIADandenong

VISIONAndritz – world marketleader for high-techproduction systems andservices for pulp andpaper, steel, and otherspecialized industries.1Andritz supplied UPM-Kymmene, Finland with one of the world’slargest single-line chemical recovery plants. Photo: Lime kilnANDRITZ 2004

COMPANY PROFILECOMPANY2PROFILEThe Andritz Group is a global market leader inthe supply of customized plants, systems, andservices for the pulp and paper industry, thesteel industry, and other specialized industries(solid/liquid separation, animal feed technology).Headquartered in Graz, Austria the Group hasabout 5,300 employees. It manufactures and sellsits products and services globally. Andritz has15 production sites and maintains more than 100offices/service centers worldwide.In 2004, the Andritz Group achieved a recordOrder Intake of over 1.8 billion Euros and recordSales of over 1.5 billion Euros. Since 1990, Saleshave grown an average of more than 10% peryear.The activities of the Andritz Group are focusedwithin the following Business Areas: Pulp andPaper, Rolling Mills and Strip Processing Lines,Environment and Process, Feed Technology, andOthers. The Group is regarded as a market leaderin each of its Business Areas, with full-line capabilitiesin critical process areas. In addition, Andritzoffers comprehensive services including the sale ofreplacement parts, the manufacture of engineeredwear products, and technical services, which helpcustomers optimize production and reduce overallcosts.ANDRITZ 2004

CONTENTSCONTENTS1 Vision2 Company Profile4 Letter from the Managing Board7 Andritz in 20048 Company Boards10 Strategy12 Andritz Share14 Corporate Governance15 Status Report19 Corporate RisksBUSINESS AREAS22 Pulp and Paper54 Rolling Mills and Strip Processing Lines60 Environment and Process66 Feed Technology70 Hydraulic Machines/Other Operations3GLOBAL SERVICES/ACTIVITIES74 Andritz Automation76 Human Resources77 Manufacturing and Sourcing78 Business Process Management79 Quality80 Environmental Protection82 CONSOLIDATED FINANCIAL STATEMENTS 2004OF THE ANDRITZ GROUP113 REPORT OF THE SUPERVISORY BOARD OF ANDRITZ AGADDITIONAL INFORMATION114 Addresses of the Andritz Group120 Technical Glossary124 Financial GlossaryANDRITZ 2004

LETTER FROM THE MANAGING BOARD4The Managing Board of Andritz AG (from left to right):Franz Hofmann, Friedrich Papst, Wolfgang Leitner (President & CEO),Markku Hänninen, Bernhard RebernikANDRITZ 2004

LETTER FROM THE MANAGING BOARDLETTER FROMTHE BOARDLadies and Gentlemen,Dear Shareholders,In 2004, the Andritz Group achieved its best financial results since the founding of the Companyover 150 years ago. Sales, Net Income, and Order Intake reached record levels and grew substantiallyover the previous year. In all major business and product segments Andritz booked large andimportant reference orders, thus confirming its leading global market positions in all of its BusinessAreas.The contract from CMPC Celulosa S.A. in Chile for the supply of a complete new fiberline(including chemical recovery) is worth special mentioning. This large order confirms the validity ofAndritz’s strategy: focused R&D, acquisition of complementary companies and technologies, quickintegration of these acquisitions into the overall business, and intensive cost-reduction measures.By buying integrated process solutions and leading technologies from one supplier, our customersbenefit from an optimized production process and seamless project execution.In Asia, especially in China, Andritz booked a number of important reference orders for Rolling Millsand Strip Processing Lines, as well as Pulp and Paper equipment. These orders have strengthened– and in some areas further extended – the market position in this region. The measures takenby the Chinese government to avoid overheating and too fast growth in some industry segments(e.g. in steel and cement) appear to have the desired effect, while maintaining the needed, verysubstantial investment level, particularly of the large, established, and experienced companies. Forthis reason, good project activity is anticipated in China in 2005.5In 2004, the Andritz Group continued its strategy of acquiring companies with complementaryproducts/technologies. The acquisitions of Bird Machine, NETZSCH Filtration, Otto Kaiser, and VATECH WABAG’s fluidized bed drying systems further strengthen the Group’s product portfolio andtechnology expertise in the Environment and Process, and the Rolling Mills and Strip ProcessingLines Business Areas.Bird Machine and NETZSCH Filtration improve Andritz’s market position in solid/liquid separationfor municipal and industrial applications, and also reduce dependency on the comparatively volatiledryer business. The purchase of the fluidized bed drying systems Business Area from VA TECHWABAG adds an important technology to the product range and extends Andritz’s capabilities,which have been focused on sewage sludge, to also cover applications for product drying, such asminerals, salts, chemicals, petrochemicals, food, feed, and pigments.With these acquisitions, Sales of the Environment and Process Business Area are approximately220 MEUR annually, representing a sufficient size and solid basis for further organic growth in thedewatering and drying areas.With the purchase of certain assets of Otto Kaiser (a manufacturer of high-performance mechanicalpresses for the processing of steel strip into stampings and drawing parts), the Rolling Mills andStrip Processing Lines Business Area extends its process capabilities for the “downstream” areaANDRITZ 2004

LETTER FROM THE MANAGING BOARDof steel strip finishing. This acquisition is the logical continuation of the Business Area’s strategy tofocus on value-added steel strip production. In addition, the Business Area’s dependence on Chinais also balanced, as Kaiser’s business activities are primarily focused on Europe.One of the major corporate goals for 2005 will be the smooth integration of the newly acquiredcompanies into the Group, so that optimum synergies can be quickly realized. Due to the fastgrowth and the size of the Group, it is necessary to follow Group-wide rules for Controlling,Accounting, Treasury, Production, Purchasing, and IT on a wider basis. Implementation of the newAndritz Group ERP system is an important step in this direction. The blueprint phase of the project,which had been launched in March of 2004, was finalized at the end of the reporting year. Over thenext years, the Andritz Group will gradually switch to a uniform ERP system.Continuous increase of the quality of our systems and products is a permanent and high-prioritygoal of Andritz. In 2005, we will again launch several new Group-wide projects to further increaseour already high level of product quality. Through the implementation of a focused Group-wideproject team, we aim at further enhancing our quality assurance procedures. This should result inincreased customer satisfaction and an overall cost reduction for warranties.6Finally, here are a few words about the long-term development of the Company. Intensive R&Dinitiatives and complementary acquisitions have helped considerably strengthen, and in some areasexpand, Andritz’s global market position. These initiatives will continue in 2005, as will the focuson product innovations that improve efficiency and reduce consumption (chemicals, raw materials,etc.). At the same time, programs are in place to further reduce manufacturing and overheadcosts in order to increase the Group’s competitiveness. Based on this strategy, the medium-termgoal is to achieve a business volume of two billion Euros by 2007 while increasing profitability ofthe Company.The very favorable business development of the Andritz Group is mirrored in the strong rise of theAndritz share price during 2004, which is being watched closely by financial analysts, shareholders,business partners, and customers. After the full withdrawal of the financial investors in the summerof 2004, Andritz is a true public company with a free float of more than 70%.The Managing Board of Andritz wants to thank all employees for their contributions and performanceduring 2004. The Board also wishes to thank each customer and business partner for theconfidence they have placed in us. For 2005, we will do the utmost to fully meet their requirementsand expectations.The Managing Board Graz, March 2005ANDRITZ 2004

ANDRITZ IN 2004MARCHSuccess in tissueAndritz receives its third tissue machine orderfrom Hengan, China. Also, Procter & Gamble,Germany orders a tissue machine modernizationat their Neuss mill.Major supplier for market pulp millAndritz is selected as a main supplier for M-real’s new BCTMP (Bleached Chemi-ThermoMechanical Pulp) market pulp mill to be built inKaskinen, Finland. Scope of supply comprisesequipment for chip handling and impregnation,bleaching/washing, drying, and auxiliary equipment.APRIL70 th MDF refining system for ChinaAndritz receives an order from ShandongChenming Group, China to supply a pressurizedrefining system for Medium Density Fiberboard(MDF). This is Andritz’s third delivery of an MDFrefining system to Shandong Chenming, and its70 th to China.Successful start-upThe single-line chemical recovery plant – oneof the largest worldwide – supplied by Andritz toUPM-Kymmene’s Pietarsaari mill in Finland startsup precisely on schedule.JUNEAcquisition of NETZSCH FiltrationAndritz acquires NETZSCH’s Filtration businessunit (a supplier of dewatering systems for industrialand municipal applications).New joint ventureAndritz and German Rheinhold & Mahla AGform a 50:50 joint venture to provide comprehensivemaintenance services to pulp, paper, andMDF mills in Europe. The new company is calledEuropean Mill Service GmbH (EMS) and is basedin Graz, Austria.Andritz to supply market pulp mill to EstoniaAndritz is selected to supply all major productionsystems – woodyard, chip handling, impregnation,refining, bleaching, dewatering, drying, and baling– for a new chemi-mechanical pulp mill to be builtin Kunda, Estonia.2004Krupp Stainless (SKS) orders a hot strip annealingJULY/AUGUSTAndritz to build stainless steel mills in ChinaAndritz receives an order from the Taigang Groupin China to supply the world’s largest annealing andpickling line for cold-rolled steel strip. Shanghaiand pickling line from Andritz for a new steel millbeing constructed in Shanghai, China.SEPTEMBERAcquisition of VA TECH WABAG’s fluidizedbed drying systemsAndritz acquires the fluidized bed drying systemsBusiness Area of VA TECH WABAG, Germany, aglobal supplier of plants for granulation and dryingof solutions, suspensions, and bulk materials. Thisacquisition further expands Andritz’s dryer productrange.Large order from ChileAndritz receives an order from CMPC to supplya complete fiberline, including pulp drying and baling,Recovery Boiler, and white liquor productionplant for the new Santa Fe Line 2 Pulp Project inChile. Total value of the order is approximately 320MEUR.Acquisition of Otto KaiserAndritz expands its product portfolio in theRolling Mills and Strip Processing Lines BusinessArea by purchasing certain assets of Otto KaiserGmbH, Germany, a manufacturer of high-performancemechanical presses for the processing ofsteel strip into stampings and drawing parts.OCTOBERRecovery boilers for Sweden and the USASwedish SCA and Weyerhaeuser of the USAorder High Energy recovery boilers to maximizeenergy production and to further reduce emissions.DECEMBERNew fiberline for APPMThe Andritz Group will deliver a new fiberline,recovery island, and woodroom upgrade to theRajahmundry mill of Andhra Pradesh Paper Mills(APPM) in India.7ANDRITZ 2004

COMPANY BOARDSPRESIDENT AND CEOWolfgang Leitner …Franz Hofmann …8COMPANYBOARDS… joined Andritz in 1987 as Chief FinancialOfficer. He has served as President and CEOsince 1994. His responsibilities encompass centralGroup functions such as Human Resources,Controlling & Finance, Corporate Communications& Investor Relations, Internal Auditing, InformationTechnology, and Business Process Development.Professional career:• Member of the Managing Board of AGIV AG• Founding member of GENERICONPharma GmbH• Management consultant atMcKinsey & Company• Researcher for Vianova… joined Andritz in 1999 as Member of theManaging Board. He is responsible for the RollingMills and Strip Processing Lines Business Area,the Environment and Process Business Area, andthe Automation department.Professional career:• Divisional Director at SMS Schloemann-Siemag AG• Management consultant at A.T. Kearney• Researcher at Vereinigte Deutsche MetallwerkeFriedrich Papst …MEMBERS OF THE MANAGINGBOARDMarkku Hänninen …… joined Andritz in 1994 as manager of theGroup’s Wood Processing Division, which Andritzhad acquired from the KONE Group. He has been aMember of the Andritz Managing Board since 2002and is responsible for Pulp Mill Technologies.… joined Andritz in 1979 and held leading positionsin manufacturing and logistics. He has beena Member of the Managing Board since 1998and is responsible for the Feed Technology andthe Hydraulic Machines Business Areas, as wellas for Manufacturing, Procurement, and QualityManagement.Professional career:• Vice President of Andritz Sprout-Bauer Inc.• Director of manufacturing at Andritz AG• Director of production planning at Andritz AGProfessional career:• President of Andritz-Ahlstrom Oy• President of Andritz Oy• President of Andritz Kone Wood Inc.• Division President at KONE CorporationANDRITZ 2004

COMPANY BOARDSBernhard Rebernik …… joined Andritz in 1979 as a manager of thedesign and development department for pumpsand nuclear components. He has been a Memberof the Managing Board since 1991 and is responsiblefor Paper Mill Technologies.Professional career:• Chairman of Andritz Sprout Bauer Inc.• Division Manager of Pulp and Paper atAndritz AG• Vice President of Aströ GmbH• Assistant professor at the Graz Universityof TechnologySUPERVISORY BOARDCHAIRMANKurt Stiassny: Chief Executive Officer of UIAG;Chairman of the Supervisory Board of Andritz AGsince 1999.Other relevant functions: Member of theSupervisory Boards of Palfinger AG and WienerBörse AG.Stock companies with major shareholdings:Chairman of the Supervisory Board of Bene AG;Chairman of the Supervisory Board of ET MultimediaAG; Deputy Chairman of the Supervisory Board ofWirtschaftsblatt Verlag AG.DEPUTY CHAIRMANHeiner Rutt: Managing Director of The CarlyleGroup; Deputy Chairman of the Supervisory Boardof Andritz AG since 2003.Other functions: Chairman of the SupervisoryBoard of Beru AG (until 4 January 2005)OTHER APPOINTED MEMBERS OF THESUPERVISORY BOARDPeter Mitterbauer: Chairman of the ManagingBoard of MIBA AG; Member of the SupervisoryBoard of Andritz AG since 2003.Other functions: Chairman of the SupervisoryBoard of FFG – Austrian Research PromotionAgency; Member of the Board of Trustees of IHS– Institute for Advanced Studies; Member of theSupervisory Boards of Generali Holding Vienna AG,Oberbank AG, Teufelberger Holding AG, and DIEERSTE österreichische Spar-Casse-Privatstiftung.Christian Nowotny: Professor at the Universityof Economics in Vienna; Member of the SupervisoryBoard of Andritz AG since 1999.Other functions: Member of the SupervisoryBoards of UIAG and CA Immo AG.Klaus Ritter: President & CEO of AVI AlpenländischeVeredelungs Industrie Ges.m.b.H, EVGEntwicklungs- und Verwertungs-Gesellschaftm.b.H., and Stahl- und Walzwerk MarienhütteGes.m.b.H.; Member of the Supervisory Board ofAndritz AG since 2004.Hellwig Torggler: Attorney-at-law and seniorpartner of Schönherr Rechtsanwälte OEG; Memberof the Supervisory Board of Andritz AG since2000.Other functions: Chairman of the SupervisoryBoard of FRAPAG Immobilienholding GmbH;Chairman of the Supervisory Board of FRAPAGIndustrieholding AG; Deputy Chairman of theSupervisory Board of Theater in der JosefstadtBetriebsges.m.b.H.; Member of the SupervisoryBoards of Mondi Packaging AG and MondiPackaging Services AG.DELEGATED MEMBERS OF THE SUPERVISORYBOARDAndreas Martiner: Member of the SupervisoryBoard of Andritz AG since 2001Johann Tschrischnig: Member of theSupervisory Board of Andritz AG since 1994Brigitta Wasserbauer: Member of theSupervisory Board of Andritz AG since 20009ANDRITZ 2004

STRATEGYSTRATEGYThe overall strategic goal of the Andritz Group isto leverage its strong market position to becomethe leading supplier of production systems andprocesses in the Business Areas in which it operates.The strategic direction is based on the followingpillars, which aim at achieving sustainedGroup growth and profita bility:COMPLETE FULL-LINE SYSTEMSCAPABILITY THROUGH PRODUCTDEVELOPMENT AND COMPLE-MENTARY ACQUISITIONS10ENHANCED TECHNOLOGICALLEADERSHIPAndritz is a technological leader in all of itsBusiness Areas and is committed to continuouslywidening its technology lead. To this end, Andritzwill continue to invest in research and developmentprograms, often in cooperation with customers,to create and/or further develop technologies thatresult in improved cost-efficiency, reliability, andproductivity for its customers.IMPROVED GLOBAL MARKETPOSITION AND PENETRATIONAndritz is a global organization with a presencein all major geographic market areas. The companytargets to enhance its strong global reachby improving its service presence and sustainingongoing business relations with key customersglobally. Andritz seeks to achieve this objective inpart through recently established centers in growthareas such as Chile, Brazil, China, and India. Asthe Group also has production sites in major economicareas of the world, it can better balancepotential currency fluctuations, thus avoiding orreducing major negative impacts on the Group’scompetitiveness.Customers in all of Andritz’s Business Areasare increasingly seeking integrated productionlines and full-service customization. Accordingly,Andritz will continue to augment its product rangeby developing its own technologies and/or selectivelyacquiring businesses that complement theexisting product portfolio, as well as service capabilitiesthat complement those currently provided.This allows Andritz to design, supply, and servicesubstantially all of the production lines, equipment,and processes required by its customers.EXPANDED RANGE OF SERVICESService sales of Andritz, which account for basicallyone-third of Andritz’s total Group Sales, havegrown significantly during the last few years. Thisis in line with the increasing requirements fromcustomers who choose to outsource service andmaintenance activities. Andritz will continue togrow its service capabilities in order to supportits customers and to maintain profitability duringmarket cycles. Recognizing the importance of aANDRITZ 2004

STRATEGYlocal presence for service, Andritz will organicallyexpand its geographic network and, when appropriate,acquire specialist service providers in localmarkets.INCREASED EFFICIENCYAND UTILIZATION OFINTERNAL SYNERGIESAndritz benefits from its investments in the knowledgeand expertise of its employees, manufacturingcapabilities, and product development and willcontinue to exploit internal synergies to enhanceits competitiveness. This is often achieved throughtechnology transfers between Business Areas andthe sharing of functional resources. Quick integrationof newly acquired companies is one of maingoals in order to achieve optimum synergies.ACTIVE MANAGEMENT OFFIXED COSTSIt has been a strength of the Andritz Groupto actively pursue cost management programs,including a “make/buy” strategy for the componentsused to manufacture its products. Thisenables Andritz to source a significant proportion ofnon-essential components from qualified externalsuppliers while focusing its manufacturing activitieson more complex or proprietary products. Allmajor system components are pre-assembled inAndritz’s own workshops or at qualified sub-suppliersto ensure high quality of delivered systems.In periods of sales declines, the Group uses thisstrategy to reduce dependence on outsourcing,thereby maintaining in-house utilization levels andreducing external costs.IMPROVED PRODUCTIVITYTHROUGH PRE-EMPTIVERESTRUCTURINGAndritz’s manufacturing facilities are utilized tosupport the Business Areas and operate in globalmarkets. Andritz continually evaluates the productivityof its manufacturing facilities, and activelyrationalizes and restructures operations when itidentifies opportunities to reduce fixed operatingcosts.11ANDRITZ 2004

ANDRITZ SHARE12ANDRITZSHARESHARE PRICE DEVELOPMENTAfter a strong performance in 2003 (+65.0%),the Andritz share price again developed very favorablyin 2004. By year’s end, it had increased by52.5%. Since the IPO in June 2001, the shareprice of Andritz has increased by 167.1%, andit significantly outperformed the ATX, which rose96.5% during the same period.The highest closing price of Andritz during 2004was 56.50 Euros (14.12.2004); the lowest was35.00 Euros (8.1.2004).TRADING VOLUMEIn 2004, the average daily trading volume ofAndritz shares at the Vienna Stock Exchange was70,744 shares (2003: 45,410 shares). The highesttrading volume was recorded on 23.4.2004(341,628 shares); the lowest on 27.5.2004 (3,754shares).SHARE BUY-BACK/SALEPROGRAMOn March 30, 2004, the Annual General Meetingof Shareholders authorized the Managing Boardto buy back and sell up to 10% of Andritz’s totalshares for a period of 18 months from the resolution.The maximum price for purchasing shareswas fixed at 30% above the average, unweightedclosing price of the share over the ten trading dayspreceding the buy-back. The minimum price wasfixed at 10.0 Euros per share. The purpose ofthis share buy-back/sale program is to balancethe supply and demand for Andritz shares onthe Vienna Stock Exchange. In addition, thepurchased shares are eligible for use in the stockoption program which covers approximately 60Andritz Group executives, including the membersof the Managing Board of Andritz.As of December 31, 2004, the number ofown shares held by the Company amounted to40,410.Detailed information about the share buy-back/sale program, as well as the transactions carriedout in relation to this program, can be found exclusivelyon the www.andritz.com website.STOCK OPTION PROGRAMIn March 2004, the Annual General Meetingapproved a stock option program for members ofthe Managing Board and other executives of theAndritz Group. This program aims at a long-termsustainable increase in shareholder value and tosecure management commitment. Participationin the program was contingent on each individualmanager purchasing Andritz shares equalto at least 20,000 Euros in value. Exercise of theoptions is based on certain defined share priceincreases and certain improvements of earningsper share. Exercise periods are between May 1,2006, and April 30, 2008.INVESTOR RELATIONSProactive Investor Relations focusing on the provisionof transparent, detailed, and comprehensiveSTOCK EXCHANGE FIGURES2004 2003 2002Highest closing price (EUR) 56.50 37.95 28.00Lowest closing price (EUR) 35.00 21.00 19.40Closing price at year-end (EUR) 56.10 37.95 22.99Market capitalization as of 31.12. (MEUR) 729.3 493.4 298.9Performance +52.5% +65.0% +7.9%ATX weighting as of 31.12. (%) 1.7656 2.3250 0.6992Average daily number of shares traded 70,744 45,410 13,255ANDRITZ 2004

ANDRITZ SHAREKEY FIGURES FOR ANDRITZ SHARES> ISIN Code AT0000730007> First Listing Day June 25, 2001> Types of Shares no-par value shares, bearer shares> Total Number of Shares 13 million> Authorized Capital 3.5 million shares, to be used by September 15, 2005> Free Float approx. 72%> Stock Exchange Vienna (Prime Market)> Ticker Symbols Reuters: ANDR.VI; Bloomberg: ANDR, AV> Stock Exchange Indices ATX, ATX Prime, WBIcorporate information to the financial community isa clearly defined goal of Andritz. In 2004, Andritzonce again received an award for its performancein the area of Investor Relations. Andritz wasranked third in the most important category,the “Austrian Financial Analysts’ Stock ExchangeAward.” This award is conferred annually by theAustrian Association for Financial Analysis andAsset Management (ÖVFA) and the Austrian businessmagazine, GEWINN. Assessment criteriainclude transparency of information policy, reliabilityof financial guidance, and functional competenceof Investor Relations officers. This is the third yearin a row Andritz received such an award.In 2004, Andritz staged several roadshows inAustria and other countries. On the occasionof the publication of the full year 2003 and thequarterly reports for 2004, Andritz Managementheld several one-on-one or group meetings withlarge institutional investors and financial analysts.Andritz was also showcased at various investmentbank conferences, e.g. at Deutsche Bank’s smallandmid-cap conference in London, and BankAustria’s investor conference in Kitzbühel, Austria.For financial analysts and selected fund managers,Andritz organized “Investor Days 2004” in Finland,which presented Andritz’s expertise in Pulp MillTechnologies. In cooperation with the ViennaStock Exchange, Andritz gave presentations toinstitutional investors in London, Edinburgh, Milan,Geneva, and New York.ANALYST COVERAGEAt the end of November 2004, Kaupthing Sofi,a specialized bank of Iceland with operationsin ten countries, initiated research coverage ofAndritz. In total, seven banks and investmentfirms publish reports on Andritz on a regular basis.They are: Bank Austria/Creditanstalt, BerenbergBank, Deutsche Bank, Erste Bank, JPMorgan,Kaupthing Sofi, and Raiffeisen Centrobank.SHAREHOLDER STRUCTUREOF ANDRITZ (AS OF 31.12.2004)72%Free floatCONTACT2%Own shares,Management26%CertusAndritz Investor RelationsMichael BuchbauerStattegger Strasse 18, 8045 Graz, AustriaPhone: +43 316 6902 2722Fax: +43 316 6902 465welcome@andritz.comwww.andritz.com13ANDRITZ 2004

CORPORATE GOVERNANCECORPORATE14GOVERNANCEAndritz endorses compliance with the AustrianCorporate Governance Code, which was officiallyintroduced in September 2002. It regards theCode as an essential means to implement responsiblemanagement and control of Andritz, which isdirected toward creating added value.Implementation of and compliance with theCode will promote and intensify the confidence ofshareholders, investors, customers, employees,suppliers, representatives of the media, and otherstakeholders in the company. The ManagingBoard and the Supervisory Board, as well as theentire staff of Andritz, are committed to complyingwith the Code.Besides the mandatory “L” Rules, which referto legal requirements, Andritz complies with theCode’s “C” Rules, with the following deviations:* )Rule 38:Andritz AG Articles of Association do not stipulatean age limit for its Managing Board members.Appointment of Managing Board members issolely contingent on personal and professionalqualifications.Rule 42:Andritz AG does not have a separate strategycommittee. Andritz AG’s Supervisory Board iscomposed of experts in different fields who holdconstructive sessions at regular intervals, to discuss,inter alia, strategic alignment. In this framework,the Supervisory Board is also involved in allstrategic decisions of the Managing Board as aconsultative body.Rule 61:Since the Internet allows continuous updating ofinformation, unlike a printed publication such asthe annual report, Andritz publishes all informationrequested under Rule 61 on its website andupdates it when necessary. In addition, mostof the requested information is published in theannual report.Rule 69:Andritz AG is of the opinion that the notificationsof share purchases and sales by members of theManaging Board and Supervisory Board, which itis obliged to make to the financial market supervisoryauthority and the Vienna Stock Exchangepursuant to Article 91a of the Stock ExchangeAct, represent a comprehensive, lawful means ofensuring equal treatment for all shareholders.The complete Corporate Governance Code canbe accessed and downloaded from the Andritzwebsite (www.andritz.com). The website also containsAndritz’s statement on compliance with theCode, including explanations to deviations.* ) The Austrian Code of Corporate Governance encompasses the followingthree categories of rules: Legal Requirement (L): referring tomandatory legal requirements, Comply or Explain (C): this rule is tobe followed; any deviation must be explained and the reasons stated inorder to be in compliance with the Code, Recommendation (R): thenature of this rule is a recommendation; non-compliance with this rulerequires neither disclosure nor explanation.ANDRITZ 2004

STATUS REPORTSTATUSREPORTGENERAL ECONOMIC CONDITIONSThe year 2004 was characterized by a globaleconomic recovery, with the US showing a muchfaster and sustained growth than Euroland.According to preliminary figures, Gross DomesticProduct (GDP) of the USA grew at an annualizedrate of 4.6% in 2004. Although economic growthwas primarily based on consumption of privateindividuals, who contribute approximately twothirdsof total economic spending, the economicupturn was also somewhat based on increasedcapital expenditures by corporations. Due tothis economic development, the Federal ReserveBoard (the FED) increased key interest rates inseveral steps from 1% at the beginning of Januaryto 2.25% by the end of the year.The economy in Euroland developed in a similarfashion, although much more moderately. GDPgrew by approximately 1.8% compared to 2003.Continued weak domestic demand and the riseof the Euro against the US dollar, which dampenedexport activities, were the main burdens togrowth.China’s economy continued its strong growthshown during the last few years also in 2004.The measures of the Chinese government to slowdown over-investment in some economic sectors,e.g. in the steel or cement industries, have shownthe desired effects, with the risk of overheatingclearly reduced. Nevertheless, overall economicgrowth of China remained very substantial duringthe reporting year.Sources: OECD, WIFOBUSINESS DEVELOPMENTIncrease in SalesSales of the Andritz Group in 2004 developedvery favorably. As a result of the execution of thehigh Order Backlog as of the end of last year, thegrowth of the services business, and Sales contributionsfrom the companies acquired in 2004,Sales increased by 20.9% to 1,481.3 MEUR(2003: 1,225.0 MEUR). In particular, the Pulp andPaper, Rolling Mills and Strip Processing Lines,and Environment and Process Business Areasincreased their Sales significantly compared to2003. Sales of the Feed Technology BusinessArea were only slightly higher than in the previousyear, mainly as a result of weak market conditionsand the decline of the US dollar against the Euro,which led to negative translation effects, especiallyfor this Business Area.Sales of the companies/business areas acquiredin 2004 (Bird Machine, NETZSCH Filtration, Kaiser,and VA TECH WABAG’s fluidized bed drying systemsBusiness Area), which were not included inthe financial statements of 2003, added approximately96 MEUR to the Group’s total Sales in2004. Organic Sales growth of the Group thereforewas approximately 13%.Order Intake and Order Backlog at recordlevelsOrder Intake of the Andritz Group reached anhistoric record level in 2004. Due to the veryfavorable business development in almost everyBusiness Area, Group Order Intake surged from1,394.4 MEUR in 2003 to 1,837.0 MEUR in 2004,an increase of 31.7%. Order Intake in the FourthQuarter of 2004, at 768.5 MEUR, reached anextraordinarily high level. In particular, the Pulp and15ANDRITZ 2004

STATUS REPORT16Paper Business Area received several large orders(including the large order from CMPC in Chile atapproximately 320 MEUR, and the supply of twonew recovery boilers to SCA and Weyerhaeuserat approximately 130 MEUR). Order Intake ofthe Environment and Process Business Area alsoincreased significantly compared to 2003, mainlydue to contributions from newly acquired companies,and the favorable development of the centrifugebusiness.Order Intake of Bird Machine, NETZSCH filtration,VA TECH WABAG’s fluidized bed dryingsystems Business Area, and Kaiser, which werenot included in the Order Intake figure of last year,amounted to approximately 106 MEUR in 2004.As a consequence of excellent Order Intake, theGroup’s Order Backlog reached a record level of1,439.2 MEUR at the end of 2004 (31.12.2003:1,053.6 MEUR). This provides a solid workload forthe Andritz Group in 2005.Significant increase in EarningsAs a result of increased Sales, ongoing costoptimization programs, and positive Earnings contributionsfrom some of the newly acquired companies,the Group’s Earnings Before Interest,Taxes, Depreciation, and Amortization of Goodwill(EBITDA) surged from 84.4 MEUR in 2003 to 115.4MEUR in 2004. With the exception of the FeedTechnology Business Area, whose Earnings wereaffected by internal restructuring costs and weakmarket conditions, every Business Area increasedits Earnings and profitability compared to last year.Group profitability expressed as EBITDA marginimproved from 6.9% in 2003 to 7.8% in 2004.EBIT (Earnings Before Interest and Taxes)increased by 55.6% to 76.1 MEUR (2003: 48.9MEUR). The lower tax rate compared to 2003results from lower deferred taxes due to theAustrian 2005 tax reform. Net Income after thededuction of Minority Interests amounted to 53.4MEUR (2003: 29.1 MEUR).Cash flow and CAPEXCash flow from operating activities amounted to208.0 MEUR in 2004, increasing significantly comparedto last year (2003: 4.6 MEUR). Investmentsin tangible and intangible assets amounted to 29.4MEUR (20.5 MEUR).Net worth position and capital structureThe balance sheet as of 31.12.2004 shows nomajor changes compared to 31.12.2003.Net liquidity (cash and cash equivalents minusinterest-bearing financial liabilities) as of 31.12.2004,at 219.6 MEUR, almost quadrupled compared tothe reference date of last year (31.12.2003: 55.0MEUR). With an equity ratio of 23.4% as of31.12.2004 (24.0% as of 31.12.2003), the AndritzGroup has a solid and balanced financial structure.Effects from exchange ratesIn 2004, approximately 35% of the AndritzGroup’s Sales were denominated in US dollars.Although the Group attempts to hedge the netcurrency exposure of each individual order tomitigate the risk of currency fluctuations, changesin exchange rates could result in the recognitionof exchange losses in the Group’s financial statementsand in translation effects on Order Intake,Sales, and Earnings.In 2004, the strength of the Euro against theUS dollar (the average exchange rate increasedby 9.9% in 2004) led to a shortfall in Group Salesof approximately 24 MEUR and in Order Intake ofapproximately 32 MEUR. At unchanged Euro/USdollar exchange rate, EBITA would have beenapproximately 1 MEUR higher.ANDRITZ 2004

STATUS REPORTRESEARCH AND DEVELOPMENTResearch and Development (R&D) is one of theGroup’s important strategic goals. In 2004, Andritzinvested approximately 21.1 MEUR in the developmentof existing and new products and processes.Approximately 180 people work in the Group’sresearch centers in the USA, Austria, Finland, andFrance to develop new processes and equipmentand expand Andritz’s technological leadership.The Divisions of the Pulp and Paper BusinessArea focus their R&D programs primarily onimproving fiber quality, increasing energy efficiency,lowering the investment cost per ton of productmanufactured, lowering maintenance costs, andreducing the environmental impact.Some newly developed products of thePulp and Paper Divisions include:• Wood Processing: Chip Sampler/Analyzer andRotaBarker for frozen wood and tropicalhardwoods• Fiberline: ModuScreen A for combined coarseand fine screening of pulp• Recovery: High Energy Recovery Boilers (HERB)which considerably increase electrical generationcapacity• Chemical Systems: LMD-Filter for lime muddewatering• Mechanical Pulping: optimization of thePreconditioning-Refiner Chemical (P-RC)Alkaline Peroxide Mechanical Pulping (APMP)process for alternative raw materials; BleachCommander process control system• Pulp Drying: world’s largest single-line systems;slab press for flash drying• Fiber Preparation: LC/HC pulpers with reducedenergy consumption; ShortFlow papermachine approach; RotoWash for ash washingand fiber recovery• Tissue: Machine Direction (MD) flexibilityfor TissueFlex shoe press; PrimeReelCenterwind for crease-free winding at very lownip loads to secure highest softness and volumeof tissue paper; PrimeRun for utmostsheet stability in the dry end; enter the TADtechnology and start up of first TAD machine• Services: Bar-Tec wedgewire screen baskets;conical refiner plates; digester screen plates;diagnostics and condition monitoring systems;screw press shaft machining deviceThe trend today is toward large, single-linemills since redundant or repetitive smaller systemsincrease both capital and operating costs.This places extreme demands on the equipmentin terms of scale, reliability, and availability. AllAndritz Divisions are actively developing largerscale equipment. UPM-Kymmene’s Pietarsaarimill demonstrates Andritz’s capabilities in engineeringand producing one of the world’s largest andmost efficient chemical recovery systems. Recentorders from Veracel in Brazil, Hainan in China, andCMPC in Chile will showcase large-scale Andritzfiberline and pulp drying systems. The chemimechanicalpulp mill being built in Kunda, Estonia,will have a large twin wire pulp dewatering press,and the installation at UPM’s Shotton (UK) showcasesa nearly 1,000 t/d large single-line screwpress and disperser from Andritz for recycled fiberprocesses.The patented TurboFeed system is now generallyaccepted to be the most advanced, butalso the simplest and most reliable solution forchip feeding to a continuous digester. It has beenincluded on the most recent orders Andritz hasreceived for continuous cooking systems, includingvery large (3,000 t/d) digesters.In the pulp bleaching area, chemical consumptionhas been decreased to record low levels withAndritz technology. The key elements to achievingthis are the fractional washing capabilities of theDD Washer and selective removal of hexenuronicacids (A-Stage Bleaching).Andritz has done considerable developmentwork to minimize emissions from the recoveryboiler (particularly NO x ) and to improve the reliabilityand safety of the boiler while maximizing energyproduction of the boiler at the same time.17ANDRITZ 2004

STATUS REPORT18Sophisticated simulation programs (designedin cooperation with IDEAS Simulation within theAndritz Group) are now being utilized for fiberlines,chemical recovery boilers, evaporation plants, pulpdrying lines, and tissue production lines.In the fiber preparation area, Andritz now canperform full-line production trials and testing forrecycled fiber applications in its new Graz pilotplant.In the Rolling Mills and Strip ProcessingLines Business Area, R&D focused on furtherstrengthening the competitive advantage of processesoffered to customers. The mixed acidrecovery system has been optimized to increasethe nitric-acid recovery rate as well as the waterbalance between stainless steel pickling linesand acid recovery plants. Work continues on theproject to develop alternative corrosion-resistantcoatings with special focus on zinc/chromium- andzinc/magnesium-coatings. This reduces the zinclayerthickness for improved laser welding in theautomotive industry.In the Environment and Process BusinessArea, the R&D program for drying technologiesfocused on further developing the range of beltdrying systems. New sizes were developed and anentire new design based on using a full concretecasing was successfully introduced to the market.For centrifuges, a newly developed drive systemhas successfully proven reliability. Marketing ofthe new drive system began in the Second Halfof 2004.Feed Technology’s R&D activities were focusedon further developing existing products, improvingmaintainability of equipment, increasing the serviceintervals for equipment, and standardizing systemsand sub-systems in the product range.OUTLOOKIn 2005, the global economy is expected tocontinue the growth shown in 2004. Reportsand forecasts by leading economic researchers(OECD, WIFO) predict that the GDP of the USAwill grow by approximately 3.3% in 2005. Theeconomic development in Euroland should againremain much more moderate compared to theUSA, mainly as a result of continued weak domesticdemand and the strength of the Euro againstthe US dollar, which will dampen export activitiesof the European exporting industries.The outlook for the markets relevant to Andritz– pulp, paper, and steel – is also favorable accordingto market researchers. In pulp and paper, it isexpected that project activity will primarily focus ongreenfield pulp mills and major modernizations ofexisting installations in the southern hemisphere.In Europe and North America, investment activitiesshould remain moderate, although a slight pickupin the course of the year 2005 can be expected.In steel, the very high investment activity in Chinaand Asia seen in 2004, particularly in the stainlesssteel area, is likely to show some cooling off in2005, but still is expected to remain at an attractivelyhigh level. Researchers expect the focus ofinvestments to shift to the downstream area ofsteel strip finishing.For the Environment and Process Business Area,centrifuges are expected to continue their high volumegrowth; margins, however, could be undersome pressure, not at least because of increasingsteel prices. The market for thermal sludge treatmentshould pick up in the course of the year.Full integration of the newly acquired companiesinto the Group and the implementation ofGroup-wide rules and procedures for Controlling,Accounting, IT, Production, and Purchasing will bethe main corporate targets for 2005. This shouldenable Andritz to realize optimum synergies.Given the positive forecasts for the global economyand the relevant Andritz markets, the AndritzGroup expects Sales and Net Income for 2005to increase compared to 2004. However, if theexpected positive development of the global economydoes not materialize, Sales and Earnings ofthe Andritz Group may be negatively affected.DisclaimerCertain statements contained in this report constitute “forward-lookingstatements.” These statements, which contain the words “believe”,“intend”, “expect” and words of similar meaning reflect Management’sbeliefs and expectations and are subject to risks and uncertainties thatmay cause actual results to differ materially. As a result, readers arecautioned not to place undue reliance on such forward-looking statements.The Company disclaims any obligation to publicly announce theresult of any revisions to the forward-looking statements made herein,except where it would be required to do so under applicable law.ANDRITZ 2004

CORPORATE RISKSCORPORATERISKSThe Andritz Group is a globally operatingcompany serving a variety of industrial marketsand customers. As such, the Group is subjectto certain general and industry-specific risks.To identify, manage, and mitigate these risks,Andritz has a long-established Group-wide managementsteering committee whose main task isto identify nascent risks early and to take counter-measures.This is an important element in theactive risk management within the Group. Therisks described below, and the effects these risksmay have on the business development of Andritz,have been taken into account in the Group’s corporateplanning.The risks that the Andritz Group may incurinclude, but are not limited to, the following:RISKS RELATED TO THE INDUS-TRIES IN WHICH THE GROUPOPERATESVolatility of incoming ordersSome customers and industries served by theAndritz Group are directly dependent on generaleconomic development and frequent fluctuationsin demand for their products. This is especiallytrue of the Pulp and Paper and the Rolling Millsand Strip Processing Lines Business Areas, butall Business Areas can be affected. The prices forthese products are, in part, dependent on the prevailingrelationship between supply and demand.Possible price fluctuations are therefore apt tohave a direct influence on each customer’s capitalinvestment decisions, with subsequent influenceon the Group’s Order Intake. This may lead tovolatility in the development of Order Intake of theGroup.the steel industries. These mergers might resultin a reduction of the number of customers in thefuture, as well as the Group having to negotiatewith global companies with greater purchasingpower. The dependence on key customers mightincrease, which could have direct consequenceson the Group’s financial development.Uncertainty of future contractsThe Group’s future performance depends on,among other things, securing certain new contracts.It can sometimes be difficult to predictwhen an order for which the Andritz Group hasprovided a quotation will actually be awarded.Contract awards are often affected by eventsoutside the control of the Group, such as prices,demand, and general economic conditions. Thiscan cause difficulties in matching the Group’sworkforce with contract needs. Although Andritzhas been able to successfully manage this risk byoutsourcing during brisk sales periods and producingin-house in periods of sales decline, thismay change in the futureEnvironmental mattersThe Group’s operations are subject to numerouslocal, national, and supranational environmentalregulations. The Group uses and generates hazardoussubstances in its manufacturing operations.In addition, many of the Group’s currentand former properties are, or have been, usedfor industrial purposes, and disposal of waste atdisposal sites has been arranged for. It is possiblethat the Group may in the future be subject toliabilities relating to the investigation and clean-upof contaminated areas.RISKS RELATED TO THE GROUP’SBUSINESS19Customer concentrationIn some of the industries served by Andritz,there is a trend toward company mergers. Thisis especially prevalent in the pulp and paper andCurrenciesThe Group has operations and subsidiaries in alarge number of countries outside Euroland, anda significant portion of its Sales and costs areANDRITZ 2004

CORPORATE RISKS20denominated in non-Euro currencies, mainly inUS dollars and British Pounds. The currencies inthese countries may be subject to fluctuations inexchange rates. Although the Group attempts tohedge the net currency exposure of the orders tomitigate the currency risk, currency fluctuations canresult in the recognition of exchange rate losses inthe Group’s financial statements. Developments ofexchange rates may also have translation effectson the Group’s Sales and Earnings, whose valuesare converted into Euros. In addition, shiftsin exchange rates may affect Andritz’s positionrelative to its competitors, although most of themain competitors of Andritz are also based inEuroland. As some of Andritz’s major customersare based outside Euroland, changes in exchangerates could lead to a delay of project decisions bythose customers. Also, the Shareholders’ Equityof the Andritz Group is not hedged and is thussusceptible to being affected by changes in theexchange rate.Competitive positionThe Andritz Group does business in very competitivemarkets. Some of the markets in whichthe Group competes are highly fragmented, witha few large, international manufacturers competingagainst each other and against a high numberof smaller, local companies. This has, in somecases, adversely impacted sales margins realizedby certain of the Group’s businesses. The AndritzGroup invests approximately 3% of total Sales inResearch and Development and has so far beenable to offer its customers the latest technologicaldevelopments. There is, however, no assurancethat the Group can maintain and defend this positionin the future.Acquisition and integration of complementarybusinessesOne of the Group’s strategies is to become acomprehensive supplier of systems and equipmentin all of its Business Areas through organic growthand complementary acquisitions. In the courseof implementing this strategy since 1990, theGroup has acquired and integrated a number ofbusinesses with worldwide operations. However,no assurance can be given that the Group will besuccessful in identifying and acquiring appropriateacquisition candidates in the future, or that suitablecandidates will be available, or that sufficientfinancing will be available. Furthermore, althoughAndritz has an excellent track record of integratingnewly acquired businesses, it is possible that inconnection with future acquisitions, the integrationwill not succeed and that planned objectives andsynergies are not realized or the Group may beexposed to new risks that have not been properlymanaged.Legal proceedingsIn the course of its ordinary business, the AndritzGroup is party to numerous legal proceedingsbefore both administrative and judicial courts andbodies and arbitration tribunals. The substantialmajority of such proceedings are of a nature consideredtypical of the Group’s business. Whereappropriate, provisions are made to cover theexpected outcome of proceedings to which Groupcompanies are a party, to the extent that negativeoutcomes are likely and reliable estimates can bemade. However, even when provisions are made,there is no guarantee that these will always besufficient.As of December 31, 2004 Andritz Inc., a subsidiaryof the Andritz Group, is one of manydefendants in a total of approximately 85 asbestoscases in the USA. In aggregate, the cases involveapproximately 19,500 plaintiffs. Nearly all of thesecases involve claims by multiple plaintiffs againstmultiple defendants. Andritz Inc. does not believeit should be found liable in connection with any ofthese claims and plans to vigorously defend eachclaim.For further information on asbestos litigation,please see pages 110ff. of this report.ANDRITZ 2004

CORPORATE RISKSRISKS RELATED TOMAJOR ORDERSPayment risks from customersMuch of the Group’s business involves handlingmajor projects with a large contract volume.If customers fail to meet their payment obligationsfor these projects, this may have negativeeffects on the net worth and liquidity position ofthe Group. The Andritz Group tries to limit theserisks by securing payment guarantees from banks.Even in projects covered by export credit insurance,typically only 85% of the purchase price issecured through such insurance.Liabilities and performance of projectsIn conjunction with the performance of plantssupplied by Andritz, the Group is in many casesunder contractual obligation to make performanceguarantees and to meet certain deadlines. If theperformances stated are not achieved, or if deadlinesare exceeded, the Group may have to performremedial work at its expense or pay dam ages.If a guaranteed performance level or deadline ismissed by a wide margin, the customer may havethe right to terminate the agreement and returnthe delivered system to the Group for a full refundand/or recover damages. Such action couldadversely affect the Group’s financial development.The Group has put risk management proceduresin place to reduce, inter alia, its contractual andfinancial risk exposure on projects.Cost overrunsThe Group’s projects are usually based on longtermcontracts, the substantial majority of whichare fixed price contracts awarded on a competitivebidding basis. The sales and operating marginsrealized in a fixed price contract may vary fromoriginal estimates as a result of changes in costsand productivity over the term of the contract,especially on projects that include plant-wideengineering and/or construction. In addition, sincecertain parts of the manufacture of the Group’ssupplies are outsourced, the Group may be compelledto quote at a fixed price to the customerwithout knowing exactly how much the purchasedparts will cost. While estimates are made usingempirical data and quotes from potential suppliers,these may not be accurate. The Group has experiencedsignificant losses on certain past and pendingprojects and project difficulties and losses mayoccur in the future in a way that would adverselyaffect the Group’s financial condition.RISKS RELATED TO THECAPITAL MARKETSDependence on the development of internationalfinancial marketsApart from company-related occurrences, developmentof the Andritz share price is also dependenton price fluctuations within international financialmarkets. Possible price fluctuations and highvolatility of major stock markets might adverselyaffect the price of Andritz shares.Recommendations by research analystsAs a publicly-listed company, Andritz is regularlyanalyzed by financial analysts and institutionalinvestors. Analysts’ recommendations to buy orsell Andritz shares and subsequent investmentdecisions by shareholders may lead to considerableprice fluctuations of the shares. The AndritzGroup has consistently followed a policy of openand transparent information exchange with shareholdersand the financial community to minimizeunfounded price fluctuations of its shares.Active trading of Andritz sharesThe high level (over 70%) of public free float ofthe Company’s total outstanding shares has ledto active trading in Andritz shares on the ViennaStock Exchange. However, there is no assurancethat active trading will be maintained in the future.If active trading is not maintained, the liquidity andthe market price would be adversely affected, andinvestors might not be able to sell their shares atwhat they perceive to be an acceptable price. Itcould also result in the removal of Andritz sharesfrom the ATX, the leading index of the ViennaStock Exchange.21ANDRITZ 2004

BUSINESS AREASPULP AND PAPER22ANDRITZ 2004

BUSINESS AREASPULP AND PAPERBUSINESS AREA MANAGERSMarkku HänninenHelsinki, FinlandBernhard RebernikGraz, Austria23PULP ANDPAPERChemical recovery plantAndritz supplied UPM-Kymmene’s Wisaforest mill in Finland with one of theworld’s largest single-line chemical recovery plants. The chemical recoveryisland consists of an evaporation plant (photo), recovery boiler, recausticizingplant, and lime kiln. Andritz chemical recovery systems fulfill the most stringentenvironmental requirements. The Wisaforest project started successfullyon time in April 2004.ANDRITZ 2004

BUSINESS AREASPULP AND PAPER24PROFILE> The Pulp and Paper Business Area isa leading global supplier of systems,equipment, and services for the productionof fiber, for chemical recovery, andfor sludge dewatering/handling in pulp,paper, and Medium Density Fiberboard(MDF) mills. The Business Area’s technologyis employed for the preparationof chemical, mechanical, and recycledpulp for all grades of paper, board, andtissue. The Business Area also suppliesstock preparation and machine approachsystems, tissue production systems,machine ventilation/drying equipment,sheet dewatering/drying/baling systemsfor market pulp, and flash drying systemsand slab presses for fluff pulp. TheBusiness Area’s service activities includeengineered wear products (refiner plates,screen baskets, pulpers, rotors, chipperknives etc.), as well as complementarytechnical services.The successful acquisition of complementaryproduct areas over the pastfew years enables the Pulp and PaperBusiness Area to supply complete processinglines from log handling to theproduction, drying, sheeting, and balingof pulp. The most recent acquisitionsextend the Business Area’s expertise inspecialized sensors, process control,technologically advanced wear products,and equipment condition monitoring.The Pulp and Paper Business Area providesbasic and detailed engineering,procurement, manufacturing, equipmenterection, construction supervision, commissioning,and maintenance services,as well as EPC contracts.The Business Area has service and saleslocations in each major market. In theemerging regions of Asia and SouthAmerica, Andritz has built upon its strongfoothold with local service centers andexcellent reference deliveries.Market developmentIn 2004, the international pulp markets and therelated equipment market showed satisfactorydevelopment. Major project activity developedfavorably throughout the reporting period, withinvestments and greenfield projects mainly concentratedin the southern hemisphere. In Europeand North America, investments focused more onmodernizations and capacity expansions of existingpulp mills.The capacity levels of market pulp producersincreased modestly for mechanical pulp producersand more substantially for chemical pulp producers.Underlying demand for pulp remained strongduring 2004. Pulp prices are denoted in US dollars,whose value decreased significantly againstthe Euro and other major currencies during 2004.This forced Canadian and Euroland producers toraise the minimum price level for market pulp, leadingto increasing pulp prices.Capacity utilization of international pulp producerswas relatively stable and at a very highlevel. In the First Half of 2004, the price forNorthern Bleached Softwood Kraft (NBSK) pulpincreased significantly. Due to strong demand andunchanged supply, the price went from approximately560 US dollars per ton in January 2004 toapproximately 650 US dollars per ton at the endof June 2004. However, due to slight oversupplyand seasonal temporary shutdowns of severalpaper manufacturers, the pulp market weakenedduring the Second Half of 2004, especially duringthe Third Quarter. Towards the end of the year, theprice started to increase again as a consequenceof increased demand.ANDRITZ 2004

BUSINESS AREASPULP AND PAPERThe market for short fiber pulp (birch and eucalyptus)developed in step with the price developmentof NBSK.Business developmentThe financial results developed very favorablyduring the reporting period. As a result of increasedexecution of some major orders and the growth ofthe services business, Sales increased by 9.2% to884.6 MEUR (2003: 810.3 MEUR).Due to increased Sales, the favorable developmentof the services business and continued costoptimization measures, EBITA of the Business Areasurged 32.0% to 64.8 MEUR in 2004 (2003: 49.1MEUR). Profitability expressed as EBITA marginincreased from 6.1% in 2003 to 7.3% in 2004.The integration of Fiedler GmbH of Germanyacquired in September 2003 progressed veryfavorably in 2004. This acquisition made Andritzone of the leading global suppliers of screenbaskets and rotors. A result of the synergiesis the new wedgewire screen basket – the Bar-Tec Wedgewire – which utilizes the strengths ofthe Andritz FiberSentry and the former FiedlerStrong-Bar © . The new basket will be introducedto customers in the First Quarter of 2005.Andritz and Rheinhold & Mahla AG of Germany,a leading provider of industrial services in Europe,formed a joint venture (European Mill ServiceGmbH) to provide a broad range of industrialmaintenance services and long-term maintenancecontracts for pulp, paper, and panelboard mills inEurope. This is consistent with customer requirementsto increasingly outsource support services,such as maintenance, to competent external suppliers.Andritz strengthened its ability to serve the growingmarket in Chile by providing local contact pointswith Chilean customers. A new office for capitalsales and project management was established inSantiago. Andritz also enlarged the service officein Concepción. The office now provides spareparts sales, field services, technical assistance,and the sale of engineered wear parts for pulpmills, paper mills, and MDF plants in Chile.Following a successful period of joint research,development, and marketing in the field of tissuemachines, Andritz and Voith have decidedto change their existing cooperation. As part ofthis, Voith Andritz Tissue LLC, Janesville, WI, USA,the joint venture company which was founded toserve the NAFTA tissue market, will continue as25KEY FIGURES PULP AND PAPERMEUR 2004 2003 2002 2001Sales 884.6 810.3 672.2 883.0Order Intake 1,218.9 857.3 843.3 642.8Order Backlog as of 31.12. 951.1 622.7 582.0 431.5EBITDA 77.9 63.9 53.5 69.8EBITDA margin 8.8% 7.9% 8.0% 7.9%EBITA 64.8 49.1 39.2 53.9EBITA margin 7.3% 6.1% 5.8% 6.1%Capital investments 14.3 9.3 11.5 10.8Employees as of 31.12. 2,805 2,959 2,634 2,626ANDRITZ 2004

BUSINESS AREASPULP AND PAPER26Andritz Tissue Inc., supplying tissue machines toUS, Canadian and Mexican customers with thesame tissue professionals. Andritz Tissue Inc. willbe a 100% affiliate of Andritz in 2005, as part of theTissue Machines Division.The large single-line chemical recovery plantsupplied by Andritz for Wisapower at UPM-Kymmene’s Pietarsaari mill in Finland started verysuccessfully in early April. Guaranteed productionwas achieved after only five days, and a newrecord for pulp production was reached within aweek of operation. Andritz’s delivery included anew recovery boiler, evaporation plant, and whiteliquor plant.Andritz chemical recovery systems were successfullystarted up in July at Mercer’s ZellstoffStendal mill, a greenfield Kraft pulp mill constructedin the Saxony region of Germany. Andritz suppliedthe black liquor evaporation plant, the chemicalrecovery boiler, and a complete recausticizing systemfor the production of white liquor. The Stendalmill is fulfilling the most stringent environmentalrequirements.In 2004, the Business Area booked a recordlevel of orders. At 1,218.9 MEUR, Order Intakeincreased by 42.2% compared to 2003 (857.3MEUR). The surge is mainly due to the receipt ofthe large order from CMPC Celulosa S.A., worthapproximately 320 MEUR.Major orders• The largest single order ever received in theGroup’s history was the contract signed inSeptember with CMPC Celulosa S.A. to supplya complete fiberline – from digester to finishedbales of market pulp – and chemical recoverysystems for a new pulping line at the Santa Fe,Chile mill.• Andritz will provide the systems for pulp productionand pulp drying/baling – as well as thechemical recovery boiler and white liquor plant.All systems will be delivered on an EPC basis.In addition, CMPC ordered two high-efficiencymulti-stage DD Washers and oxygen delignificationequipment from Andritz for their Laja, Chilemill.• Celulosa Arauco y Constitución ordered awoodroom, recausticizing, and lime kiln for itsnew Itata mill in Chile.• Estonian Cell selected Andritz to deliver acomplete hardwood chemi-mechanical pulpmill from the woodyard to the finished pulpbales. The greenfield mill will be built in Kunda,Estonia.• In Russia, Andritz will supply a completewood and chip processing installation for SCArkhangelsk Pulp and Paper Mill.ANDRITZ 2004

BUSINESS AREASPULP AND PAPER• Andra Pradesh Paper Mills of India (APPM)ordered a new fiberline, chemical recoveryisland, and woodyard upgrade from Andritz toincrease pulping capacity at its Rajahmundrymill. The new fiberline incorporates the mostmodern, efficient, and environmentally-friendlytechnologies in the Indian market.• In Canada, Irving Pulp & Paper ordered a completelime kiln system. This is the first LMD limekiln system to be installed in Canada.• Andritz High Energy Recovery Boiler (HERB)technology, proven at the successful Pietarsaariinstallation of UPM-Kymmene in Finland, isquickly gaining acceptance as the technologyof choice. New recovery boilers utilizingHERB technology have been ordered by SCA inSweden and Weyerhaeuser in the USA.• JSC Kotlas Pulp & Paper ordered a new sixeffectevaporation plant. This is the first completelynew evaporation plant to be installed inRussia in over a decade.• Based upon their positive experience with theAndritz OPE ® (Overall Production Efficiency)service contract for the white liquor plant attheir Joutseno mill in Finland, Metsä-Botniaexpanded Andritz’s scope to include the entirefiberline.• As a result of its excellent reputation in MDF,Andritz received 14 additional orders during theyear for refining systems – eleven from China,two from Russia, and one from Austria.• Andritz sold two P-RC APMP mechanicalpulping lines to Jiaozuo and Ningxia Meiliin China, a refiner system to Norske Skog inBrazil, a complete RTS line to Germany, andan upgrade of conventional Thermo-MechanicalPulping (TMP) to RTS energy-saving technologyto Norske Skog in France.• Andritz will provide the complete chip impregnationsystem and a complete bleaching, washing,and drying line for M-real’s new BCTMP millto be built in Kaskinen, Finland.• Fiber preparation systems were sold to HolmenPeninsular of Spain, Shandong Huatai of China,and Perlen Paper of Switzerland. The strongmarket position of the FibreFlow ® Drum wasunderscored by additional orders from the USA,Korea, Finland, Spain, and China.• Andritz will supply another CrescentFormertissue machine and stock preparation equipmentto Hengan in China. This is the thirdconsecutive installation of an Andritz machineby Hengan. The ICT Group of Italy has alsoordered a CrescentFormer machine and stockpreparation for its greenfield mill to be built inSpain.27ANDRITZ 2004

BUSINESS AREASPULP AND PAPERWOOD PROCESSING DIVISIONPROFILE> The Wood Processing Division is a globalmarket leader for the supply of systems,equipment, and processes for all stepsrequired in a woodyard — from receivinglogs to their subsequent preparationinto wood chips — for the production ofchemical and mechanical pulps.The Wood Processing Division is basedin Hollola, Finland and also has operationsin Brazil, Canada, Sweden, and theUSA.Forestry & Paper Co., and ShandongZhongmao Shengyuan. Also, several ChineseMDF mills confirmed the Division’s expertise byordering wood handling systems.• The Division will deliver a wood handling systemto Estonian Cell that will be integrated withmechanical pulping systems from other Andritzdivisions.• Portal crane and circular crane orders havebeen received in Canada from Slocan-LP OSBCorp. and in the USA from Weyerhaeuser.Weyerhaeuser also ordered tree-length debarkinglines for two mills in the USA.28Business developmentBusiness activities in the Wood ProcessingDivision progressed favorably during 2004. TheDivision succeeded in maintaining its leading positionin the major markets of Northern and CentralEurope, South America, China, Canada, and theUSA.The woodyard at Celulosa Arauco y ConstituciónS.A.’s mill in Valdivia, Chile reached full productionon schedule early in the year. A successful startupwas also conducted for the wood and chipprocessing plant at Hainan Island, China. In theUSA, a tree-length debarking line was successfullystarted for Weyerhaeuser’s Valliant, Oklahomamill; a stacker/reclaimer was started for InterstatePaper’s Riceboro, Georgia mill; and a circular craneand chipper modernization project was successfullycompleted for Weyerhaeuser’s Oglethorpe,Georgia mill. The first HHQ chipper in the USAwas successfully started up for Sappi Fine Paper’sCloquet, Minnesota mill.Major orders• The Division booked an order for a completewood and chip processing installation in Russiafor SC Arkhangelsk Pulp and Paper Mill.• The Division received a significant debarkingand chipping order from Celulosa Arauco yConstitución’s Itata mill in Chile.• The Division will deliver TMP wood handlingsystems to three mills in China: ShandongHuatai Paper Co., Henan Jiaozuo RuifengDIVISION MANAGERJarmo ViialaHollola, FinlandResearch and DevelopmentJoint R&D with customers is an essential stepin product development when implementing newtechnologies and applications. During 2004, twomajor agreements were signed for the Division toconduct full-scale product tests at customer sites.The first is a cooperation project with a customerin Northern Europe for chip sampling and analysis.Representative chip sampling and reliable analysisare critical elements in chip quality monitoring.In Southern Europe, a project is underway to testthe Division’s RotaBarker debarking technologyon tropical hardwood.ANDRITZ 2004

WOOD PROCESSING DIVISIONBUSINESS AREASPULP AND PAPER29Chipping plantAndritz supplied a complete four-line chipping plant to Jiang Lin pulp mill, Hainan Island, China. The Andritz ChipQuality Package includes chipping with HQ-Chipper, chip screening with JetScreen, and processing of oversizedchips with HQ-Sizer.ANDRITZ 2004

BUSINESS AREASPULP AND PAPERFIBERLINE DIVISION30PROFILE> The Fiberline Division is one of theworld’s leading suppliers of systems,equipment, and processes for the productionof chemical pulp. Productsinclude continuous cooking systems,brownstock washers and screens,bleaching systems, and related equipment.> The Division is headquartered in Kotka,Finland and also has operations in Brazil,Japan, Sweden, and the USA.Business developmentA modernization of the continuous cookingsystem for Lwarcel Pulp in Brazil was successfullystarted up. The project included installation ofa Lo-Level® chip delivery system, a Lo-Solids®cooking technology upgrade, and a retrofit of thedigester.Four projects involving Drum Displacer® (DD)Washers were started up in Russia, Portugal,South Africa, and the USA.The Division started up three sawdust digesters(Canada, Indonesia, and Finland). The deliveries inIndonesia and Finland also included screen roomsand DD Washers.While Western European market activity waslight, activity in the Russian market continued toimprove. The North American market activity forupgrades and system replacements continues at amodest pace. The most active market continuesto be South America, including system modernizations,and capacity expansions of existing and newmills. Sales activity for system upgrades and millexpansions in Japan, China, and Southeast Asiacontinues to be promising.Major orders• The Division will supply a major portion of theorder received from CMPC Celulosa S.A. inChile. Included is a complete EPC fiberline(capacity: 2,405 t/d) with a two-vessel Lo-Solids® digester, TurboFeed chip feeding,high-efficiency DD Washers for washing andbleaching, and the patented A-stage bleachingprocess for reduced chemical consumption.• In addition, the Division will deliver high-efficiencyDD Washers and oxygen delignificationequipment for CMPC’s Laja, Chile mill.• Andhra Pradesh Paper Mills (APPM) in Indiaordered a new fiberline to increase pulpingcapacity at its Rajahmundry mill. The newfiberline will consist of a DownFlow Lo-Solids®cooking system, brownstock washing with DDWashers, two-stage oxygen delignification,deknotting/screening, and ECF bleaching withDD Washers.• In North America, the Division sold a four-stageDD Washer to a Weyerhaeuser mill in Wisconsinand a Lo-Solids® cooking upgrade for a digesterto another major customer. The Divisionwas also selected to supply a customer in theSoutheastern USA with systems for brownstockDIVISION MANAGERJukka SainiemiKotka, Finlandscreening, washing, and oxygen delignificationusing the proven DD Washer technology.• In China, the Division sold a screening systemto Shandong Zhanhua Jingbo.• In Brazil, Lwarcel Pulp ordered the machineryand engineering services for a new washing,screening, and bleaching line.• In Estonia, Horizon Paper ordered a four-stageDD Washer for brownstock washing, a knotseparation system, and advanced process controlsfrom the Division.Research and DevelopmentTechnology development in the Fiberline Divisioncontinues to focus on lowering the investment costper ton of pulp produced. This is being accomplishedthrough process simplification, optimization,standardization, and modularization.ANDRITZ 2004

FIBERLINE DIVISIONBUSINESS AREASPULP AND PAPER31Bleach plantThis ECF bleach plant was supplied for the 1,900 t/d hardwood fiberline at Stora Enso’s Imatra mill in Finland. Thedelivery also included brownstock washing, oxygen delignification, and deknotting/screening.TurboFeed has made the breakthrough andis today the standard solution in chip feeding systemsinto the digester. The new developments ofthe DD Washer show remarkable progress withregard to reliability, washing efficiency, and capacity.These improvements are available for modernizationsand upgrades of existing lines, in additionto new fiberlines.Recent start-ups and sales of the new coarse/fine screening systems (combined unit) is a clearindication of market acceptance of this new product.The combined unit further reduces screenroom costs.The Division is also continuing to focus developmentefforts on MC ® based technology throughoutthe fiberline. Research is ongoing in the developmentof fiberline processes for Southern hemispherewood species. Sophisticated simulationprograms are being utilized to improve upon washingand cooking technologies. Advanced controlsystems for all of the fiberline process areas arebeing developed and tested.ANDRITZ 2004

BUSINESS AREASPULP AND PAPERCHEMICAL SYSTEMS DIVISION32PROFILE> The Chemical Systems Division offerssolutions for pulp mill on-site chemicalpreparation. The main process areasserved by the Division are recausticizing,lime reburning, and white liquor production.The Division is headquartered in Kotka,Finland and also has operations in Brazil,Indonesia, Japan, Sweden, and the USA.Business developmentThe Division’s business activities progressedvery favorably during 2004. Major business activitieswere in the Southern hemisphere, althoughmodernizations of equipment have stimulatedbusiness in market areas worldwide.The recausticizing plant and lime kiln for Arauco’sValdivia mill in Chile were successfully started up inMarch. In April, the chemical recovery island atUPM-Kymmene’s Pietarsaari mill in Finland wentonline. Included in this project was the world’slargest single line white liquor plant (10,000 m 3 /d)supplied by the Division.At the end of July, the 8,000 m 3 /d whiteliquor plant for Zellstoff Stendal in Germany wassuccessfully started up. This greenfield projectincludes two CPR-Filter systems for lime mudfiltration.In the Fourth Quarter, new X-Filter systems forgreen liquor filtration were started up at Södra’sMörrum mill in Sweden.Major orders• The Division received its largest order ever aspart of the multi-Division order from CMPCCelulosa S.A. in Chile. For the Santa Fe mill,the Division will supply a complete EPC whiteliquor plant (including lime kiln).• The Division received an order from ComplejoForestal Industrial Itata to deliver a completewhite liquor plant, including recausticizing andlime reburning.DIVISION MANAGERMarkku KosonenKotka, Finland• The Division was chosen to modernize a limekiln for Billerud Skärblacka, Sweden.• In India, the Division will provide a CD-Filterfor white liquor, an LMD-Filter for lime mud,and a lime kiln burner as part of the capacityexpansion for Andhra Pradesh Paper Mills’Rajahmundry facility.• In Canada, Irving Pulp & Paper ordered a completelime kiln system. This is the first LMD limekiln system to be installed in Canada.Research and DevelopmentThe Chemical Systems Division successfullylaunched new technology for lime mud dewatering– the LMD-Filter. The filter is a compact designbased upon disc filter technology, which reducesemissions from the lime kiln, and is a completelyclosed system so there is no dusting. A largeLMD-Filter was installed at UPM-Kymmene’sPietarsaari mill in Finland and has been operatingwith excellent results.The trend today is toward large “single line”mills, since redundant or repetitive smaller systemsincrease capital and operating costs. The Divisionhas led this development and has active programsto produce larger scale equipment. New, highercapacity X-Filter systems, CD-Filter sizes,slakers, and lime kilns are now commercially available.An example from the Pietarsaari installationis the single, large LMD-Filter (to support 10,000m 3 /d white liquor production) which does the workof two large drum filters.A new lime kiln burner is being developed tomeet the demanding environmental requirementsof modern mills. New equipment for dregs handling(green liquor dregs) is in the final phase ofdevelopmental testing before introduction to themarket.ANDRITZ 2004

CHEMICAL SYSTEMS DIVISIONBUSINESS AREASPULP AND PAPER33LMD-FilterThis LMD-Filter, with Continuous Precoat Renewal (CPR), was delivered to UPM-Kymmene’s Wisaforest mill inFinland. The LMD-Filter is the latest technology for lime mud dewatering. It achieves optimum dry solids and excellentwashing results. This ensures efficient lime kiln operation with low heat consumption and low emissions.ANDRITZ 2004

BUSINESS AREASPULP AND PAPERRECOVERY DIVISIONDIVISION MANAGERHarry RickmanHelsinki, FinlandPROFILE34> The Recovery Division is a global leaderin the supply of systems, processes, andequipment used in chemical recoveryprocesses in pulp mills. The productsof the Division include chemical recoveryboilers, evaporation plants, effluentevaporators, NCG systems, and TMPheat recovery systems.The Recovery Division’s major activitiesare located in Kotka and Varkaus,Finland, with significant operations inBrazil, Sweden, and the USA.Business developmentThe Recovery Division saw a very favorablebusiness development in 2004. Much of the businessactivity was in South America, but marketimprovement in North America and Russia is alsopromising.The evaporation plant for Arauco’s Valdivia mill inChile was successfully started up in March.There is significant customer interest in theAndritz High Energy Recovery Boiler (HERB),which has been a focus of the Division’s R&D programfor several years. The technology has provenitself in commercial-scale installations – mostnotably the recovery boiler at UPM-Kymmene’sPietarsaari mill in Finland. The boiler started up inApril, exactly on schedule. It is rated at 4,450 tonsof dry solids per day, and has the capacity to fire600 MW per day of biofuel with virtually no fossilcarbon dioxide emissions. The next step towardsAdvanced HERB is implemented in the new SCA/Östrand recovery boiler with higher steam valuesto increase the power output.In addition to the Pietarsaari project, the Divisionalso started up the recovery island for ZellstoffStendal GmbH of Germany in July. This recoveryisland is capable of meeting the tightest environmentalregulations using up-to-date technologiesdeveloped by Andritz.In August, the Division started up a rebuilt evaporationplant and new chemical recovery boiler forNeusiedler’s Ruzomberok mill in Slovakia. A newevaporation plant for Mondi Paper’s Richards Baymill in the Republic of South Africa was started upin September.The evaporation plant and recovery boilerrebuilds at Portucel Tejo in Portugal were startedup in October.The recovery boiler at Portucel Soporcel successfullystarted up in December. This projectincluded the first chlorine and potassium removalsystem delivered by Andritz.Major orders• The Division received an order for a new recoveryboiler at Portucel’s Cacia mill in Portugal.The capacity of the boiler is 1,300 tds/d and itwill replace two older, smaller boilers.• A new 3,800 tds/d recovery boiler featuring aVertical Air system is included in the majorEPC pulp mill order from CMPC Santa Fe inChile.• Andhra Pradesh Paper Mills (APPM) ordered arecovery boiler and evaporation plant from thejoint venture Enmas-Andritz in India.• SCA ordered a new 3,300 tds/d recoveryboiler and an evaporation plant retrofit for theirÖstrand mill in Sweden. The boiler will utilizestate-of-the-art HERB technology with highpressure and temperature.• A new recovery boiler for Weyerhaeuser’sValliant, Oklahoma mill in the USA will incorporateHERB technology.ANDRITZ 2004

RECOVERY DIVISIONBUSINESS AREASPULP AND PAPER35Recovery boilerAndritz recovery boiler at UPM-Kymmene’s Wisaforest mill in Finland. It is a High Energy Recovery Boiler (HERB)designed for 103 bar/505°C and provides high energy output at minimal emissions.ANDRITZ 2004

BUSINESS AREASPULP AND PAPERRECOVERY DIVISION36• Metsä-Botnia’s Kaskinen mill in Finland selectedAndritz to retrofit an existing recovery boiler.• JSC Kotlas Pulp & Paper of Russia ordered anew six-effect evaporation plant. This is thefirst new evaporation plant to be installed inRussia in over a decade.• Weyerhaeuser ordered a recovery boilerupgrade for their Springfield, Oregon mill in theUSA.• JSC Neusiedler Syktyvkar ordered a recoveryboiler retrofit for their Syktyvkar mill in Russia.• Frantschach Swiecie in Poland ordered anupgrade to its existing Andritz evaporation plantto increase the dry solids content of the blackliquor to 80%.• VCP in Brazil selected Andritz to perform themodernization work for its evaporation plantand recovery boiler at the Luiz Antonio mill.Research & DevelopmentChloride removal is becoming more importantas mills close their chemical circulation loops toreduce emissions to the environment. A new, lowcost alternative for Ash Recrystallization (ARC)using a leaching process is being developed. Theleaching process removes chlorine from the fly ashof the recovery boiler. Pilot tests at the Wisaforestmill in Finland are demonstrating the successof this process for removing chlorides from thechemical circulation in the pulp mill.Another increasing need is the ability to split thesteam condensates from the evaporation processinto separate streams in order to facilitate theirproper reuse or treatment. A development studyhas been conducted by the Division to improve thecalculation model for condensate segregation andto predict the quality of secondary condensate inorder to meet performance guarantees.The new giant evaporation plant at UPM-Kymmene’s Wisaforest mill in Pietarsaari is thefirst one in the world having a steam condensateoptimization to four fractions using integrated condensatesegregation allowing most effective re-utilizationof the condensates in mill processes.Intensive material research has been continuedto select safe and cost-effective constructionmaterials for evaporators. Research has especiallyconcentrated on selecting materials for evaporatorsoperating at high concentrations and temperatures.Development of software to model the heattransfer and fluid streams of the recovery furnace(CFD Modeling) is continuing in order to predictfurnace behavior and performance. The accuracyof CFD Modeling has been compared with fieldmeasurements and the pre-processing time hasbeen cut in half.The Division has done considerable developmentwork to minimize emissions from recoveryboilers (particularly NO x emissions) and to improvethe reliability and safety of the boiler. The chemicalrecovery boiler at UPM-Kymmene’s Pietarsaari millincluded several innovations. The Andritz VerticalAir System for the first time includes a two-levelspraying arrangement of black liquor. This willfurther decrease NO x emissions in the flue gas.Also, a virtual dynamic simulator was included inthe recovery boiler plant delivery. The simulation isso realistic that operators cannot tell the differencebetween a simulated operation and the actualprocess.ANDRITZ 2004

PULP MILL SERVICES DIVISIONBUSINESS AREASPULP AND PAPERDIVISION MANAGERRisto HämäläinenSavonlinna, FinlandPROFILE> The Pulp Mill Services Division encompassesthe service activities for theWood Processing, Fiberline, ChemicalSystems, and Recovery Divisions.Primary emphasis is on the productionefficiency of woodyards and kraft pulpmills, and the availability of processequipment, whether supplied by Andritzor other equipment manufacturers.Today, there is more emphasis on OverallProduction Efficiency (OPE®) of a mill’smachinery throughout its lifetime. TheDivision provides services for continuousimprovement and optimization ofmill operations, as well as field services,rebuilds and upgrades of equipment, andreplacement parts or engineered wearproducts.The Division is headquartered inSavonlinna, Finland. It is managedthrough Regional Centers and operatesthrough service centers worldwide inall important pulp producing countries.Production facilities for rebuilds arelocated in Austria, Finland, and the USA.The Division also partners with externalworkshops in other locations around theglobe.Business developmentThe Division’s business has developed satisfactorily.There was continued strong demand for servicesin North America, especially for HQ Plusknifesystems for woodyard chippers (recently introducedto the North American market), recoveryboiler services, and woodyard services.Andritz services were enhanced by acquiringthe smelt pumping service business from KaakonTeollisuuspalvelu Oy of Finland. Andritz previouslywas a licensee of the company’s technology forNorth and South America.Acutest Oy, which was acquired in 2003, wasmerged into the Division as a specific productgroup, supporting the OPE® service business.The acoustic emissions condition monitoring technologyfrom Acutest will be utilized to support theLife Cycle Management concept offered by Andritzfor different processes.Major orders• Significant orders for recovery boiler rebuildsand upgrades were received from customersin diverse geographies. For example, theCRISOBA mill in Mexico ordered a VerticalAir System upgrade, Georgia-Pacific orderedupgrades for two mills in the USA, and VisyPulp & Paper selected the Division to performan air system upgrade for their boiler in Tumut,Australia.• The Division signed agreements with Metsä-Botnia’s Joutseno mill in Finland for maintenanceservices and development. Based upontheir positive experience with Andritz OPE® inone process area (white liquor plant), Metsä-Botnia expanded Andritz’s role to include theentire fiberline.• Several HQ Plus chipper knife systems werestarted up in wood processing operations.UPM-Kymmene’s Wisaforest mill in Finlandasked the Division to expand its service to bothof the mill’s chipper lines. In the wood processingarea, several significant debarking drumrebuild orders were also received.37ANDRITZ 2004

BUSINESS AREASPULP AND PAPERPULP MILL SERVICES DIVISION38• A large boiler monitoring system based onAcutest ® technology was awarded to Andritzfor VCP’s Luiz Antonio in Brazil. This is thesecond Acutest® installation in South America,showing global acceptance of this technology.• The Division was selected to supply a displacementwashing upgrade for the digester systemat the MeadWestvaco mill in Wickliffe, Kentucky,USA. This delivery will include the first set ofnew diagonal digester screens sold in NorthAmerica.• Andritz’s burner technology for lime kilns wasselected by APP of Indonesia. New burners willbe supplied for five lime kilns in the company’sPerawang and Jambi mills.Research and DevelopmentDevelopment work in diagnostics and conditionmonitoring continues, with the primary focus onapplications for specific Andritz process equipment.The goal of the development program is tocombine data from the condition monitoring equipmentwith certain data collected from the processes,to optimize efficiency from both a maintenanceand operations view.New applications for Acutest® technology arebeing researched and developed. A program tooptimize the performance and adjustment of DDWasher seal elements is one of the most recentexamples. This optimizes washer performancewhile simultaneously reducing start-up time andlife cycle costs.To support and supplement the OPE® concept,new development agreements with customerswere introduced. These agreements increasecooperation between customers and Andritz toimprove both the production process and themachinery. This cooperation utilizes Andritz’scomplete knowledge and experience – from allrelevant Andritz Divisions.The development and testing of two new style(step-in and tapered) digester screen plates continues.The step-in design simplifies the additionof new screen rows to existing digesters or thereinstallation of screens that had been previouslyremoved. The tapered design may allow for anincrease in the circulation or extraction flow for agiven amount of open screen area. Both of thesedesigns have been sold and installed on Andritzcontinuous cooking systems. The early operatingdata is extremely positive.Many smaller improvements for existing equipmentwere developed to improve the customer’sprocess. Examples include new wash pipingsystems for filter washers and the cleaning ofrotating wires. An example for recovery boilers isthe patented cleaning device for secondary andtertiary air ports.ANDRITZ 2004

PULP MILL SERVICES DIVISIONBUSINESS AREASPULP AND PAPER39Service for improved production efficiencyAndritz offers customers its expertise in continuously optimizing the performance of process equipment to maintain orimprove overall production efficiency of mills. Here, an Andritz service engineer works on optimizing a DD Washer atStora Enso’s Kotka mill in Finland.ANDRITZ 2004

BUSINESS AREASPULP AND PAPERMECHANICAL PULPING SYSTEMS DIVISIONDIVISION MANAGERWolfgang LashoferVienna, Austria(since January 1, 2005)40PROFILE> The Mechanical Pulping SystemsDivision is a leading global supplier ofcomplete systems for producing highqualityand high-brightness mechanicaland chemi-mechanical pulps for paperand board production and high-qualityfibers for Medium Density Fiberboardand Particleboard producers.The high-efficiency pulping technologyis based on proprietary RTS (Retentiontime, Temperature, and Speed) refiningand alkaline P-RC APMP (Preconditioning-RefinerChemical / AlkalinePeroxide Mechanical Pulping) processes.Equipment for washing and high-consistencybleaching makes the Division acomprehensive supplier of systems solutionsfor mechanical pulping.The Division operates through its headquartersin Vienna and Graz, Austria,as well as locations in Canada and theUSA. The Division’s research laboratoryand pilot plant in the USA is a completelyequipped and independently certifiedprocess research facility.Business developmentIn a move to better support customer needswith focused solutions, the Mechanical PulpingSystems Division has recently been reorganized.Pulp dewatering and drying systems had grownto the extent that it became a separate Division,enabling Mechanical Pulping Systems to increaseits focus on its core technologies.The Division successfully completed the HCbleach plants for MD Paper in Plattling, Germany,StoraEnso in Veitsiluoto, Finland, and HolmenPaper in Wargön, Sweden. Another twin wirepress was also installed at Holmen Paper’s mill inHallstavik, Sweden.Twin wire press washing systems were successfullycommissioned for Lenzing, Austria, andJiangmen Paper in China.P-RC APMP systems were started up successfullyfor Shandong Tralin Paper, ShandongChenming, Yueyang Paper of China, and Tembec’sMalette mill in Canada.The RTS system, bleaching line, and heatrecovery system for CMPC Papeles in Chile wasstarted up successfully. Another RTS systemwas completed for Solikamsk in Russia.A total of 17 MDF refining systems were successfullystarted up in China for several differentcustomers. In addition, two MDF start-ups inTurkey and the start-up of an MDF production linein Russia were completed in 2004.Major orders• The Division will supply, in cooperation with theWood Processing and Pulp Drying SystemsDivisions, a complete hardwood chemimechanicalmarket pulp mill – including woodyard,chip handling, impregnation, refining,bleaching, dewatering, drying, and pulp balingsystems – to be built in Kunda, Estonia. Themill will use proven Andritz P-RC APMPtechnology to produce a variety of market pulpgrades from aspen wood. Andritz will supply allthe major production systems.• The Division will supply the complete chipimpregnation system, bleaching, and washingsystems as part of the multi-Division order fromM-real for a greenfield Bleached Chemi-ThermoMechanical Pulp (BCTMP) mill to be built inKaskinen, Finland.ANDRITZ 2004

MECHANICAL PULPING SYSTEMS DIVISIONBUSINESS AREASPULP AND PAPER41RefinerThe high-speed refiner depicted is part of the new RTS-TMP line supplied to Cartulinas CMPC S.A. in Maule, Chile.It is a key element of the pulping system which produces fiber for paperboard from local pine wood resources. In additionto the new mechanical pulping line, the Andritz delivery included a high-consistency bleach plant, a heat recoverysystem, and an existing machinery upgrade program.ANDRITZ 2004

BUSINESS AREASPULP AND PAPERMECHANICAL PULPING SYSTEMS DIVISION42• Four new P-RC APMP plants were sold toChinese producers – Jiaozuo Paper, NingxiaMeili, Zhongmao, and Xinya Paper.• Norske Skog in Golbey, France ordered a conversionof its existing TMP refining system toadvanced RTS technology. Norske Skogalso ordered a complete new RTS line fortheir Walsum, Germany mill.• A contract for two RTS-TMP pulping lineswas awarded by Kondopoga of Russia.• UPM Caledonian of Scotland ordered a conversionof its bleach plant to state-of-the-art highconsistencyperoxide (PHC) bleaching. M-realof Finland ordered bleaching equipment for itsreject refining line in Joutseno.• Refining systems were sold to BowaterNewsprint of Calhoun, Tennessee andWeyerhaeuser of Springfield, Oregon in theUSA; Norske Skog in Pisa, Brazil; Tann PapperDunyavaros in Hungary; Holmen Paper’sBraviken, Sweden mill; and Quingsha Paper ofChina.• Upgrade orders were received for a TMP rejectsystem at Norske Skog in Albury, Australia; achip washing system at Södra Cell’s Folla mill inSweden; and MSD Impressafiners for sawdustmoisture control at Georgia-Pacific’s Wauna,Washington mill in the USA.• As a result of its reputation and rapidly growingbase of MDF installations, the Division receivedeleven additional orders from Chinese MDFproducers, one from Austria, and three largeupgrade orders from customers in Luxembourg,Poland, and Germany.Research and DevelopmentThe Mechanical Pulping Systems Division focusesits development activities on the broader use ofmechanical pulps in paper and board production,minimizing operating costs in the mill, and reducingenvironmental impact.As production increases worldwide, a shortageof conventional wood resources (spruce, aspen)can be foreseen in certain regions for the nearfuture. The Division has developed technologiesand equipment to process alternative raw materialssuch as different species of pine and a varietyof hardwoods (eucalyptus, acacia, birch, andmaple). The goal is to maintain the Division’stechnical leadership in advanced processes suchas P-RC APMP and RTS-TMP refining, RTpretreatment, and PHC bleaching.In chemi-mechanical pulping, the R&D programis concentrated on mill-scale optimization of theadvanced P-RC APMP process, which hadbeen successfully started up in two mills in Chinaand one in Canada. All results that had beenachieved in pilot plant work were confirmed orsurpassed in actual mill operation.New pre-treatment and high-consistency refiningtechnologies were developed to allow, for thefirst time, the use of alternative wood species (pine)in the RTS-TMP process. Pulps of very highquality have been produced with these processes,and specific energy consumption has beenreduced 20–30% compared to standard TMP.Major drivers in equipment development areproductivity improvements and increased productioncapacities. The mechanical availability andease of maintenance for refiners and dewateringmachines have been improved. An ongoing programto standardize equipment and manufacturingprocesses has resulted in improved quality ofthe machinery, reduced delivery times, and lowerinvestment costs.Due to the development of new screen baskets,the production capacity and dryness achieved byscrew presses have been significantly increased.Customer requirements include sophisticatedprocess control. The new Andritz BleachCommander uses modeling and predictive controlstrategies to better control the bleaching process– minimizing quality deviations and maximizingthe production of “on-grade” pulp. Chemicalconsumption is optimized to the target brightness,which reduces bleaching costs.The acquisition of a majority stake inCyberMetrics, a supplier of online sensors forfiber quality monitoring, will further enhance theDivision’s ability to offer advanced measurementand control strategies for mechanical pulping inthe future.ANDRITZ 2004

PULP DRYING SYSTEMS DIVISIONBUSINESS AREASPULP AND PAPERPROFILE> The Pulp Drying Systems Division isthe leading global supplier of completesheet drying lines comprising screening,dewatering, drying, sheet cutting, andbale finishing systems. These systemsare offered separately or as a completelyintegrated line for the production of marketpulp. Capacities over 3,500 t/d withworking widths up to 9.3 m in a singleline are available.The Division also supplies wet lap systems,flash dryers, and bale forming (slabpress) equipment, as well as finishinglines. As part of its services, the Divisionalso modernizes pulp drying lines toincrease production, quality, and usefullife.The Division is headquartered in Graz,Austria and has locations in Canada andSweden.Business developmentIn order to better focus on customers needs,Pulp Drying Systems was newly organized as aDivision within Paper Mill Technologies in 2004.The Division works in close cooperation with theother Divisions to meet customers’ requirementsfor drying and finishing pulp (mechanical, recycled,or chemical pulp) and uses synergies in sheetforming, dewatering, pressing, and drying with theTissue Machines Division.The world’s largest high-speed cutter for asingle-line pulp machine (9.3 m sheet width) wassuccessfully started up at the Jiang Lin Pulp Mill inChina. New systems for automated tail threadingto the cutter/layboy were successfully started upat a mill of Mondi Paper in the Republic of SouthAfrica and the Jiang Lin mill in China.Major orders• The Pulp Drying Systems Division will contributethe Single-Line Drying Package (including FläktDryer) to the multi-Division order from CMPCCelulosa S.A. in Chile. When completed, theplant will be among the largest in the world,rated at up to 2,560 t/d production and a workingwidth of 9.23 m.DIVISION MANAGERKarl HornhoferGraz, Austria(since January 1, 2005)• The Division will supply the complete dryingline for M-real’s new BCTMP mill to be built inFinland. This technology is the most efficientflash drying system available today.• An upgrade to the world’s largest pulp dryingline at a pulp mill in Hainan, China was orderedby the mill to increase production from 3,000 to3,250 t/d.• The Division will provide the flash drying andbaling line for the greenfield chemi-mechanicalmarket pulp mill of Estonian Cell to be built inKunda, Estonia.• A fiberboard plant drying system (Twin Wiretechnology) was sold to Pavatex AG inSwitzerland.Research and DevelopmentTechnology development in the Pulp DryingDivision continues to focus on lowering the investmentcost per ton of pulp produced. The mainR&D thrust is to produce a single drying line witha production of 4,000 t/d (1,000,000 t/y) basedupon the successful Twin Wire Former technology.In addition, development is underway to continuallyimprove the machinery’s uptime througheasy/fast sheet threading and process conditionmonitoring.A highly sophisticated process simulator basedon Andritz’s process simulation technology fromIDEAS for the entire sheet drying line has beendeveloped. This is used for operator training andDCS check-out prior to start-up. This simulationapproach is proven to deliver fast productionramp-ups after the line is started. The simulatoralso contributes to continuous optimization of theplant.Work is progressing on improving the Andritzslab press, which is an advanced developmentbased on the successful Nilsen design acquiredin 2004. The first commercial installation of thispress will be at the Estonian Cell greenfield millbeing built in Kunda, Estonia.43ANDRITZ 2004

BUSINESS AREASPULP AND PAPERPULP DRYING SYSTEMS DIVISION44Pulp drying plantThis pulp drying plant was delivered to Jiang Lin pulp mill, Hainan Island,China. It is the largest single-line pulp drying plant worldwide, with aworking width of 9.3 m and a capacity of 3,250 t/d.ANDRITZ 2004

FIBER PREPARATION SYSTEMS DIVISIONBUSINESS AREASPULP AND PAPERDIVISION MANAGERSJarmo HäkkinenKotka, FinlandChristian PedratscherGraz, AustriaPROFILE> The Fiber Preparation Systems Divisionis a global supplier of systems, processes,and equipment for the provision offiber for all papermaking processes suchas recycled fiber processing, fiber stockpreparation, paper machine approachsystems, broke handling, sludge andreject handling, and internal water loophandling in the paper mill.The Division has its headquarters inGraz, Austria and Kotka, Finland withsignificant operations in China and theUSA.Business developmentBusiness of the Division developed very favorablyin 2004. The most active markets for the Division’sproducts were in Central Europe and China.The majority of the systems and equipmentordered by customers in 2003 were started upsuccessfully in 2004. This includes the stock preparationsystem for Jian Hui Paper Co. in China andthe 400 t/d deinking line at Vipap Videm Krško inSlovenia. FS-Karton of Germany has also taken anew 200 t/d deinking line into daily operation. Theline provides furnish for the top layer of a multi-plyboard grade. A complete new OCC line at Cartieradel Polesine in Italy was successfully started.Also of note are two Chinese start-ups: a completenew deinking line for newsprint production atNanping Paper; and a complete stock preparationsystem for Yanzhou Tian Yuan Paper (Sun Paper),which includes newly developed FibreSolvepulpers and Papillon LC refiners.The rebuild of a deinking line for P.T. Aspex ofIndonesia was completed. The project includedthe start-up of a new SelectaFlot flotation deinkingsystem.Major orders• Holmen Paper Peninsular of Spain, UPM-Kymmene of Finland, and Shandong Huataiof China ordered key equipment for their newnewsprint machines, including the market leadingFibreFlow ® Drum pulper and Andritz dewateringpresses for pulp and sludge.• Perlen Papier, Switzerland, awarded the Divisionan order for a major upgrade of an existingDIP line, including SelectaFlot flotation andModuScreen screening systems.• The strong market position of the FibreFlow ®Drum was underscored by additional ordersfrom the USA at SP Newsprint and AmericanFiber Resources. In addition, the Divisionreceived orders for FibreFlow ® Drums to bedelivered to Korea and Finland.• Also in the USA, World Waste Technologieswill install a unique and patented system torecover aluminum, plastics, and cellulosefiber from municipal solid waste. World WasteTechnologies selected the Division to providethe major components for their recycled fiberlineat the facility.• In cooperation with the Tissue Machines45ANDRITZ 2004

BUSINESS AREASPULP AND PAPERFIBER PREPARATION SYSTEMS DIVISION46Division, the Fiber Preparation Systems Divisionwas successful in winning orders for completestock preparation and approach systems ormajor upgrades at Thüringer Hygiene Papierand Procter & Gamble, Germany; ShandongHengan Paper, China; and ICT Iberica, Spain.• Also, Holmen Paper Peninsular, Spain; AlSindian Paper, Egypt; Shandong Huatai, China;and Norske Skog Albury, Australia awardedorders for paper machine approach systems tothe Division.Research and DevelopmentThe success of a recycled fiberline or stockpreparation system is based on the right integrationof sub-processes such as pulping, screening,cleaning, flotation, dispersion, bleaching, and refining.It is important to have a pilot plant to run trials– upon customer request and for internal productdevelopment. A major investment by the Divisionin 2004 was the extension of the pilot plant in Graz,Austria so that it can run full-line trials. The Divisionis now able to offer full-line trials for all recycledfiber and stock preparation sequences and comprehensivetesting of different process steps.In addition to the pilot plant, the Division focusedits development activities on optimizing new products(e.g. SelectaFlot flotation, CompaDisdispersion, and Papillon LC refining).Also, the Division was engaged in the completeredevelopment of conventional equipment (suchas LC/HC pulpers to reduce energy consumptionand widen the operating window; and theRotoWash “screen” which is now equipped withelectron beam drilled baskets for ash washing andfiber recovery).After extensive research in paper machineapproach systems, the new ShortFlow conceptwas introduced. ShortFlow reduces spacerequirements, lowers investment and operatingcosts, and increases the flexibility of a paper,board, or tissue machine.Extensive development work is underway todesign a complete water handling system from thepaper machine back to the pulper.ANDRITZ 2004

FIBER PREPARATION SYSTEMS DIVISIONBUSINESS AREASPULP AND PAPER47Screening plantThis screening plant is part of the complete stock preparation line supplied by Andritz to Cartiera del Polesine in Italy.The mill produces board grades from the recycling of old corrugated containers.ANDRITZ 2004

BUSINESS AREASPULP AND PAPERTISSUE MACHINES DIVISIONPROFILE> The Tissue Machines Division providesmodern tissue machines includingCrescentFormers with conventionalpress configurations, Through-Air Drying(TAD) technology, and machines withthe patented TissueFlex* ) shoe press.Ventilation and drying systems for tissueand other paper and board gradescomplement the product portfolio.The Tissue Machines Division is headquarteredin Graz, Austria with locationsin Canada, Sweden, and the USA.DIVISION MANAGERRudolf GreimelGraz, Austria* ) Trademark of Voith48Business developmentGold Hong Ye, Suzhou, China set a new speedrecord for CrescentFormers with an Andritz tissuemachine. In January 2004, the machine ran at2,100 m/min for five consecutive days producing13.2 gsm facial tissue. A second Andritz machineat the mill also achieved a speed record of 2,060m/min producing 17.5 gsm toilet paper. The additionof the patented Andritz PrimePickup devicein the former section of both machines improvedrunability considerably.The current world speed record is also held byan Andritz CrescentFormer tissue machine, at PT.Lontar Papyrus, Jambi, Indonesia. In December2004, a 32-hour high-speed run was performed ata continuous speed of 2,110 m/min (product: 13.5gsm facial tissue). Andritz tissue machines nowcome first, second, and fourth in the internationalspeed rankings for CrescentFormers.Andritz started up its first 200” wide PrimeTADthrough-air drying production system with anannual capacity of 80,000 tons, in January 2005.Production is already ahead of the projected rampup curve. The TAD technology applied is a newAndritz development.Just 17 months after contract signing, a newwet-crepe tissue machine started up at SCA’sgreenfield tissue mill in the USA (Barton, Alabama).The machine has a total capacity of 110,000 t/ygiving the highest specific production worldwide.Andritz was selected by Procter & Gambleto modernize a tissue machine at the Neuss,Germany mill. The aim of the retrofit, which wasstarted up in June 2004 after only ten days ofrebuild activity, was to increase machine speedand improve paper quality. The Andritz scope ofsupply comprised a new approach flow system, anew headbox, a “speed-up package” in the wetsection, web stabilizing equipment, and an Andritzdust removal system in the dry end.An EquiDry F high-temperature hood supplied byAndritz to German Papierfabrik Gebr. Grünewald’sKirchhundem mill is responsible for a productionincrease of more than 25%. After one year ofoperation with the new Andritz hood, the machinehas become one of the highest capacity machinesin Europe producing machine-glazed paper.A new PrimeLine CrescentFormer tissuemachine equipped with a TissueFlex shoe pressfor Thüringer Hygiene Paper GmbH of Germanysaw first paper on the reel in December 2004.The machine is installed at a greenfield site andwill produce 30,000 t/y of high-quality toilet andtowel paper.ANDRITZ 2004

TISSUE MACHINES DIVISIONBUSINESS AREASPULP AND PAPER49Tissue machineThis wet-crepe tissue machine was delivered to SCA Tissue North America in Barton, AL, USA. With an annual capacityof 110,000 tons, the Barton machine has the highest specific tissue production worldwide.ANDRITZ 2004

BUSINESS AREASPULP AND PAPERTISSUE MACHINES DIVISION50The Andritz Fiber Drying group in Växjö, Swedenis positioned to capitalize on hall ventilation projectsfor mechanical pulping and pulp drying linesaround the world. This is another result of Andritz’sposition as a full-line supplier of systems and processesfor the pulp and paper industry.The Division provides engineered services, suchas machine surveys and machine optimizationrecommendations. An example of optimizationservices are the PrimeDry TCS (TemperatureCoating Surface) measurements on the Yankeecylinder of a European tissue manufacturer’s TADmachine. Recommendations based upon thesemeasurements helped the mill improve the Yankeecrowning curve considerably, which had a positiveimpact on the runability of the TAD machine.Major orders• The Division received an order to supplyanother CrescentFormer tissue machine, includingstock preparation equipment, to Hengan,a leading manufacturer of high-quality tissueproducts in China. The new machine will bethe third consecutive installation of an Andritztissue line for Hengan. It will be erected at agreenfield site in Shandong Province. The newmachine will produce 60,000 t/y of high-qualityand very soft tissue paper.• The ICT Group of Italy has placed an order forthe supply of a new CrescentFormer tissuemachine and stock preparation system. Themachine will be installed in Pozuelo de Alarcon,Spain. This is the second greenfield projectoutside of Italy for ICT. The first project, inPoland, also included an Andritz machine.• In the market for drying equipment outsideof tissue production, Andritz Fiber Drying inSweden received orders for a paper machinehood and air systems from Holmen PaperPapelera Peninsular in Spain (newsprint production),and from Voith for Adolf Jass in Germany(board production).• Andritz Fiber Drying in Canada will deliver a wetend mist removal system, Yankee hood withprocess air system, and tissue machine dustremoval system to CMPC’s Talagante mill inChile. From Familia Sancela in Colombia, theunit received an order of similar scope.Research and DevelopmentFor optimum “hands-on” operator training, theTissue Machines Division developed a tool to providedynamic simulation of all mass and energyflows in a TAD plant. Operators can virtually runthe future paper production line and change settingsin a safe, virtual environment.The patented TissueFlex shoe press has beenproven in eleven installations around the world.One of its latest features is Machine Direction (MD)shoe movement for the highest operational flexibility.This additional functionality of the shoe pressresults in gaining more bulk, or achieving higherpost-press dryness, giving the operator more flexibility.A further development of the reel with linearprimary and secondary arms is the centerwindassist drive in the secondary arm. A centerwindreel is mainly used in TAD machines to retain thebulk of heavyweight tissue and towel grades.The new PrimeReel Centerwind controls verylow nip loads sufficient for crease-free winding.Furthermore, it allows winding of larger diameterrolls to increase productivity.A stable sheet run in the area between thecreping doctor and reel is critical to runability. TheTissue Machines Division developed a system ofsheet run components, such as air or dust deflectors,suction headers, active headers with lowsheet contact, and guiding/stabilizing foils. Thenew PrimeRun system ensures better runability,especially with lightweight tissue at high machinespeeds.ANDRITZ 2004

PAPER MILL SERVICES DIVISIONBUSINESS AREASPULP AND PAPERDIVISION MANAGERHumbert KöflerVienna, Austria(since January 1, 2005)PROFILE> The Paper Mill Services Division encompassesthe service activities for theMechanical Pulping Systems, FiberPreparation Systems, and Pulp DryingSystems Divisions. Primary emphasisis on establishing service partnershipswith customers to increase the overallproduction efficiency and availability ofprocess equipment.The Division offers solutions to increasethe reliability, efficiency, and availabilityof equipment while also providinginnovative upgrades, engineered wearproducts (Durametal® refiner plates andAndritz Fiedler screen baskets), automationproducts, and modernization programs.The headquarters for the Paper MillServices Division is Vienna, Austria. TheDivision is managed in major geographicregions, each with at least one servicecenter equipped to provide responsiveservice to local customers. Durametal®refiner plates are manufactured in Muncy,Pennsylvania, USA, while the manufacturingof Andritz Fiedler screen basketsis performed in Regensburg, Germany(center of competence) and Brantford,Ontario, Canada.Business developmentThe Division developed favorably in 2004,with customer projects mainly concentrating onmo dernizing and reducing production costs inpaper mills.Customer requirements to measure processparameters and product quality were the drivingforce behind Andritz’s purchase of controlling interestin CyberMetrics, a research and developmentcompany in the USA specializing in online measurementsensors and other instruments. This willconsiderably strengthen Andritz’s advanced refinerprocess control systems.EMS, the new joint venture of Andritz andRheinhold & Mahla, offers long-term maintenanceand service contracts based upon key performanceindicators that are considered most importantto each customer facility. Depending on thescope of the service contract, significant economicsavings can be obtained for the customer. EMSwill assume responsibility for maintenance managementfor a production area within a mill, or acomplete mill.Major orders• Innovations introduced to the market, not onlyfor Andritz equipment but also for competitors’equipment, enabled the Division to secure severalorders for rebuilding competitors’ refiners.The Division completed six Twin Refiner modernizationcontracts in Central and NorthernEurope, and further rebuilds of mechanicalpulping lines in North America to increase productivityand reliability of the machines.• UPM-Kymmene’s mill in Steyrermühl, Austriaentrusted the Division with a modernizationcontract for a FibreFlow® drum, an upgrade ofthe bleaching plant to improve the process conditions,and a shaft exchange to extend the lifeof a Hedemora filter.51ANDRITZ 2004

BUSINESS AREASPULP AND PAPERPAPER MILL SERVICES DIVISION52• Several high performance screen basketsand screen rotors were started up in variousscreening lines worldwide. Nine Dragon Paperin China selected Andritz Fiedler as the mainsupplier of engineered wear products for theirscreening lines and expanded the service contractfor Bar-Tec wedgewire screen baskets.The packaging paper producer APP Ningboin China, and the American printing and writingpaper producer MeadWestvaco Corp. inWickliffe, Kentucky, awarded the Division withmodernization orders to improve screening performance.• The high performance and very low energy consumptionof LemaxX Spiral refiner plate technologyfor low-consistency refiners convincedseveral customers, such as Neusiedler SCPa.s. Ruzomberok in Slovakia and FrantschachSwiecie S.A. in Poland, to sign annual contractsfor refiner plate deliveries.• Aylesford Newsprint Ltd. in the UK ordered acomplete service and modernization for theirKvaerner washer drums. International Paper inPine Bluff, Arkansas, USA ordered a modernizationof their Bauer screw press to improveperformance and reliability.Research and DevelopmentIntensive efforts to combine the technology ofthe Andritz FiberSentry and the former HeinrichFiedler Strong-Bar© screen baskets has led to thecreation of a new wedgewire basket. The product,known as the Bar-Tec wedgewire basket, willbe introduced to customers in the First Quarter of2005.Another development in the field of engineeredwear products is conical refiner plates. The firstmill trial of the design was very successful. In thisspecific case, plate life is excellent (3,350 operatinghours), as is pulp quality.Development programs for mechanical pulpingfocused on a versatile new sealing system,comprehensive modular machine diagnostics toenhance condition-based service strategies, andupgrades to allow production increases of TMP atlower specific energy.Several new techniques for equipment optimizationwere investigated: pulper upgrades for virginfiber and broke; and cleaner plant rebuilds (TC 133vortex control) for both Andritz and other manufacturers’equipment.One example of an innovation to reduce maintenancecosts is the SCP shaft machining device.This enables customers to repair and rebuild ascrew press shaft without dismounting the shaftfrom the press – saving time and the cost of havinga replacement shaft in inventory.Together with Acutest, the Division developeda new condition monitoring system for the slowlyrotating bearings in a twin wire press. The sensorscontinuously monitor the lubrication condition ofthe bearings. Defects are detected at a very earlystage to avoid unplanned shutdowns.ANDRITZ 2004

PAPER MILL SERVICES DIVISIONBUSINESS AREASPULP AND PAPER53Service for a large refinerIn 2004, Andritz once again serviced the large refiner installed at NSI Golbey, France. With Andritz’s preventivemaintenance program, the system maintains state-of-the-art technology with consistent improvements.It has been operating at highest availability since 1990.ANDRITZ 2004

BUSINESS AREASROLLING MILLS ANDSTRIP PROCESSING LINESLEITER DES GESCHÄFTSBEREICHS54ROLLING MILLSAND STRIPPROCESSING LINESAnnealing and pickling lineAnnealing and pickling line for cold-rolled strip supplied to Baoxin StainlessSteel, China. Production: approx. 180,000 t/y of stainless steel; strip widths:650–1,350 mm; strip thicknesses: 0.3–3.0 mm.ANDRITZ 2004

ROLLING MILLS ANDSTRIP PROCESSING LINESBUSINESS AREASBUSINESS AREA MANAGERPeter GravertVienna, Austria55ANDRITZ 2004

BUSINESS AREASROLLING MILLS ANDSTRIP PROCESSING LINES56PROFILE> The Rolling Mills and Strip ProcessingLines Business Area designs and buildscomplete lines for the production andfurther processing of cold-rolled stainlesssteel, carbon steel, and non-ferrousmetals. These lines consist of equipmentfor cold-rolling, surface treatment,strip coating and finishing, stamping anddeep drawing, and acid regeneration.The expertise and key equipment aredeveloped in-house and manufactured atthe Business Area’s own facilities.The Andritz Group is the only singlesourcesupplier capable of providing alltechnologies and processes involvedin the manufacturing of stainless steelstrip (cold rolling, annealing, pickling,and finishing) on a comprehensive basis(mechanical, process, and electricalequipment). This ensures minimizedinterfaces and takes the interdependenciesof the overall process into consideration.The assets of Otto Kaiser GmbH,acquired in 2004 and now called “AndritzKaiser”, enable the Business Area toextend its range of equipment for the“downstream” area of strip finishing.The products and technology portfolioof Andritz Kaiser are a valuable supplementto the existing product range andstrengthen the Business Area’s strategicfocus on value-added steel strip production.Market developmentThe year 2004 was characterized by continuedhigh demand for steel and stainless steel products,mainly as a result of strong demand from China.World consumption of finished steel has risen by7.7% to approximately 950 million tons in 2004.The stainless steel market developed likewise,with global consumption of stainless steel growingby 7% to approximately 24 million tons in 2004.China continued to lead the growth of global(stainless) steel consumption and production.Prices for cold-rolled steel and stainless steelproducts increased steadily during the reportingperiod and remained at a very high level until theend of the year. Capacity utilization was at a veryhigh level throughout the whole year even thoughcapacities increased quite steeply.Project activity was almost solely concentratedon China (including Taiwanese, Korean, andEuropean investments in China), where severallarge projects, especially in stainless steel, weredecided. Andritz was able to secure a large shareof orders for stainless steel plants, thus confirmingits leading market position in this area. In NorthAmerica and Europe, only selective investmentswere made.The measures of the Chinese government toslow down over-investment in some industries likecement or steel led to a delay of some projectsfrom new private companies. However, projectsof established steel producers continued asplanned.Sources: ISSF, IISIThe Rolling Mills and Strip ProcessingLines Business Area operates throughthe following companies: Andritz AG,Austria; Andritz-Ruthner, Inc., USA;Thermtec B.V., Netherlands; SundwigGmbH, Germany; Andritz Selas S.A.S.,France; Andritz Technologies Pvt.Ltd., India; and Andritz Kaiser GmbH,Germany. There are manufacturing andassembly facilities in Graz, Austria, andHemer and Bretten, both in Germany.Business developmentSales of the Rolling Mills and Strip ProcessingLines Business Area in 2004 increased significantly.At 235.4 MEUR, Sales surged by 36.0%compared to 2003 (173.1 MEUR). This favorabledevelopment is mainly due to the execution of therecord Order Backlog as of the end of 2003.EBITA also developed very favorably in 2004.At 12.1 MEUR, it almost tripled compared to2003 (4.4 MEUR), which was affected by a tem-ANDRITZ 2004

ROLLING MILLS ANDSTRIP PROCESSING LINESBUSINESS AREASporary capacity under-utilization in one of theBusiness Area’s product segments. Profitabilityalso showed a positive development, with EBITAmargin increasing to 5.1% in 2004 (2003: 2.5%).The Business Area’s Order Intake in 2004 was266.7 MEUR, a decrease of 7.3% compared tothe record level achieved in 2003 (287.6 MEUR).However, several orders were announced in theThird Quarter 2004 which will become effectivein the First Quarter 2005. The main portion ofthe Order Intake came from China, amounting toapproximately 71% of the Business Area’s totalOrder Intake in 2004.Major orders• Chinese Taigang Group placed an order to supplythe world´s largest annealing and picklingline for cold-rolled stainless steel strip. Theplant will have an annual capacity of 500,000tons and will be installed at Taiyuan Iron andSteel Co. Ltd., Taiyuan Shanxi, China. With thisorder, Andritz further strengthens its positionas a leading technology supplier for completestainless steel processing lines. In addition,several orders for strip processing lines (tensionlevelers, recoiling lines), including mechanicaland electrical equipment, were obtained.• SeAH Steel Group, Seoul, South Korea ordereda 6-high cold-rolling mill which will be deliveredin spring 2005. This mill will roll carbon steelup to 1,360 mm width at a maximum speed of1,400 m/min. The line is equipped with a POS(Process Optimization System).• The Business Area will supply two sophisticatedinspection lines for steel strip for automotiveapplications to Wuhan Iron & Steel (Group)Corporation, Changqian, Quingshang, Wuhan,China. In addition, Andritz received an orderfrom this customer to supply a very specialhydrochloric acid regeneration plant with a twinreactor design, with a total capacity of 15,000 l/h.• Hunan Valin Iron & Steel Group of the Hunanprovince in China ordered an hydrochloric acidregeneration plant with waste acid purificationand silicon pre-sedimentation. Capacity of thisplant is 10,000 l/h.• The Business Area received an order fromShanghai Krupp Stainless (SKS), a joint ventureof Thyssen Krupp Stainless and ShanghaiPudong Iron & Steel Company Ltd. (subsidiaryof Baosteel Group), to supply a hot-stripannealing and pickling line for stainless steel57KEY FIGURES ROLLING MILLS/STRIP PROCESSING LINESMEUR 2004 2003 2002 2001Sales 235.4 173.1 177.4 167.4Order Intake 266.7 287.6 175.7 196.3Order Backlog as of 31.12. 293.1 265.4 154.0 159.2EBITDA 14.3 6.6 11.1 8.7EBITDA margin 6.1% 3.8% 6.3% 5.2%EBITA 12.1 4.4 8.5 6.1EBITA margin 5.1% 2.5% 4.8% 3.7%Capital investments 3.2 1.4 1.6 3.4Employees as of 31.12. 736 533 642 562ANDRITZ 2004

BUSINESS AREASROLLING MILLS ANDSTRIP PROCESSING LINES58strip. The line will have an annual productioncapacity of approximately 440,000 tons.Equipment delivery is scheduled for the end of2005 and production of the first strip is plannedfor the summer of 2006.• Andritz also received a large follow-up orderfrom Lianzhong Stainless Steel, a member ofTaiwanese Yieh Group, for the extension of thenew stainless steel mill in Guangzhou, China.In 2003, Andritz had received an order to buildthe world’s largest stainless steel hot stripannealing and pickling line for the same customerand that project is currently underway.The recent order relates to a stainless steelcold strip annealing and pickling line with acapacity of approximately 250,000 t/y. Deliveryis scheduled for August 2005, with productionof the first strip expected in July 2006. Inorder to regenerate the waste mixed acids ofthese lines, the customer additionally ordereda Pyromars plant, which will recover nitric acidand fluoric acid.• For the automotive plant joint venture of Mazdain China on the island of Hainan, Andritzreceived the first cut-to-length line which willbe implemented together with Jier Company, aChinese press manufacturer.• JISCO, a steel company in the northwesternChinese province Gansu, signed a contractwith Andritz for the supply of a complete stainlesssteel strip manufacturing plant, consistingof several rolling mills, two pickling andannealing lines, and several slitting, cutting andprocessing lines. The contract was split up inan engineering part which came into force inDecember. The supply contract for the equipmentwill probably follow in 2005, after receivingall necessary approvals from the Chineseauthorities.Research and DevelopmentIn 2004, R&D activities focused on productimprovements to further strengthen the competitiveadvantage of processes offered to customers.The mixed acid recovery system has been optimizedto increase the nitric-acid recovery rate, aswell as the water balance between stainless steelpickling lines and acid recovery plants.A previously started project on alternative corrosion-resistantcoatings has been continued, withspecial focus on zinc/chromium- and zinc/magnesium-coatingsto reduce the zinc-layer thicknessfor improved laser weldability in the automotiveindustry.Implementation of the IDEAS simulation softwarewas successfully started by creating a static massbalance model of the acid recovery plant.The filter systems for 20-high rolling mills havebeen further improved and are now offered asstandardized product. The roll and strip coolingsystems of 4-high and 6-high rolling mills havebeen optimized for improved flatness of the producedstrip.New advanced coater technology has been successfullyinstalled and commissioned for a line ofthe Austrian steel producer voestalpine. With thistechnology, Andritz once again underscores itsleading position in high-precision color coating.ANDRITZ 2004

ROLLING MILLS ANDSTRIP PROCESSING LINESBUSINESS AREAS59Annealing and pickling line/FurnaceThis furnace supplied by Andritz affiliate Thermtec is part of the annealing and pickling line for cold-rolled strip deliveredto Shanghai Krupp Stainless Steel, China. Production: approx. 290,000 t/y of stainless steel; strip widths: 800–1,340mm; strip thicknesses: 0.3–3.0 mm.ANDRITZ 2004

BUSINESS AREASENVIRONMENT AND PROCESSBUSINESS AREA MANAGERSFrom left to right:Luc Gilbert Vélizy, FranceOlaf Jansen Graz, AustriaJohannes Kappel Graz, AustriaArmin Vonplon Wohlen, Switzerland60ENVIRONMENTAND PROCESSDecantersThese six D7LL decanters were supplied to Sungai Semenyih, Kuala Lumpur,Malaysia, one of the largest drinking water treatment plants in SoutheastAsia. Sungai Semenyih uses the decanters to treat the drinking water sludgeas a result of the rising ecological awareness of the Malaysian government.ANDRITZ 2004

BUSINESS AREASENVIRONMENT AND PROCESS61ANDRITZ 2004

BUSINESS AREASENVIRONMENT AND PROCESS62PROFILE> The products of the Environment andProcess Business Area cover a comprehensiverange of technologies and servicesfor mechanical and thermal solid/liquid separation.The Business Area is a global leaderin this field and offers comprehensivesupport from design to manufacture ofkey components for sludge thickening,dewatering, drying, and incineration aswell as erection and start-up of turnkeyplants, including automation and safetyengineering. The installed base of morethan 10,000 centrifuges is serviced fromnine dedicated service centers in Europe,the USA, and Asia.Customers are offered a wide range ofthermal dryers, decanters, rotating filters,belt presses, and filter presses to servemajor industries such as coal and mineralprocessing, chemical/petrochemical,and food processing.For the industrial and municipal waterand wastewater treatment markets, theBusiness Area offers a large range ofscreens, sieves, and sand filters. For thetreatment of sludges, the product rangeencompasses gravity and rotary thickeners,decanters, belt and filter presses aswell as belt, drum, and fluidized bed dryers.The Business Area operates through itsheadquarters, Andritz AG, in Austria andthe following affiliates: Andritz-Ruthner,Inc., Andritz Bird Inc., and Andritz FilterPress, USA; Andritz Separation GmbHand Andritz Filtrationstechnik GmbH,Germany; Andritz Fließbett SystemeGmbH, Germany; Andritz S.A.S., France;Andritz Ingeniería S.A., Spain; AndritzTechnologies Ltd., China; AndritzSeparation Industria e Comércio deEquipamentos de Filtracâo Ltda. andAndritz Brasil Ltda., Brazil; AndritzSeparation Private Limited, India; AndritzLtd., Great Britain; Andritz Jochmans.r.o, Slovakia; Andritz Pty Ltd., Australia;Andritz Singapore Pte. Ltd., Singapore;and Andritz 3Sys AG, Switzerland.Production and service facilities formachines and components are locatedin Graz, Austria; Châteauroux, France;Cologne, Germany; Singapore; Foshan,China; Den Helder, Netherlands;Pittsburg, Texas; Scott Depot, WestVirgina; Houston, Texas; Lakeland,Florida, all USA; Pomerode, Brazil;Spišská Nová Ves, Slovakia; Chennai,India; and Saskatoon, Saskatchewan,Canada.Market developmentOverall, the market for sewage sludge treatmentdeveloped satisfactorily during 2004, howeverwith a marked difference between dewatering anddrying. While the centrifuge market showed solidproject activity throughout the year, the projectsituation for thermal sludge treatment systemsdidn’t recover until the Fourth Quarter.For industrial applications, project activity wasvery brisk due to the boom in the petrochemical,mining, mineral, and palm oil industries. Due to thebroader product range as a result of the acquisitionsof Bird Machine and NETZSCH Filtration, theBusiness Area was able to secure high bookingsin this area.The municipal dewatering market remainedmoderate in North America and Western Europe.Project activity in the municipal market in EasternEurope, Russia, and other CIS countries graduallypicked up during 2004, although below expectations.Certain Asian markets, especially China,showed increased growth.ANDRITZ 2004

BUSINESS AREASENVIRONMENT AND PROCESSKEY FIGURES ENVIRONMENT AND PROCESSMEUR 2004 2003 2002 2001Sales 217.9 110.4 122.8 135.3Order Intake 200.7 110.2 147.7 140.6Order Backlog as of 31.12. 138.3 113.8 122.6 99.7EBITDA 12.6 3.3 2.8 9.0EBITDA margin 5.8% 3.0% 2.3% 6.7%EBITA 9.9 1.5 1.0 7.2EBITA margin 4.5% 1.4% 0.8% 5.3%Capital investments 7.9 1.5 1.9 1.9Employees as of 31.12. 926 428 439 435Project activities for sewage sludge drying plantsfocused on North America and Western Europe.A new EU directive banning the disposal of sewagesludge to landfills is starting to have a positiveinfluence on the demand for advanced treatmenttechnologies such as thermal drying and incineration.Major projects are underway in Eastern andSouthern European countries. Also, the NorthAmerican market for dryers has improved.Business developmentIn 2004, the Environment and Process BusinessArea broadened its product range and technologyknowledge through the acquisition of BirdMachine, the NETZSCH Filtration business, andthe fluidized bed drying systems Business Areaof VA TECH WABAG. As a result, the BusinessArea is now one of the world’s leading suppliersof industrial and municipal dewatering and dryingtechnologies.The acquisition of Bird Machine from BakerHughes, Inc. in the USA added a full rangeof R&B filter presses, Bird KHD/Humboldt solidand screen bowl centrifuges, and special BirdHumboldt Young Filters to the product portfolio ofthe Business Area.The NETZSCH Filtration business added processknowledge for fully automated filter pressesas well as for the palm oil processes to the productportfolio. In addition, NETZSCH Filtration has anexcellent market presence in Southeast Asia andSouth America, which will be used to sell otherproducts of the Business Area.The acquisition of VA TECH WABAG’s fluidizedbed drying systems further enhances the comprehensiverange of drying technologies. The BusinessArea is the global market leader in bio-solids drying.Through this acquisition, the Business Areaexpanded its activities into the chemicals and foodindustry markets.Sales of the Business Area increased significantlyin 2004. As a result of organic growth and theacquisition of Bird Machine, NETZSCH Filtration,and VA TECH WABAG’s fluidized bed drying systemsBusiness Area (all three companies were notincluded in last year’s financial statement), Salesalmost doubled to 217.9 MEUR (2003: 110.4MEUR).Sales of Bird Machine, NETZSCH Filtration, andVA TECH WABAG’s fluidized bed drying systemsBusiness Area together amounted to approximately93 MEUR in 2004.63ANDRITZ 2004

BUSINESS AREASENVIRONMENT AND PROCESS64In 2004, Andritz again confirmed its leading positionas a supplier of centrifuges for sewage sludgetreatment, reaching another record number ofcentrifuges sold.As a result of increased Sales and positiveEarnings contributions from the newly acquiredcompanies, EBITA increased to 9.9 MEUR (2003:1.5 MEUR). EBITA margin improved significantlyfrom 1.4% in 2003 to 4.5% in 2004.Development of the Business Area’s Order Intakewas mainly influenced by the newly acquired companies,adding approximately 94 MEUR to theBusiness Area’s total Order Intake of 200.7 MEUR(2003: 110.2 MEUR).Major orders• Large orders were obtained for fine coal dewateringvia centrifuges, filter presses, and hyperbaricfilters for Iran and Russia, as well as forfilter presses for titanium dioxide plants in theUkraine.• For a Russian cement factory, Andritz will deliverfive large filter presses to convert the mill from awet to a semi-wet process in order to increaseproduction.• The boom in the petrochemical industry led tothe receipt of a significant number of orders forPTA, PVC, HDPE, and melamine processingcentrifuges in China, Brazil, and the USA.• The municipality of Bremen ordered Andritzcentrifuges for the dewatering of municipalsludge.• Long-term service contracts for multiple centrifugeinstallations were signed with the City ofNew York, the City of Singapore, as well as withHaliburton.• The Business Area booked major orders formunicipal sludge dryers from Pierce County,Washington; Bonita Springs, Florida; Winston-Salem, North Carolina; and Encina, California,all in the USA; Schwenk Zement AG, Germany;the City of Strasbourg, France; and the City ofYeoSu, South Korea.Research and DevelopmentThe R&D focus for dryers was to further developthe range of Belt Drying Systems (BDS). Newsizes were developed and an entire new designbased on a full concrete casing was successfullyintroduced to the market with three ordersreceived at the end of 2004.The new drive system for centrifuges has successfullyproven its long-term reliability. Marketingstarted in the Second Half of 2004 and resulted inthe sale of four centrifuges with the new system.A medium-term program has started in orderto rationalize and standardize the former Andritz,Bird, and Humboldt products. This programincludes modernization of designs as required.Research work continued in order to broadenthe applications for centrifuges.A value engineering program has been startedto merge the filter press designs of Ritterhaus &Blecher and NETZSCH Filtration.ANDRITZ 2004

BUSINESS AREASENVIRONMENT AND PROCESS65Drum dryingThe drum drying plant (1 line, DDS 20) in Sandown, England turns digested sewage sludge into pasteurizedgranulate with a dry solids content of 92%. Evaporation capacity of the plant is 2,000 l/h.ANDRITZ 2004

BUSINESS AREASFEED TECHNOLOGY66FEEDTECHNOLOGYFeed expanderAndritz supplied two Sprout-Matador process lines (30 t/h) for AarhusegnensAndel’s highly advanced feed mill in Galten, Denmark. The feed expander(photo) is part of this delivery.ANDRITZ 2004

BUSINESS AREASFEED TECHNOLOGYBUSINESS AREA MANAGERHarald HeberEsbjerg, Denmark67ANDRITZ 2004

PROFILEBUSINESS AREASFEED TECHNOLOGY68PROFILE> The Feed Technology Business Areais a global market leader for supplyingmachines and systems, pellet mill consumables,dies and rolls, and other servicesto the animal feed industry, the petfood industry, and the fish and shrimpfeed industries. The Business Area alsoholds a leading position in fast-growingniche markets for wood fuel pelleting,pelleting of agricultural and industrial byproducts,and household waste.The Business Area has a central managementand operates from three mainsites:• Esbjerg, Denmark: the center for newequipment and spare parts (R&D, engineering,production, and procurement ofprocess equipment and parts).• Geldrop, the Netherlands: the centerfor consumable parts (R&D, engineering,and production of replacement dies androlls for pellet mills, and beaters/hammersfor hammermills).• Muncy, Pennsylvania, USA: the centerfor sales and service in North America(dedicated R&D, engineering, in-housemanufacturing, and procurement entitiesfor certain equipment and replacementparts).The Business Area operates from tenregional sales and service offices. It issupported by a strong network of distributorsand sub-suppliers.Market developmentThe global animal feed market developed verymoderately in 2004. Investment activities in largeplant and expansion projects were mainly focusedon Eastern Europe and South America. Largeprojects in North America and Western Europe,as well as Asia were few and slow moving. Asianinvestments were negatively affected by the avianinfluenza. Western European investments weremostly modernizations and technological upgradesin connection with production plant consolidations.In the aquatic feed segment, project activity withinwarm water and marine species has increased.The salmon industry is still facing relatively lowprices, leading to cautious investment activity infeed plants.The project activity for plant expansions andgreenfield projects with regional pet food producerswas good throughout the year. Larger producersmade few investments in process technology.The market for environmentally-friendly biofuelpellets, mainly from wood, continued to developfavorably in Western Europe, strongly driven bypower plants converting to “green” energy fuels.This has led to increasing investment activities inpelleting plants in the forestry regions of Northernand Eastern Europe, as well as in North America.Pelleting projects in support of improved combustionof waste from households and industriesremained at a modest level throughout the year.ANDRITZ 2004

BUSINESS AREASFEED TECHNOLOGYBusiness developmentDue to the moderate market conditions andnegative translation effects resulting from thestrength of the Euro against the US dollar, Sales ofthe Business Area in 2004 increased only slightlyto 99.6 MEUR (2003: 99.2 MEUR). Excludingexchange rate effects, Sales would have increasedby approximately 2% compared to 2003.Earnings developed unsatisfactorily. Due tocosts of approximately 2.4 MEUR relating to therestructuring of the Business Area and translationeffects as a result of the weak US dollar, EBITAdropped to 2.2 MEUR in 2004 (2003: 4.8 MEUR).The restructuring should result in annual Earningsimprovements of 2.0 MEUR, starting from themiddle of 2005.The Business Area’s largest-capacity feed pelletinglines installed in Asia and South America weresuccessfully commissioned during the year.Order Intake in 2004 decreased to 92.0 MEUR(2003: 102.0 MEUR). This is mainly due to theweak US dollar and the limited number of largerorders for complete systems.Major ordersThe Business Area secured a number of animalfeed plant modernization and expansion projectsin Eastern Europe and South America.• A large number of orders for process machines– pellet mills, expanders, and other products –were received from integrated meat producersin these regions.• An increasing number of orders for extrusionkey machines were awarded from European petfood industries and producers of feed for warmwater fish in Southern Europe and Asia.• Larger orders for wood pelleting systems werereceived in Sweden, the USA, Russia, andLatvia.Research and DevelopmentR&D activities focused on further developingexisting products, simplifying maintenance ofequipment, increasing the service intervals ofproducts, and also standardization of products.A new generation of pelleting line control systemswas developed together with an updatedversion of SM 32 Supervisory Control and DataAcquisition (SCADA) software.In the area of pellet mill consumables, improvementswere made in the alloys used and heattreatment of parts due to the investment in newheat treatment furnace technologies.69KEY FIGURES FEED TECHNOLOGYMEUR 2004 2003 2002 2001Sales 99.6 99.2 108.4 107.0Order Intake 92.0 102.0 104.7 112.6Order Backlog as of 31.12. 16.0 24.5 23.5 27.6EBITDA 5.1 7.4 6.1 4.7EBITDA margin 5.1% 7.5% 5.6% 4.4%EBITA 2.2 4.8 4.2 0.9EBITA margin 2.2% 4.8% 3.9% 0.9%Capital investments 1.6 6.6 5.4 6.7Employees as of 31.12. 482 549 609 676ANDRITZ 2004

BUSINESS AREASHYDRAULIC MACHINES/OTHER OPERATIONS70HYDRAULICMACHINES/OTHEROPERATIONSPump impellerImpeller for one of the pumps supplied by Andritz for the water supply plants ofHong Kong and Shenzen, China. The pumps are the largest units with adjustablevanes manufactured by Andritz to date (average impeller diameter: 1,950 mm).ANDRITZ 2004

HYDRAULIC MACHINES/OTHER OPERATIONSBUSINESS AREASBUSINESS AREA MANAGERManfred WörgötterGraz, Austria71ANDRITZ 2004

BUSINESS AREASHYDRAULIC MACHINES/OTHER OPERATIONS72PROFILE> The Hydraulic Machines/OtherOperations Business Area encompassesthe development, planning, and manufactureof water turbines, large-scalepumps for selected applications, pumpsfor the primary and secondary loopsin nuclear power stations, centrifugalpumps for the pulp and paper industry,as well as space technology components.The main markets are Europe andAsia.Market developmentMarket conditions in Austria for the BusinessArea’s main product – water turbines – improvedconsiderably in 2004 over previous years. Therewere several larger modernization, rebuild, and serviceprojects as well as new investments. Projectactivity was also on the rise in the mini-power sector,involving projects below 10 MW.In China, investment and project activitiesremained at a high level. There is a trend toincrease the local portion of supplies for projects.On a number of promising turbine projects, Andritzcooperates with Chinese manufacturers acting asthe supplier of engineering and key components.Business developmentSales of the Hydraulic Machines/Other OperationsBusiness Area developed favorably in 2004, increasing36.9% to 43.8 MEUR (2003: 32.0 MEUR). Thisis mainly due to the high Order Backlog at theend of 2003 and the positive development of theAndritz-Kenflo joint venture in China.EBITA increased to 3.8 MEUR (2003: 3.3MEUR).Order Intake of the Business Area reached arecord level in 2004, surpassing the record set in2003 by 57.4%. Order Intake was 58.7 MEUR,compared to 37.3 MEUR in 2003. Major ordersfor water turbines and stock pumps were the maindrivers for this successful development. The 60:40joint venture Andritz-Kenflo once again increasedthe number of stock pumps sold to paper mills,reaching a new record level.In the area of turbines and pumps, the revisionof Tanzmühle pump storage plant for the Germanutility company E.ON was completed on scheduleand to the customer’s full satisfaction. The storageplant was restarted in March. As a result, theBusiness Area was able to book several follow-uporders in this market segment.The first orders were received from Switzerlandfor Pelton runners manufactured with a new technique(milled from a single forged piece), and forautomation systems.Sales of centrifugal pumps in Europe developedbetter than expected, especially in the Germanmarket. The Business Area has entered theRussian and Brazilian markets with centrifugalpumps, and the first results are quite positive.In China, the 60:40 joint venture Andritz-Kenflohas further strengthened its market leadership,winning nearly all stock pump contracts awardedin 2004. In addition, the first ten pumps for fluegas desulphurization systems were sold in China,where this sector has been steadily growing overthe past few years.The services business in 2004 again proved tobe a strong pillar of the Business Area’s operations.Rebuilds and modernizations of waterturbines and turbine governors, spare parts fornuclear power stations, and centrifugal pumps forANDRITZ 2004

HYDRAULIC MACHINES/OTHER OPERATIONSBUSINESS AREASKEY FIGURES HYDRAULIC MACHINES/OTHERSOPERATIONSMEUR 2004 2003 2002 2001Sales 43.8 32.0 29.3 26.0Order Intake 58.7 37.3 28.3 28.6Order Backlog as of 31.12. 40.7 27.2 21.5 22.6EBITDA 5.5 3.2 7.4 2.3EBITDA margin 12.6% 10.0% 25.3% 8.9%EBITA 3.8 3.3 5.8 -0.1EBITA margin 8.7% 10.3% 19.8% n.sp.Capital investments 2.4 1.7 2.6 0.9Employees as of 31.12. 365 302 277 246the pulp and paper industry accounted for a bigportion of total Order Intake.Major orders• The Business Area received orders for engineeringand the supply of key components forlarge bulb turbines at Chinese power stations.• Verbund Austrian Hydropower (AHP) awardedan order to refurbish four Kaplan turbines atAschach hydropower station to a cooperativeventure formed by Andritz and Voith Siemens.These turbines were the largest of their kind inEurope when they were installed in 1964.• Two pit turbines will be supplied and installedby the Business Area at Pichlern power stationof Ennskraftwerke, Austria.• A horizontal Pelton turbine will be supplied tothe Ganeu power station, Austria. GermanE.ON awarded an order for the rehabilitation ofReisach pump storage plant in Germany.Research and DevelopmentThe cooperation for many years with ASTRÖ(Institute for Hydraulic Research) concentrating onthe advancement of hydraulic components continuedin 2004. The development of top hydrauliccomponents featuring efficiencies which are considerablysuperior to competitive equipment hasessentially contributed to the successful sale of anew headbox pump.Achievements in optimizing hydraulic equipmentfor turbines have been confirmed by several ordersfrom different customers, most recently by theorder for the Aschach power station.A new test stand for Pelton equipment will soonbe operational. This investment was made in connectionwith a focus on Pelton turbine developmentinitiated two years ago.Other development activities focused on centrifugalpumps for the pulp and paper industry, afield which is expected to grow substantially.73ANDRITZ 2004

GLOBAL SERVICES/ACTIVITIESANDRITZ AUTOMATIONAUTOMATION74Automation equipment is a fast growing businesssegment of the Andritz Group. The mainassignment of the Andritz Automation team is tofocus internal and external competence and experienceto support Andritz production technologies.Three hundred thirty (330) engineers at 23 Andritzsites worldwide are responsible for automation andthe smooth running of Andritz technologies andproducts.The integration of new companies generatesadditional competencies in automation. To ensurethat the engineers are trained on the latest hardwaretechnologies and software skills, employeesattended seminars and training programs.Research and DevelopmentAndritz Automation works on automation solutionsto improve processes and plants from a technicaland economic point of view. R&D projectsfocus on advanced control strategies and specialsensors for Andritz technologies to further improvethe quality of products and the efficiency of theengineering processes.In support of the Refiner Commander, a newmodular automation system for refiner control, theRefiner Protection System (RPS) was launched.The system increases the life of refiner plates.More than 15 units sold since the launch show thesuccess of this innovative product.Short start-up times and product changes duringproduction require new control strategies of plantsand machines. The Advanced Process Controldevelopment based on MPC (Model PredictiveControl) is a main goal of Andritz’s R&D activities.Two Advanced Process Control projects, onefor flatness control in rolling mills and the other inbleaching plants, are in the practical test phase.The proven experience of IDEAS Simulation andCyberMetrics enhances the overall competencein this field.MIS (Multi-Ingredient Scan), a sensor platformwhich identifies quality parameters of fluids usingspectography and provides controllers with inputdata from online measurements, has successfullyfinished the pilot tests on customer sites.Business developmentAndritz Automation will provide the engineering,medium- and low-voltage equipment, automation,simulation, installation, and start-up of the systemsfor CMPC’s Santa Fe project in Chile.Arkhangelsk Pulp and Paper mill in Russiaordered a complete low-voltage electrification andprocess control system.Celulosa Arauco currently operates the world’slargest debarking and chipping lines for eucalyptusat its Valdivia mill. Andritz delivered a dedicatedcontrol system to meet the high capacity demandand the challenging quality needs of the customer.Due to the success of this installation, Araucochose Andritz as a supplier for their Itata project.The delivery includes a process control systemand special electrical motors.ANDRITZ 2004

GLOBAL SERVICES/ACTIVITIESANDRITZ AUTOMATIONAndritz received further DCS (Dedicated ControlSystem) orders for the P-RC APMP plants to beinstalled at Estonian Cell’s mill in Kunda, Estoniaand Zhongmao’s mill in China.Automation for pulp mills reached a record volumeof new orders. These deliveries include totalelectrification, automation, and instrumentation forall major processes: fiberline, recovery, white liquorplant, and pulp drying. Deliveries of the RBS-Z20(Recovery Boiler Safety System) were made toZellstoff Stendal in Germany, SPC Ruzomberokin Slovakia, and Portucel Soporcel in Portugal.By the end of the year, three more orders werereceived.An Advanced Process Control Model of therecovery boiler furnace was integrated into a simulatorat UPM-Kymmene’s Pietarsaari mill in Finland.Two additional deliveries were ordered by othercustomers during the year.Andritz Automation’s activities in the field of processsimulation and staging have been very successful.At the Pietarsaari mill, an excellent startupof the recovery boiler was achieved due to thefact that the control system was checked out withan IDEAS simulator prior to actual start-up.Further deliveries for simulation include:• Arauco, Itata, Chile: pulp mill simulator forrecovery, recausticizing, lime kiln, and whiteliquor production areas.• CMPC, Santa Fe, Chile: pulp mill simulator andsimulation for all major areas.• Shell Canada, Canada: steady-state modelsfor project feasibility study of a major oil sandsplant expansion.• Enbridge Pipelines, Canada: control valve optimizationstudies and optimum control strategyto reduce costs for Trans-Canada pipelines.Andritz has also strengthened its position as anautomation integrator for steel strip processing andslitting lines in Asia. Data exchange with productioncontrol and ERP systems, in addition to electricdrive equipment and Level 2 process control,was delivered for plants of WISCO in China andSEAH in South Korea. Andritz Advanced ProcessControl solutions were implemented in all stainlesssteel plants delivered by Andritz.75ANDRITZ 2004

GLOBAL SERVICES/ACTIVITIESHUMAN RESOURCES76HUMANRESOURCESAs of December 31, 2004, the Andritz Grouphad a total of 5,314 employees (2003: 4,771). This11.4% increase, mainly due to the acquisition ofBird Machine, the NETZSCH Filtration business,VA TECH WABAG’s fluidized bed drying systemsBusiness Area, and Otto Kaiser, was partly offsetby staff adjustments in some Business Areas.Of the total, 1,205 are Andritz AG employees(2003: 1,173) and 4,109 work for other AndritzGroup companies (2003: 3,598).During 2004, the staff in the Chinese locationsincreased steadily as Andritz continued its strategyto establish a strong local organization in this fastgrowingmarket.All vacancies in managerial and other functionswere filled with highly qualified candidates. Tosecure staffing for future projects, the Group hasbeen actively recruiting for positions to be filled in2005.To attract well-educated personnel, the Groupintensified its contacts with universities in Austriaand Finland, and participated in job fairs organizedby those universities.Activities in 2004During the year under review, the implementationof the Group-wide management training programwas continued with success. Twenty-two employeesfrom twelve different Andritz Group companiesparticipated in the second module of the AndritzManagement Challenge Program, organized incooperation with the Management Centre of St.Gallen, Switzerland. Participants were impressedby the program and gave very good feedback.After some minor adjustments to the program,another session was conducted in October 2004,with 20 managers from ten different locations participating.Managers from new subsidiaries wereinvited to participate in order to assist with a quickand smooth integration in the post-acquisitionphase.Approximately 25 employees participated ina Group-wide Conflict Resolution Managementprogram.In addition to Group-wide training activities, localtraining programs were held in all major Groupcompanies.Human Resources activities with a Group-wideimpact were coordinated globally, with a focus onmajor projects involving employees from departmentsand Divisions in different geographic locations.Employees by region 2004 (2003) [%]Other 5 (2)China 5 (3)United Kingdom 1 (1)Netherlands 3 (3)France 4 (4)Denmark 3 (5)Human Resources activities were conducted inaccordance with the Group’s Quality Managementsystem.Austria 23 (25)Germany 18 (13)Northern Europe 17 (24)North America 21 (20)ANDRITZ 2004

GLOBAL SERVICES/ACTIVITIESMANUFACTURING AND SOURCINGMANUFACTURINGAND SOURCINGThe Andritz Group operates 15 manufacturingplants in Europe, North America, and China.These sites concentrate on the production of keycomponents for Andritz equipment and systems.Manufacturing facilities in Finland were reorganized.The workshops in Varkaus and Hollolawere sold to partner companies who will continueto serve Andritz.A highly qualified labor force with long-termexperience and state-of-the-art production systemsensure high product quality and reliable, onscheduleorder execution.Concentrating on key competenciesKey components are manufactured and assembledat Andritz’s own workshops to ensure thatcustomer requirements and contractual obligationsare met. In-house manufacturing accountsfor approximately 45% of the overall Andritz manufacturingvolume. The remaining portion is sourcedfrom qualified sub-suppliers who are subjected tocontinuous quality and progress monitoring.Managing workloadOutsourcing is one tool Andritz uses to manageworkload. In addition, a temporary workforce isutilized to cope with fluctuations. At several manufacturingsites, measures have been agreed uponwith the works councils to implement more flexibleworking hours.Shorter lead times and on-time productionShort lead times and on-time production arecritical to success in the businesses Andritz manages.Continuous monitoring ensures that performancein these areas is maintained at a high level.In 2004, several projects were implemented to furtherreduce lead times at the manufacturing sitesin Graz, Austria; Savonlinna, Finland; Regensburg,Germany; and Geldrop, Netherlands.Major developments in 2004Due to the high Order Intake for the AndritzGroup in 2004, workload for the Andritz manufacturingfacilities reached a record level. Workloadwas especially high at the sites in Graz, Austria;Savonlinna, Finland; Cologne, Germany; and thetwo sites in China.Comprehensive optimization measures were initiatedat Andritz Fiedler, a specialist in manufacturingscreen baskets for fiber screening. AndritzFiedler production sites in Alpharetta, Georgia inthe USA, and Plžen in the Czech Republic wereclosed and the screen basket manufacturing inRegensburg, Germany was modified to enable acontinuous production flow. This led to a substantialincrease in productivity and capacity and to animprovement in on-time performance.The manufacturing facility in Cologne, Germany,acquired with the purchase of Bird Machine,was reorganized to specialize in manufacturingand servicing high-quality centrifuges for industrialapplications.Consumables production for pelleting equipment– previously handled by four manufacturing sites –was concentrated at a newly erected, state-of-theartfacility in Geldrop (Netherlands). Manufacturinghas successfully started at this new facility, whichis the world’s largest production of replacementdies for pellet machines.Andritz Technologies’ new manufacturing centerin Foshan, China has also started operations.In view of the rising order volume in this region,the production capacity of the center is beingexpanded.With the acquisition of the assets of Otto Kaiserin the autumn of 2004 another manufacturing sitewas added to the Group. The facility in Bretten,Germany specializes in manufacturing and assemblinglarge presses up to 360 tons.77ANDRITZ 2004

GLOBAL SERVICES/ACTIVITIESBUSINESS PROCESS MANAGEMENTBUSINESS78PROCESSMANAGEMENTThe strong growth of the Andritz Group over theyears has added a wide variety of organizationalprocedures and IT systems. This creates a challengefor inter-company integration of BusinessAreas, which is an increasingly important goal. In2002, Andritz established a centralized function tofocus on these issues and to standardize essentialbusiness processes where needed. This includesthe implementation of the business processeswithin a common IT structure.Need for a Group Enterprise ResourcePlanning (ERP) systemA detailed study within Andritz identified severaldifferent and local ERP systems in use. Most ofthose systems had been used for a number ofyears and do not fulfill the long-term requirementsof the Andritz Group. Given the global activities ofthe Business Areas, the Andritz Group made thedecision to change to a global ERP system.ASAP – Andritz towards global SAPFollowing the decision to establish one globalERP system and after choosing the vendor (SAP),a project was established under the name of ASAP(Andritz towards global SAP). The project wasofficially started at the end of the First Quarter of2004.Since then, about 50 team members have beenworking on the definition and harmonization of theASAP Business Processes. The task has been todetermine how the essential business processes– from sales and project execution to procurement,manufacturing, service, and finance – will besupported by SAP in the future.Goals of the new ERP systemThe main goal of the new Andritz Global ERPsystem is to support the business activities asefficiently as existing systems do today, with theadded advantage of being able to function globallyfor all Andritz organizations. This global systemwill facilitate Group integration, common globalbusiness, integration of new acquisitions, andorganizational flexibility.The global ERP system will enable globalresource sharing, reduction of inventories, poolingof functions (i.e. accounting, purchasing, etc.),automation of inter-company business, andimproved financial overview and reporting. Risks– and therefore costs – for IT system operation areexpected to decrease since there will be just oneglobal system to be maintained and updated.It is anticipated that the global ERP system willresult in improved customer service, which will giveAndritz a competitive advantage.Major project stepsAfter defining the relevant business processes,the ASAP team began implementing them withinthe SAP system in June 2004. Approximately80% of the processes were finalized in 2004.At the end of 2004, the new ERP system had itsfirst test – integrating all the related business transactionsof an existing customer project, includingservice orders. The test was successful.So as not to disrupt daily business more thanabsolutely necessary, the ERP system will beestablished step-wise over a period of six years.Each location is being staged for implementationbased upon when their existing systems would bein need of replacement.Beginning March 2005, the ASAP team willfocus on Finland where outdated systems will bereplaced and SAP will be implemented for about420 users. This is the first rollout of the system. Itis planned to begin implementation in China at theend of 2005 and move to North America, wheremost of the old systems will be replaced in thecourse of 2006.ANDRITZ 2004

GLOBAL SERVICES/ACTIVITIESQUALITYQUALITY“Do it right the first time” is what Andritzstrives to achieve.The high technical standards of Andritz productsand systems require manufacturing standardsof the highest level, systematic organization,well-defined business processes, and well-trainedemployees. Thorough knowledge of key technologiesis a prerequisite for developing machines,plants, and processes that meet or even exceedcustomers’ requirements and expectations.Andritz Group manufacturing sites focus onkey components and equipment whose designand manufacturing require special knowledge andexperience. Other components are sourced fromqualified sub-suppliers located either in the vicinityof our customers or close to an Andritz productionsite. Sub-suppliers are carefully chosen basedon their ability to fulfill requirements with respectto quality, delivery time, and cost. Most sub-suppliershave long-term experience working withAndritz. They are a key factor in the cost leadershipof the Andritz Group.Major developments in 2004The implementation of the business processapproach – a focus in Quality Management activitiesin 2003 – was successfully certified. Theessential business processes defined by Andritzare Product Management, R&D, Sales, Delivery,Service, Procurement, Manufacturing, HumanResources, and Improvement. Best Practiceswithin the Group are applied to these processesand communicated to all. Training provides acommon understanding of the necessary stepsto manage the risks inherent in Andritz’s businessand to apply the quality standards defined in dayto-daywork.A further step in harmonizing the Andritz GroupwideQuality Management was undertaken duringcustomization of the new Andritz ERP system. Itis an essential advance in further improving productquality, as it provides the basis for a uniformapproach at all Andritz sites. It will considerablyfacilitate the handling of large projects whereseveral Divisions work together to serve one customer.Workplace safety is a focus within the AndritzGroup. Activities to ensure the safety of employeesin-house and at customer sites are an integral partof the Quality Management system. Managementof safety at work is organized according to managementstandard OHSAS 18001 and was successfullyaudited by an external company.An intranet-based system for feedback and suggestionsfor improvement was installed at severalsites after it had been successfully used by AndritzOy and Andritz AG for some time. This tool helpsthe Group to improve on a wide range of levels,including manufacturing, standardization, andbusiness processes.79ANDRITZ 2004

GLOBAL SERVICES/ACTIVITIESENVIRONMENTAL PROTECTIONENVIRONMENTAL80PROTECTIONThe Andritz Group is committed to promotingenvironmental protection and conservation ofnatural resources. Andritz AG’s official Declarationof Environmental Protection establishes the principlesand objectives of its environmental policy.The Group also pursues a proactive informationpolicy vis-à-vis the communities in the vicinity ofthe Group’s production plants, the general public,and government authorities.Andritz’s manufacturing processes and the productsit makes are designed to minimize the consumptionof natural resources and energy in orderto have minimum impact on the environment. Thisapproach also reduces production and operatingcosts to the benefit of Andritz customers.Most mills have taken significant actions toreduce the environmental impact if bleaching is apart of their production processes. Andritz continuesto be a technology leader in the developmentof bleaching processes which utilize alternativesto chlorine for reduced environmental impact.Andritz systems for dewatering (such as pressesand filters) and water recycling (within the fiberlineor during the papermaking process) within themill reduce the effluent loads on nearby receivingwaters.In the chemical recovery area of a pulp mill,systems for black liquor evaporation, combustion,and white liquor production have a significantimpact on the emissions from the mill.Uniform environmental protection guidelinesare implemented at all Andritz production sites.Responsible managers within each Andritz facilityare empowered to ensure that the guidelines arestrictly adhered to.As a commitment to continuous improvement,each year Andritz AG has the results of its environmentalprotection activities examined by acommission appointed by the City of Graz. In2004, the Andritz site in Graz again received the“ÖKOPROFIT” certificate awarded by the Cityof Graz for special environmental achievements.Measures to further reduce energy consumptionwere continued in 2004, including improved thermalinsulation in the workshops and the use ofpower-saving lighting. Also, the portion of goodsshipped by rail was considerably increased, reducingtruck traffic on the surrounding roads.Andritz products for a cleaner environmentThe Pulp and Paper Business Area offersprocesses, systems, and equipment that reducewaste, save energy, and minimize the environmentalimpact of its customers’ operations.Andritz black liquor evaporators produce reusableprocess water from the black liquor. The reuseof condensate reduces the COD load in effluentwaters and the amount of fresh water required inthe pulping/recovery process. Condensates generatedwithin the black liquor evaporation processare segregated and collected within the Andritzsystem and methanol found in the condensateis “stripped” from the condensate for further processing.Andritz also provides methanol liquefactionequipment so that the liquefied methanol canthen be used to replace fossil fuel in the lime kiln.After extensive research and development work,the emissions from a state-of-the-art Andritzrecovery boiler are minimal. For example, the SO 2emissions approach zero when the black liquor isevaporated into high dry solids and a Vertical Airsystem is utilized in the recovery boiler.Maximum electricity production and minimalgreenhouse gas emissions are becoming importantconsiderations for the increasingly energyandenvironmentally-conscious pulp industry. TheHigh Energy Recovery Boiler (HERB) concept,developed by Andritz, offers an effective way toANDRITZ 2004

GLOBAL SERVICES/ACTIVITIESENVIRONMENTAL PROTECTIONgenerate electricity from wood-based fuels (blackliquor from the cooking process) while reducingemissions.A new development, the Andritz LMD-Filter(special disc filter for separating, washing, anddrying lime mud) offers superior washing results. Itlowers the amount of sulphur residuals which enterthe lime kiln and should result in lower sulphuremissions into the air.There is a strong demand in the market toreduce water consumption. Andritz, as a marketleader in large pulp drying machines, has developedmachines with closed water loops so watercan be reused. These machines also incorporatesub-systems for the collection of spill water andthe reuse of cooling water such that the totalamount of fresh water required can be reduced toan extremely low 1.5 m 3 /ton of pulp.In terms of true energy conservation, RTSmechanical pulping technology produces highqualitymechanical pulp at up to 30% lower specificenergy consumption. This results in hugeenergy savings for paper producers with a majorimpact on reduction of greenhouse gas emissions.For an RTS TM -TMP system with an annual productionof 175,000 tons, energy savings can amountto 70,000 MWh a year. If an oil-fired power plantis utilized to provide electrical energy for the refiner,the savings are equivalent to 17,000 tons of oil peryear. At the same time, the emissions of CO 2 , amajor contributor to greenhouse gases worldwide,are reduced by 48,000 tons per year. Thus, theRTS TM -TMP system can make a major contributionto the objectives of the Kyoto protocol.P-RC APMP is a chemi-mechanical pulpingprocess that minimizes energy consumption andthe consumption of bleaching chemicals. Thehigh-consistency peroxide bleaching technology ofAndritz (PHC) also minimizes the consumption ofbleaching chemicals. By eliminating chlorine andsulphur-containing chemicals, the bio-degradabilityof process effluents is significantly improved.Papermakers have the opportunity to save considerableenergy and minimize effluents with thenew Andritz FibreSolve LC and HC pulpers, aswell as the CompaDis disperser system.In Rolling Mills and Strip Processing Lines,many process materials are used that would beharmful to the environment if they were not properlyrecycled or disposed of. Andritz systemsare designed to make maximum use of, and torecycle, such materials as rinse waters, rollingemulsions, and pickling acids. Evaporation isused in some processes to avoid the generationof wastewater. A process was developed for thecomplete recycling of the electrolyte (sodium sulphate)used in electrolytic pickling. In this recyclingstep, hexavalent chromium (formed during thepickling operation) is completely eliminated.Sundwig, an Andritz affiliate company, developed,and has continually improved, “no-rinsecoaters” over the years. The application ofhexavalent chromium coating to the strip can nowbe carried out in a closed chemical fluid circuitwhich prevents contamination of the surroundingenvironment.The Environment and Process BusinessArea supplies complete process lines which convertliquid sewage sludge into a fuel granulate.With a calorific value of approximately 11 to 13MJ/t, this granulate can be used as a substitute forfossil fuels in heat and power generation systems,reducing CO 2 emissions.The Feed Technology Business Area is aleading supplier of equipment for the production ofenvironmentally-friendly, renewable fuels. Biofuelproduction is expanding beyond its establishedbase in North America and Western Europe to newregions where there are surplus raw materials fromforestry and other industries. Andritz equipmentis being utilized to produce biofuel from wood,peat, and other agricultural by-products. In thisway, highly valuable fuels are generated from surplusmaterials, which would otherwise have to bedisposed of. Andritz also supplies waste pelletingequipment which can offer an environmentallyfriendlyalternative to landfills.Hydropower is an essential renewable energysource which does not pollute the environmentand produces no waste. Only 20% of the world’shydropower potential has been developed so far.The Hydraulic Machines Business Area hasbeen providing state-of-the-art equipment andcomprehensive services to hydropower plants formore than 130 years.81ANDRITZ 2004

CONSOLIDATED FINANCIAL STATEMENTS 2004 OF THEANDRITZ GROUP ACCORDING TO IFRSINDEPENDENT AUDITORS’ REPORTWe have audited the accompanying consolidated financial statements of Andritz AG and subsidiaries as ofDecember 31, 2004 prepared in accordance with International Financial Reporting Standards (IFRS) of the InternationalAccounting Standards Board. These group financial statements are the responsibility of the Company’s management.Our responsibility is to express an opinion on these group financial statements based on our audit. The audits of theannual accounts of Group subsidiaries were partly carried out by other auditors. As far as these subsidiaries are concerned,our opinion is based solely on the report of the other auditors.We conducted our audit in accordance with International Standards on Auditing (ISA) issued by the InternationalFederation of Accountants (IFAC). Those Standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatements. An audit includes examining,on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made by management, as well as evaluating theoverall financial statement presentation. We believe that our audit and the reports of the other auditors provide areasonable basis for our opinion.82In our opinion the consolidated financial statements present fairly, in all material respects, the financial position ofthe Group as of December 31, 2004, and of the results of its operations and its cash flows for the year then endedin accordance with International Financial Reporting Standards.We certify that the status report is in compliance with the consolidated financial statements and that the legalrequirement for the exemption from the obligation to prepare consolidated financial statements in accordance withthe Austrian Commercial Code are met.Vienna, February 18, 2005AUDITOR TREUHAND GMBHWirtschaftsprüfungs- und SteuerberatungsgesellschaftAlfons STIMPFL-ABELE Walter MÜLLER(Austrian) Certified Public AccountantsAUDITOR TREUHAND GMBH is a member ofIn case that the consolidated financial statements are disclosed or handed over to a third party in a version whichdiffers from that certified by us, our prior approval is necessary if our audit opinion is included or our audit is mentioned.ANDRITZ 2004

CONSOLIDATED BALANCE SHEETas of December 31, 2004 and 20032004 2003Notes (in TEUR) (in TEUR)AssetsIntangible assets 7,061 4,921Goodwill 107,561 122,785Property, plant and equipment 125,390 127,165Shares in associated companies 2,102 3,022Investments 12,321 2,340Fixed and financial assets 1. 254,435 260,233Deferred tax assets 18. 21,854 18,876Inventories 2. 139,972 107,714Advance payments made 3. 14,142 17,334Trade accounts receivable 4. 201,763 216,702Cost and earnings of projects under construction in excess of billings 5. 115,950 107,738Other receivables 6. 63,314 60,510Prepayments and deferred charges 4,920 4,224Marketable securities 63,097 52,705Cash and cash equivalents 273,939 120,876Current assets 877,097 687,803Total assets 1,153,386 966,912Shareholders’ equity and liabilitiesShare capital 94,510 94,510Capital reserves 45,966 45,966Retained earnings 129,436 92,008Shareholders’ equity 269,912 232,48483Minority interests 7,169 6,616Bonds 100,000 100,000Bank loans - non current 5,211 4,486Provisions - non current 9. 77,800 72,969Obligation under finance leases - non current 582 919Non-current liabilities 11. 183,593 178,374Liabilities for deferred taxes 18. 58,693 50,546Bank loans - current 11,207 11,104Obligations under finance leases - current 421 484Bills of exchange 0 1,550Trade accounts payable 132,970 104,580Billings in excess of cost and earnings of projects under construction 5. 197,832 107,399Advance payments received 49,564 30,765Provisions - current 9. 81,823 77,459Liabilities for current taxes 10,368 16,670Other current liabilities 12. 149,834 148,881Current liabilities 634,019 498,892Total Shareholders’ equity and liabilities 1,153,386 966,912The following notes to the consolidated financial statements form an integral part of this consolidated balancesheet.ANDRITZ 2004

CONSOLIDATED INCOME STATEMENTfor the years ended December 31, 2004 and 20032004 2003Notes (in TEUR) (in TEUR)Sales 13. 1,481,347 1,224,990Changes in inventories of finished goodsand work in progress 10,996 (3,517)Capitalized cost of self-constructed assets 468 1561,492,811 1,221,629Other operating income 14. 20,799 20,099Cost of materials (866,263) (676,133)Personnel expenses 15. (322,706) (304,797)Other operating expenses 16. (209,283) (176,428)Earnings before interest, taxes,depreciation and amortization (EBITDA) 115,358 84,370Depreciation and amortization (without amortization of goodwill) (22,539) (21,237)Earnings before interest, taxes andamortization of goodwill (EBITA) 92,819 63,133Amortization of goodwill (16,684) (14,201)Earnings before interest and taxes (EBIT) 76,135 48,93284Income/Expense from associated companies (1,543) (419)Interest result 1,979 1,006Other income from financing activities 657 (201)Financial results 17. 1,093 386Earnings before taxes (EBT) 77,228 49,318Income taxes 18. (22,830) (18,801)Net income 54,398 30,517Share of profit due to minority interests (1,027) (1,389)Net income excluding minority interests 53,371 29,128Earnings per non par value share (in EUR) 19. 4.13 2.26Proposed or paid dividend per non par value share (in EUR) 1.40 1.00Weighted average number of non par value shares 12,917,037 12,871,600The following notes to the consolidated financial statements form an integral part of this consolidated income statement.ANDRITZ 2004

CONSOLIDATED CASH FLOW STATEMENTfor the years ended December 31, 2004 and 20032004 2003(in TEUR) (in TEUR)Earnings before taxes (EBT) 77,228 49,318Interest result (1,979) (1,006)Depreciation, write-ups and amortization of fixed assets 38,922 35,410Income/Expenses from investments in associated companies 1,543 419Changes in accrued expenses 2,549 8,725Results from the sale of fixed and financial assets (3,359) (62)Other non-cash income/expenses (2,566) 0Taxes paid (19,973) (10,207)Interest received 8,356 5,973Interest paid (6,397) (5,992)Gross cash flow 94,324 82,578Changes in inventories (17,659) 5,213Changes in advance payments made 3,338 (14,175)Changes in receivables, prepayments and deferred charges 22,298 (85,569)Changes in short-term provisions and accruals (3,169) (5,837)Changes in advance payments received 11,803 455Changes in liabilities and deferred income 97,087 21,934Cash flow from operating activities 208,022 4,599Payments received for asset disposals 11,523 3,242Payments made for investments in fixed tangible and intangible assets (24,002) (20,662)Payments made for investments in financial assets (9,750) (167)Cash flow due to purchase of minority interests and business aquistions (5,215) (13,943)Payments made for short-term financial investments (10,079) (24,076)Cash flow from investing activities (37,523) (55,606)85Changes in interest bearing borrowings (3,642) (311)Dividends paid by Andritz AG (12,889) (11,543)Dividends paid to minority shareholders (372) (659)Payments concerning own shares 1,328 (844)Payments made by associated companies 0 27Cash flow from financing activities (15,575) (13,330)Change in cash and cash equivalents 154,924 (64,337)Changes in cash and cash equivalents resulting from exchange rate fluctuations (1,861) (2,916)Cash and cash equivalents at the beginning of the period 120,876 188,129Cash and cash equivalents at the end of the period 273,939 120,876The following notes to the consolidated financial statements form an integral part of this consolidated cash flowstatement.ANDRITZ 2004

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITYfor the years ended December 31, 2004 and 2003CurrencyShare Capital Retained IAS 39 translation(in TEUR) Notes capital reserves earnings reserve adjustments TotalStatus as at 1 January 2003 94,510 45,966 83,917 8,601 (10,057) 222,937Net income excludingminority interests 29,128 29,128Dividend payments (11,543) (11,543)Currency translation adjustments (17,617) (17,617)Acquisition of own shares (331) (331)Changes to IAS 39 reserve 9,910 9,910Status as at 31 December 2003 94,510 45,966 101,171 18,511 (27,674) 232,484Status as at 1 January 2004 94,510 45,966 101,171 18,511 (27,674) 232,48486Net income excludingminority interests 53,371 53,371Dividend payments 8. (12,889) (12,889)Currency translation adjustments 8. (7,197) (7,197)Changes concerning own shares 1,583 1,583Changes to IAS 39 reserve 2,138 2,138Other changes 422 422Status as at 31 December 2004 94,510 45,966 143,658 20,649 (34,871) 269,912The following notes to the consolidated financial statements form an integral part of this consolidated statement ofshareholders’ equity.ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSas of December 31, 2004 and 2003A. GeneralAndritz AG (“Andritz”) is incorporated under the laws of the Republic of Austria and is listed on the Vienna StockExchange since June 2001. The Andritz Group (the “Group”) is a leading producer of high technology industrialmachinery and operates in four main strategic business areas: Pulp and Paper, Rolling Mills and Strip ProcessingLines, Environment and Process, and Feed Technology.The average number of employees in the Group was 5,026 in 2004 and 4,597 in 2003. The registered office addressof the Group is located at Stattegger Strasse 18, 8045 Graz, Austria.The consolidated financial statements are the responsibility of the management and will be acknowledged by theSupervisory Board.Various amounts and percentages set out in these consolidated financial statements have been rounded andaccordingly may not total.B. Summary of significant Accounting PoliciesThe principal accounting policies adopted in preparing the financial statements of Andritz are as follows:a. GeneralThe financial statements are prepared in accordance with the standards formulated by the International AccountingStandards Board (IASB) as well as the interpretations formulated by the International Financial Reporting InterpretationsCommittee (IFRIC). IFRS 2 Share-based Payment has been applied.87For these financial statements prepared in accordance with IFRS based on § 245a of Austrian Commercial Codethe legal requirements are met for the exemption of the obligation of preparing group financial statements.b. Reporting CurrencyThe Group financial statements are prepared in EURO.c. Principles of ConsolidationThe consolidated financial statements of the Group include Andritz and the companies that it controls. This control isnormally evidenced when Andritz owns, either directly or indirectly, more than 50% of the voting rights of a company’sshare capital and is able to govern the financial and operating policies of an enterprise so as to benefit from its activities.The equity and net income attributable to minority shareholders’ interests are shown separately in the balancesheets and income statements, respectively.The purchase method of accounting is used for acquired businesses. Companies acquired or disposed of duringthe year are included or excluded, accordingly, in the consolidated financial statements from the date of acquisition orfrom the date of disposal. Joint ventures with equal voting rights are consolidated on a proportionate basis.d. Major Differences between Austrian and IFRS Accounting PrinciplesGoodwill: In accordance with IAS 22, goodwill from capital consolidation is capitalized and amortized over theuseful life. Any goodwill arising from business combinations on or after 31 st March 2004 will be treated in accordancewith IFRS 3. The Austrian Commercial Code allows a credit to reserves, with no effect on the income statement.ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSConstruction contracts: According to Austrian accounting regulations, sales and profits are first realised upontakeover by the customer (“completed contract method”). Under IAS 11, order completion is accounted using thepercentage of completion method in accordance with progress and pro rata profit realisation. The extent of completionis established by considering the ratio of accumulated costs to estimated total costs to complete each contract(“cost-to-cost method”).Deferred taxes: The Austrian Commercial Code requires the creation of deferred tax provisions for temporary differencesif a tax liability is expected to arise when these differences are reversed. IFRS require the creation of deferredtaxes for all temporary differences, which arise between financial statements prepared for tax purposes and IFRSfinancial statements, measured at actual or enacted tax rates. Deferred tax assets must also be recorded for unusedloss carry forwards and unused tax credits, which are expected to be offset against taxable profits in the future.Other provisions: In contrast to the Austrian Commercial Code, IFRS interprets the principle of prudence differentlywith respect to provisions. IFRS tends to place stricter requirements on the probability of an event occurring andon estimating the amount of the provisions. According to Austrian Commercial Code certain amounts reported asliabilities under IFRS would be normally shown as provisions.Provisions for pensions: In keeping with the Austrian Commercial Code, provisions for pensions are calculatedby an actuary. Under IFRS, provisions for pensions are calculated using the projected unit credit method, based on adiscount rate determined by reference to market yields on high quality corporate bonds and an expected compensationincrease.Marketable securities: Austrian accounting principles require securities to be recorded at the lower of acquisitioncosts or market value. Under IFRS marketable securities available for sale are to be valued at fair values, and there isa choice for the treatment of changes in the fair value.88Foreign currency transactions: These two accounting systems require different treatments for unrealized profitsarising from the valuation of foreign exchange items as of the balance sheet date. According to Austrian law, onlyunrealized losses are recorded, whereas IFRS also requires the recognition of unrealized profits of monetary items.Non-current securities: In accordance with IFRS non-current securities of the Group are classified as “availablefor sale” and are valued at their quoted market price at the balance sheet date. The Austrian Commercial Coderequires a valuation at acquisition costs or a lower market value if there is a sustainable decrease of monetary items.Hedging: With the adoption of IAS 39, the Group has designated its forward exchange contracts as cash flowhedges and carries them at fair value. Changes in the fair value of a hedging instrument that qualifies as a highly effectivecash-flow hedge are recognized directly in the hedging reserve in shareholders’ equity. The Austrian CommercialCode does not require a valuation of hedging contracts at fair value as of the balance sheet date.C. AcquisitionsIn January 2004, the Company acquired certain assets of Bird Machine Company business from the US-basedBaker Hughes Incorporated. Bird Machine is a global specialist in solid/liquid separation for industrial and municipalapplications utilizing a broad range of centrifuges and filter presses. In August 2004, Andritz completed the acquisitionof the Filtration Business Unit from international Netzsch Group, based in Germany. The Netzsch Filtration BusinessUnit supplies different types of dewatering units, in particular filter presses, for solid/liquid separation in industrial undmunicipal applications. The acquisition of the Fluidized Bed Drying Systems Business Area of VA TECH WABAG,Germany was completed in November 2004. Based in Ravensburg, Germany, the globally active Fluidized Bed DryingSystems Business Area is specialized in the development, production and erection of plants for granulation and dryingof solutions, suspensions, and bulk materials. The total costs for these three acquisitions amounted to EUR 3,520thousand of which Euro 1,366 thousand have been allocated to patents and know-how and the remaining goodwillamounted to EUR 1,344 thousand. The described acquisitions are all part of the Environment and Process BusinessArea.ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSIn August 2004 the company acquired in the Pulp and Paper Business Area 51.1% of the shares of CyberMetricsInc. in the USA, a specialist in on-line measurement of pulp quality and the remaining 50% of Voith Andritz TissueL.L.C. in November 2004. The total costs of these acquisitions amounted to EUR 247 thousand with a related goodwillof EUR 1.080 thousand.To expand the product portfolio in the Rolling Mills and Strip Processing Lines Business Area, Andritz has purchasedcertain assets and know-how of insolvent Otto Kaiser GmbH in Germany, a manufacturer of high-performancemechanical presses for steel strip. This transaction took place in September 2004. The total costs for these assetswere EUR 3,987 thousand.The acquired businesses have contributed EUR 95,257 thousand to sales and EUR 3,496 thousand to EarningsBefore Interest, Taxes and Amortization of Goodwill (EBITA) of the Andritz Group since the date of acquisition. If theacquisitions had been at the beginning of the reporting period the Group’s EBITA would have been EUR 96,738 thousandand the revenue from continuing operations would have been EUR 1,545,202 thousand.Inter-company balances and transactions, including inter-company profits and unrealized profits and losses havebeen eliminated. The consolidated financial statements have been prepared using uniform accounting policies for liketransactions and other events in similar circumstances.D. Accounting and Valuation Principlesa. Intangible AssetsIntangible assets are accounted for at acquisition cost. After initial recognition, intangible assets are accounted forat cost less accumulated amortization and any accumulated impairment losses. Intangible assets are amortized ona straight-line basis over the best estimate of their useful lives. The amortization period and the amortization methodare reviewed annually at each financial year-end.Concessions, industrial rights and similar rights and valuesAmounts paid for concessions, industrial rights and similar rights and values are capitalized and then amortized ona straight-line basis over the expected periods of benefit. The expected useful lives vary from 3 to 15 years.89Business Combinations and GoodwillFor business combinations occurring on or after 31 March 2004, IFRS 3 has been applied. According to this standardgoodwill is measured as the residual cost of the business combination after recognizing the acquiree’s identifiable,assets, liabilities and contingent liabilities. Any goodwill arising from business combinations is not amortized.Goodwill is tested for impairment in accordance with IAS 36 annually, or more frequently if events or changes in circumstancesindicate that it might be impaired. In determining whether an impairment write-down is required, goodwillis allocated to the cash-generating units that are expected to benefit from the synergies of the combination and therecoverable amount is compared with its carrying amount.After reassessment of the identification and the measurement of the acquirees’s identifiable assets, liabilities andcontingent liabilities and the measurement of cost of the combination, any negative goodwill is recognized in profit orloss immediately.For any goodwill arising from business combinations effected before 31 March 2004 IFRS 3 has not been appliedfor the business year ended 31 December 2004. Goodwill arising from these combinations is carried at cost lessaccumulated amortization and accumulated impairment losses. The amortization is calculated on a straight-line basisover its useful life. The amortization period ranges from 7 to 15 years. The un-amortized balances are reviewed at eachbalance sheet date by assessing the probability of continuing future benefits. If there is an indication that goodwill maybe impaired, the recoverable amount is determined for the cash-generating unit to which the goodwill belongs. If thecarrying amount is higher than the recoverable amount, an impairment loss is recognized. Beginning with the businessyear 2005 according to transitional provisions of IFRS 3 the amortization will be discontinued and the carryingamount of accumulated depreciation will be eliminated against the carrying amount of goodwill. The impairment testsaccording to IAS 36 will be performed annually.Goodwill and negative goodwill arising from business combinations effected before 1 January 1995 were chargedor credited directly to equity.ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSb. Property, Plant and EquipmentProperty, plant and equipment are stated at cost less accumulated depreciation and accumulated impairmentlosses. When assets are sold or retired, their cost and accumulated depreciation are eliminated from the accountsand any gain or loss resulting from their disposal is included in the income statement.The initial cost of property, plant and equipment comprises its purchase price, including import duties and nonrefundablepurchase taxes and any directly attributable costs of bringing the asset to its working condition and locationfor its intended use. Expenditures incurred after the fixed assets have been put into operation, such as repairsand maintenance and overhaul costs, are normally charged to income in the period in which the costs are incurred.Depreciation is calculated on a straight-line basis over the following estimated useful lives:BuildingsMachinery and technical equipmentTools, office equipment and vehicles20-50 years4-10 years3-10 yearsThe useful life and depreciation methods are reviewed periodically to ensure that the method and period of depreciationare consistent with the expected pattern of economic benefits from items of property, plant and equipment.Assets in the course of construction represent plant and properties under construction and are stated at cost. Theseinclude costs of construction, plant and equipment and other direct costs.c. Financial Assets and Investments in Associated Companies90These long-term investments consist primarily of shares in associated companies and non-current securities.Investments in associated companies (generally investments of between 20 to 50% in a company’s equity), wherea significant influence is exercised by the Group, are accounted for by using the equity method. An assessment ofinvestments in associates is performed when there is an indication that the asset has been impaired or the impairmentlosses recognized in prior years no longer exist.Other non-current securities held on a long-term basis are classified as available-for-sale investments and valued atfair value. Changes of these fair values are recognized as gains or losses in the income statement.d. Finished Goods, Work in Progress, Raw MaterialsInventories, including work in progress, are valued at the lower of cost and net realizable value, after provision forobsolete and slow moving items. Net realizable value is the selling price in the ordinary course of business, less thecosts of completion, marketing and distribution. Cost is determined primarily on the basis of the FIFO method. Forprocessed inventories, cost includes the applicable allocation of fixed and variable overhead costs. Unrealizable inventoryhas been fully written off. Contracts other than construction contracts are valued at production costs. For thesecontracts the revenue is recognized when the ownership of the goods is transferred (“completed contract method”).e. Construction ContractsReceivables from construction contracts and the related sales are accounted for using the percentage of completionmethod. The construction contracts are determined by the terms of the individual contract, which are agreed at fixedprices. The extent of completion (“stage of completion”) is established by the cost-to-cost method. Reliable estimatesof the total costs and sales prices and the actual figures of the accumulated costs are available on a monthly basis.Estimated contract profits are recorded in earnings in proportion of recorded sales. In cost-to-cost method salesand profits are recorded after considering the ratio of accumulated costs to estimated total costs to complete eachcontract. Changes to total estimated contract costs and losses, if any, are recognized in the income statement of theperiod in which they are determined. For remaining technological and financial risks, which might occur during theremaining construction period, an individually assessed amount is included in the estimated contract costs. Impendinglosses out of the valuation of construction contracts are recognized at the time of occurrence. Impending losses arerecognized when it is probable that the total contract costs will exceed the contract revenues. For possible customerwarranty claims provisions are accounted for according to the profit realization. At the completion of a contract theremaining warranty risk is reassessed.ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSf. Trade Accounts ReceiveableReceivables are stated at face value, after allowances for doubtful accounts.g. Marketable SecuritiesMarketable securities consist of governmental bonds and bonds of first-class banks that are traded in liquid markets.They are held for the purpose of investing in liquid funds and are not generally intended to be retained on a longtermbasis. Marketable securities are stated at the market value. Adjustments in valuation are included in the incomestatement. Interest received on trading securities is reported as interest income. On a disposal of an investment, thedifference between the net disposal proceeds and the carrying amount is included in the income statement.h. Cash and Cash EquivalentsCash includes cash in hand and cash at banks. Cash equivalents might include short-term deposits with non-bankswith original maturities of three months or less and that are not subject to any risk of change in value.i. Share CapitalOnly ordinary shares exist and all shares are issued and have the same rights.The share capital of Andritz AG amounts to EUR 94,510,000 divided into 13,000,000 shares of non par value.Based on the articles of association and with approval of the Supervisory Board, the Managing Board is authorized toincrease the capital by up to EUR 25,445,000 through issuing up to 3,500,000 shares until 15 September 2005.Based on the authorization of the shareholders’ meeting and with approval from the Supervisory Boardthe Managing Board has decided a program for acquisition of own shares up to 650,000 shares between16 May 2002 and 27 June 2003 within a price range of 10 to 35 Euro per share and extension of this programfor acquisition of own shares up to 650,000 shares between 28 June 2003 and 27 June 2004 within aprice range of 10 to 30 Euro. The program was cancelled at 30 March 2004. Based on a new authorizationof the shareholders’ meeting, held on 30 March 2004, and with approval from the Supervisory Board theManaging Board has decided a program for acquisition of own shares up to 1,300,000 shares between5 April 2004 and 29 September 2005 within a price range of a lowest price of 10.00 Euro and a highest price, whichmust not exceed the average un-weighted closing price over the ten preceding trading days by more than 30%. In2003 128,701 own shares have been acquired in several steps with an average price of EUR 22.75 per share and94,600 own shares were resold in several steps with an average price of 27.44 per share. 50 own shares were usedas a price in a lottery. At 31 December 2003 the Company held 110,948 own shares at a market value of EUR 4,210thousand. In 2004 2,000 own shares have been acquired with an average price of EUR 36.93 per share and 66,750own shares were resold with a price of EUR 21.00 per share to eligible executives of the Management Share OptionPlan. 5,788 own shares have been transferred to employees of Andritz AG in the course of an employee participationprogram. At 31 December 2004 the Company held 40,410 own shares at a market value of EUR 2,267 thousand. Itis planned to use these shares for delivery of shares within the framework of the Management Share Option Plan.91j. Capital ReservesCapital Reserves are created in accordance with Austrian requirements and include share premium amounts.k. ProvisionsA provision is recognized when, and only when, an enterprise has a present obligation (legal or constructive) as aresult of a past event and it is probable (i.e. more likely than not) that an outflow of resources embodying economicbenefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Where the effectof the time value of money is material, the amount of a provision is the present value of the expenditures expected tobe required to settle the obligation.ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSl. Other Accounting and Valuation PrinciplesFinancial instrumentsFinancial assets and financial liabilities carried on the balance sheet include cash and cash equivalents, marketablesecurities, trade and other accounts receivable and payable, long-term receivables, borrowings and investments. Theaccounting policies on recognition and measurement of these items are disclosed in the respective accounting policiesfound in these notes.Financial instruments are classified as assets or liabilities in accordance with the substance of the contractualarrangement. Therefore interest, dividends, gains and losses relating to these financial instruments classified as anasset or a liability are reported as expense or income. Financial instruments are offset when the Group has a legallyenforceable right to offset and intends to settle either on a net basis or to realize the asset and settle the liabilitysimultaneously.HedgingThe Group uses forward exchange contracts to mitigate exposure to foreign currency risk out of projects and regularbusiness in foreign currency. According to the Group’s hedging policy most forward contracts are used for highlyprobable future cash flows for these projects or regular sales and can therefore be classified as cash flow hedges.Changes in the fair value of a hedging instrument that qualifies as a highly effective cash flow hedge are recognizeddirectly in the hedging reserve in shareholders’ equity. If the hedged cash flow results in the recognition of an assetor a liability, all gains or losses previously recognized directly in equity are transferred from equity and included in theinitial measurement of the cost or carrying value of the asset or liability. Otherwise, for all other cash flow hedges, gainsand losses initially recognized in equity are transferred from hedging reserve to net profit or loss in the same period orperiods during which the hedged firm commitment or forecast transaction affects the income statement. If a forwardexchange contract is not classified as cash flow hedge the fair values respectively any changes of these contracts arereported as profit or loss in the income statement.92When the committed or forecast transaction is no longer expected to occur, any net cumulative gain or loss previouslyreported in equity is transferred to the income statement.All investments in a foreign entity are long-term investments and presently a sale of such investments is not expectedto occur in the foreseeable future. According to the Group’s hedging policy there are no hedges of net investmentsin foreign currencies.Derivative financial instrumentsMajor parts of derivative financial instruments are designated as hedging instruments. Fixed forward exchange ratecontracts are used for hedging of currency risks and interest swaps are used for hedging of interest risk.Research and development costsExpenditures for research and development are charged against income in the period incurred because the criteriafor capitalization (IAS 38) are not met. In 2004 EUR 21,114 thousand and in 2003 EUR 25,470 thousand have beenrecognized as an expense.Revenue recognition (except for construction contracts)Revenue is recognized when it is probable that the economic benefits associated with the transaction will flow tothe enterprise and the amount of the revenue can be measured reliably. Sales are recognized net of sales taxes anddiscounts when delivery has taken place and transfer of risks and rewards has been completed.Interest is recognized on a time proportion basis that reflects the effective interest rate of the asset. Dividends arerecognized when the shareholders’ right to receive payment is established.Borrowing costsBorrowing costs are generally expensed as incurred.ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSImpairment of assetsProperty, plant and equipment and intangible assets are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not be recoverable. Whenever the carrying amountof an asset exceeds its recoverable amount (the higher of fair value less costs to sell and value in use), an impairmentloss is recognized in income for items of property, plant and equipment and intangibles carried at cost. Recoverableamounts are estimated for individual assets or, if it is not possible, for the cash-generating unit.m. Foreign currencyForeign currency transactionsForeign currency transactions are recorded in the reporting currency by applying to the foreign currency amount theexchange rate between the reporting currency and the foreign currency at the date of the transaction. Exchange ratedifferences arising on the settlement of monetary items at rates different from those at which they were initially recordedduring the periods are recognized in the income statement in the period in which they arise.Foreign entitiesForeign consolidated subsidiaries are regarded as foreign entities since they are financially, economically and organizationallyautonomous. Their reporting currencies are their respective local currencies. Financial statements of foreignconsolidated subsidiaries are translated at year-end exchange rates with respect to the balance sheet. Expense andrevenue items are translated using the average exchange rates for the year. All resulting translation differences areincluded in a currency translation reserve in equity.Any goodwill arising on the acquisition of a foreign entity is recorded using the exchange rate at the effective dateof the transaction. Exchange differences arising on a monetary item that, in substance, forms part of the Group’s netinvestment in a foreign entity are classified as equity in the consolidated financial statements until disposal of the netinvestment.n. Employees BenefitsDefined benefit plans (provisions for pensions)Some Group companies provide defined benefit pension plans for certain employees. The funds are valued everyyear by professionally qualified independent actuaries. The obligation and costs of pension benefits are determinedusing a projected unit credit method. The projected unit credit method considers each period of service as giving riseto an additional unit of benefit entitlement and measures each unit separately to build up the final obligation. Pastservice costs are recognized on a straight-line basis over the average period until the amended benefits becomevested. Gains or losses on the curtailment or settlement of pension benefits are recognized when the curtailment orsettlement occurs. Actuarial gains or losses are amortized based on the expected average remaining working lives ofthe employees. The pension obligation is measured at the present value of estimated future cash flows using differentdiscount rates for different countries.93Other Group companies provide defined contribution plans for certain employees. The related costs are expensedas they occur.Severance paymentsIn certain countries the Group is also obliged by law to pay termination indemnities in some cases of terminationof employment. No termination indemnities are payable for voluntary termination at the request of the employee.Expenses related to termination indemnities are accrued.o. Income TaxesThe income tax charge is based on profit for the year and considers deferred taxation. Deferred taxes are calculatedusing the balance sheet liability method. Deferred income taxes reflect the net tax effects of temporary differencesbetween the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used forincome tax purposes. Deferred tax assets and liabilities are measured using the tax rates expected to apply to taxableincome in the years in which those temporary differences are expected to be recovered or settled, based on taxrates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The measurementof deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner inwhich the enterprise expects, at the balance sheet date, to recover or settle the carrying amount of its assets andliabilities.ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSDeferred tax assets and liabilities are recognized regardless of when the timing difference is likely to reverse.Deferred tax assets are recognized when it is probable that sufficient taxable profits will be available against whichthe deferred tax assets can be utilised. At each balance sheet date, the Group reassesses unrecognized deferred taxassets and the carrying amount of deferred tax assets. The enterprise recognizes a previously unrecognized deferredtax asset to the extent that it has become probable that future taxable profit will allow the deferred tax asset to berecovered. The Group conversely reduces the carrying amount of a deferred tax asset to the extent that it is no longerprobable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to beutilized.Deferred tax is charged or credited directly to equity if the tax relates to items that are credited or charged, in thesame or a different period, directly to equity, including exchange differences arising on the translation of intercompanyloans.E. SegmentsBusiness segmentsFor management purposes the Group is organized on a worldwide basis into four major operating businesses. Thestrategic business units are the basis upon which the Group reports its primary segment information. Financial informationon business and geographical segments is presented in section I (see “segment information” below). Thereare no material inter-segment transactions. All consolidation entries are included in the relevant segment. Accordingto the monthly reporting scheme, which is the basis for the primary segment information, all sales and all direct andindirect expenses (including overhead and administrative costs) are allocated to business segments.F. Contingencies94Contingent liabilities are not recognized in the financial statements. They are disclosed unless the possibility of anoutflow of resources embodying economic benefits is remote.A contingent asset is not recognized in the financial statements but disclosed when an inflow of economic benefitsis probable.F. ContingenciesContingent liabilities are not recognized in the financial statements. They are disclosed unless the possibility of anoutflow of resources embodying economic benefits is remote.A contingent asset is not recognized in the financial statements but disclosed when an inflow of economic benefitsis probable.ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSG. Notes to the Balance Sheet1. Changes in Fixed and Financial AssetsAcquisition or production costsChangesBalance Currency due to Balanceas at translation business as at1 Janu- differ- Addi- Dis- acqui- Trans- 31 Decem-(in TEUR) ary 2004 ences tions posals sitions fers ber 2004Intangible assets 24,889 (473) 3,727 493 1,369 5 29,025Goodwill 233,466 (7,225) 3,204 (0) 0 0 229,446Land and buildings 131,493 (1,410) 3,235 10,089 127 1,455 124,811Technical equipment andmachinery 136,098 (2,721) 11,172 11,353 1,267 214 134,676Other equipment, factoryand office equipment 63,783 (1,192) 9,605 7,194 671 511 66,184Assets in course ofconstruction 1,951 (26) 1,560 366 0 (2,180) 939Advance payments ontangible assets 50 0 69 42 0 0 77Total property, plantand equipment 333,375 (5,350) 25,641 29,044 2,065 0 326,687Total intangible andtangible assets 591,730 (13,048) 32,572 29,434 3,435 5 585,15895ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSDepreciation and amortizationDeprecia-ChangesBalance Currency tion and due to Balanceas at translation amorti- business as at1 Janu- differ- zation for Dis- acqui- Trans- 31 Decem-(in TEUR) ary 2004 ences the year posals sitions fers ber 2004Intangible assets 19,968 (454) 2,875 425 0 0 21,964Goodwill 110,681 (5,481) 16,684 0 0 0 121,884Land and buildings 56,280 (787) 3,072 4,425 0 39 54,180Technical equipmentand machinery 103,177 (1,960) 8,093 10,149 3 (414) 98,750Other equipment, factoryand office equipment 46,753 (984) 8,470 6,330 76 382 48,367Assets in course ofconstruction 0 0 29 29 0 0 0Advance payments ontangible assets 0 0 0 0 0 0 0Total property, plantand equipment 206,210 (3,731) 19,664 20,932 79 7 201,297Total intangibleand tangible assets 336,859 (9,665) 39,223 21,358 79 7 345,14596Net book valueNet book Net bookCosts as at value as at value as at31 December Accumulated 31 December 31 December(in TEUR) 2004 depreciation 2004 2003Intangible assets 29,025 21,964 7,061 4,921Goodwill 229,446 121,884 107,561 122,785Land and buildings 124,811 54,180 70,631 75,213Technical equipment and machinery 134,676 98,750 35,926 32,921Other equipment, factory andoffice equipment 66,184 48,367 17,818 17,030Assets in course of construction 939 0 939 1,951Advance payments on tangible assets 77 0 77 50Total property, plant and equipment 326,687 201,297 125,390 127,165Total intangibleand tangible assets 585,158 345,145 240,012 254,871ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSFinance leasesThe net book value for technical equipment and machinery includes an amount of EUR 1,074 thousand (2003 EUR1,426 thousand) and the net book value for other equipment, factory and office equipment includes an amount of EUR211 thousand (2003 EUR 256 thousand) in respect of assets held under finance lease. The total of minimum leasepayments at balance sheet date amounts to EUR 1,088 thousand (2003 EUR 1,555 thousand). The leasing contractshave remaining terms from 7 up to 49 months.Impairment lossIn 2004 the goodwills arising from the acquisition of Acutest and the furnace business from Selas met the testsfor impairment because the businesses did not develop according to plan. The impairment loss for these goodwillsamounted to EUR 2,955 thousand, of which EUR 1,294 thousand are related to the Pulp and Paper Business Areaand the remaining value is related to the Rolling Mills and Strip Processing Lines Business Area. For participation inassociated companies an impairment loss of EUR 1,041 thousand has been reported, which is related to the Pulpand Paper Business Area.Goodwill(in TEUR) 2004 2003Andritz Ahlstrom 32,367 37,630Acquisition of Andritz AG 59,596 65,555Other 15,598 19,600107,561 122,7852. Inventories(in TEUR) 2004 2003Finished goods 46,054 35,585Work in progress 66,395 50,781Raw materials 27,523 21,348139,972 107,71497The shown inventories are valued at cost.3. Advance Payments MadeThe advance payments made and presented in the balance sheet relate to open purchase orders for contracts.4. Trade Accounts Receivable(in TEUR) 2004 2003Accounts receivable 207,635 219,023Allowance for doubtful accounts (5,872) (2,321)201,763 216,702ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS5. Construction Contracts(in TEUR) 2004 2003Contract revenue recognized as sales in the period 944,988 767,380Contract costs incurred and recognized profits(less recognized losses) to date 1,344,997 1,063,683Advances received and progress billings 1,426,880 1,063,344Amount of retentions 1,233 1,242The billings in excess of costs and earnings of projects under construction represent, primarily, payments fromcustomers for work, which is not performed yet.6. Other Receivables(in TEUR) 2004 2003Receivables from associated companies 746 410Financial instruments carried at fair value 32,836 31,581Other 29,732 28,51963,314 60,5107. Statement of Receivables982004Thereof Thereofremaining remainingterm under term over(in TEUR) Total 1 year 1 yearTrade accounts receivable 201,763 201,280 483Cost and earnings of projects under constructionin excess of billings 115,950 115,396 554Other receivables 63,314 62,169 1,145381,027 378,845 2,1822003Thereof Thereofremaining remainingterm under term over(in TEUR) Total 1 year 1 yearTrade accounts receivable 216,702 216,672 30Cost and earnings of projects under constructionin excess of billings 107,738 107,738 0Other receivables 60,510 59,418 1,092384,950 383,828 1,122ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS8. Retained EarningsDividendsFor 2004 a dividend of EUR 1.40 per outstanding share is proposed by the Managing Board. The dividend for2003 of EUR 12,889 thousand which is equal to EUR 1.00 per share was proposed by the Managing Board and wasresolved at the 97 th ordinary shareholders’ meeting on 30 March 2004. The dividend was paid to the shareholderson 8 April 2004.On 16 February 2005 the Managing Board authorized the consolidated financial statements for the year ended31 December 2004 according to IFRS. On 16 February 2004 the management authorized the consolidated financialstatements for the year ended 31 December 2003 according to IFRS to be issued to its Supervisory Board. TheSupervisory Board is made up solely of non-executives and includes representatives of employees. The consolidatedfinancial statements were presented for information purposes only to the Supervisory Board and subsequentlyacknowledged by the meeting of shareholders. The Supervisory Board and the meeting of shareholders acknowledgedthe consolidated financial statements.Currency translation adjustmentEquity and shareholder loans in foreign currency are not hedged against currency risks because the investmentsare considered to be permanent and the conversion to the reporting currency is not planned. Exceptions are madefor planned disposal of investments or planned repayments of shareholder loans.9. ProvisionsBalance Changes Balanceas at 1 Currency due to as at 31January translation business Reclassi- December(in TEUR) 2004 differences acquisitions fication Use Reversal Addition 200499Provisions forseverancepayments 25,221 0 0 0 141 21 4,292 29,351Provisions forpensions 28,593 (101) 950 0 1,260 6,024 5,022 27,180Other non-currentprovisions 19,155 (334) 539 (1,773) 1,260 5,404 10,346 21,269Non-currentprovisions 72,969 (435) 1,489 (1,773) 2,661 11,449 19,660 77,800Current provisions 77,459 (707) 4,374 2,382 18,894 16,643 33,852 81,823Other non-current and current provisions consist primarily of order related provisions (2004: EUR 93,554 thousand;2003: EUR 80,004 thousand) for warranties, contingencies and impending losses.ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS10. Employee Benefit ObligationsDefined benefit plan for pensionsSome Group companies in Austria, USA, Finland, Germany and Sweden provide defined benefit pension plansfor some classes of employees. Provisions for pension obligations are established for benefits payable in the form ofretirement, disability and surviving dependant pensions. The benefits offered vary according to the legal, fiscal andeconomic conditions of each country. Benefits are dependent on years of service and in some cases on the respectiveemployee’s compensation.The following table reconciles the funded status of defined benefit plans to the amounts recognized in the balancesheet:(in TEUR) 2004 2003Present value of funded defined benefit obligations 19,637 22,087Fair value of plan assets (10,891) (8,266)8,746 13,821Present value of unfunded defined benefit obligations 19,145 16,516Unrecognized actuarial gains/losses (711) (1,744)Net liability in balance sheet 27,180 28,593Pension expense is comprised of the following:(in TEUR) 2004 2003100Current service costs 1,240 965Interest expense on obligations 1,591 886Expected return on plan assets (79) (7)Net actuarial gains/losses recognised 4,085 (143)Past service costs (0) 7,720Effect of any curtailment or settlement (8,672) (10)(1,835) 9,411Payments to defined contribution plans 12,334 12,75510,499 22,166Principal actuarial assumptions used to determine pension obligations as of 31 December were as follows:(in per cent) 2004 2003Discount rate 5.00% 5.75%Wage and salary increases 3.00% 3.00%Retirement benefit increases 2.50% 2.50%Severance payments(in TEUR) 2004 2003Present value of unfunded defined benefit obligations 29,351 25,221Net liability in balance sheet 29,351 25,221ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSSeverance expense is comprised of the following:(in TEUR) 2004 2003Current service costs 1,392 1,473Interest expense on obligations 1,358 1,466Net actuarial gains/losses recognised 2,728 (2,354)5,478 585Payments to defined contribution plans 73 215,551 606Principal actuarial assumptions used to determine severance obligations as of 31 December were the same as usedfor pension obligations.Management share option planA selected group of executives employed by the Group as at 1 June 2001 were eligible to participate in aManagement Share Option Plan in connection with the Initial Public Offering. Each eligible executive who has subscribedshares having an aggregate subscription value calculated at the Offer Price (21 EUR per share) of at least20,000 EUR (each such subscription a “Private Investment”) is eligible for a special remuneration in the form of optionrights. These option rights can be exercised provided that the average price of the shares during two separate assessmentperiods exceeds a certain percentage of the Offer Price. The first assessment period will run for a period of threemonths preceding the second anniversary of the initial listing of the shares on the Vienna Stock Exchange, whereasthe second assessment period will run for a period of three months preceding the third anniversary of the initial listingof the shares on the Vienna Stock Exchange. If the average market value of the shares exceeds the Offer Priceby 15% in the first assessment period (Option 1) or by 20% in the second assessment period (Option 2), the eligibleexecutive will be entitled to purchase up to a maximum of 1,500, 2,500 and 5,000 shares with respect to Option 1or Option 2 at the Offer Price depending on the seniority of the relevant executive, provided that the relevant executivecan prove uninterrupted ownership of his Private Investment until the end of the assessment period. The optionscan be exercised only once and are not transferable. Option 1 could not be exercised, however exercise of Option 2was possible, as the average market value of the shares in the second assessment period exceeded the Offer Priceby more than 20%. The options can only be exercised at given times. Each participant may subscribe up to 50% ofthe number of shares stated in the Average Price Notice immediately after exercise of the option and payment of theprorata subscription price, the relevant participant can subscribe up to the remaining 25% of the shares set out in thenotice on the exercise of the option. At the end of a six month term from the exercise of the option and payment ofthe remaining subscription price, the relevant participant can subscribe up to the remaining 25% of the shares set outin the notice on the exercise of the option.101Due to legal requirements, executives in the United States were not allowed to make a Private Investment but weregranted option rights. Out of 105,500 options outstanding on 31 December 2003 66,750 options have been exercisedin 2004; the weighted, average market share price at the time of exercise amounted to EUR 40,70. 22,250 optionswere useable on 31 December 2004 and were exercised in January 2005. The 16,500 remaining options lapsed in2004. Andritz provided these shares by using the repurchased own shares.The 97 th Annual General Meeting of Shareholders on 30 March 2004 resolved a Share Option Program for Managersand Members of the Managing Board. The number of options granted to the different Manager varies, depending onthe area of responsibility, between 1,500, 2,500 and 5,000 shares for Managers, to 10,000 for Board Members and12,500 for the CEO. The options are to be drawn from the pool of shares bought back under the corporate sharebuy-back program. One share option entitles to the purchase of one share. In order to exercise a share option, eligiblepersons must be in active employment of Andritz AG or one of its affiliates from 1 May 2004 until before each date ofexercise of an option. Another requirement is that Managers must have invested at least 20,000 EUR in Andritz sharesfrom their own resources, and the Members of the Managing Board at least 40,000 EUR.The exercise price of the option is the un-weighted average closing price of Andritz shares in the four calendarweeks following the 97 th Annual General Meeting of Shareholders on 30 March 2004 and amounts to 37.53 EUR.Option can be exercised between 1 May 2006 and 30 April 2008 (=period of exercise) provided that the average unweightedclosing price of the Andritz share over twenty consecutive trading days within the period from 1 May 2006and 30 April 2007 is at least 15% above the exercise price and the earnings per share in business year 2005 (basedANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSon the total number of shares listed) or the earnings per share in business year 2006 (based on the total number ofshares listed) are at least 15 % above the earnings per share in business year 2003 (based on the total number ofshares listed) or that the average unweighted closing price of the Andritz share over twenty consecutive trading dayswithin the period from 1 May 2007 and 30 April 2008 is at least 20% above the exercise price and the earnings pershare in business year 2006 (based on the total number of shares listed) or the earnings per share in business year2007 (based on the total number of shares listed) are at least 20 % above the earnings per share in business year2003 (based on the total number of shares listed).If the conditions of exercise are met, 50% of the options can be exercised immediately, 25% after three months andthe remaining 25% after a further three months. Share options can only be exercised by way of written notification tothe company. The share options are not transferable. The shares purchased under the Share Option Program are notsubject to a ban on sales over a certain period.The total of options granted in 2004 amounts to 174,500, which is equal to the total of outstanding options on31 December 2004. The fair value of the options at the time of granting amounts to EUR 1,220 thousand, thereofEUR 356 thousand has been reported as proportionate expense in 2004. The calculation of the fair value is basedon the Black-Scholes Option Pricing Model. The share price at the time of granting the options is the closing price ofthe Andritz share on 17 May 2004 and amounts to EUR 37.05. The exercise price of EUR 37.53 was calculated inaccordance to the rules of the option program. For the lifetime of the options a period of two years was assumed. Theexpected dividend yield was fixed with 3%, a discount rate of 5% was used. The expected volatility was calculatedon the basis of the historical development of the share price of the Andritz share during the 30 months preceding thegranting date of the options. Further parameters of granting the options were not used.11. Statement of Liabilities2004102Remaining Remaining Totalterm between term over non-current(in TEUR) 1 and 5 years 5 years liabilitiesBonds 100,000 0 100,000Bank loans 2,575 2,636 5,211Obligations under finance lease 582 0 582103,157 2,636 105,793Provisions non-current 77,800183,5932003Remaining Remaining Totalterm between term over non-current(in TEUR) 1 and 5 years 5 years liabilitiesBonds 100,000 0 100,000Bank loans 1,919 2,567 4,486Obligations under finance lease 919 0 919102,838 2,567 105,405Provisions non-current 72,969178,374The interest bearing borrowings consist primarily of current bank loans at floating interest rates and fixed rates.Property, plant and equipment amounting to EUR 3,414 thousand and EUR 17,781 thousand as at 31 December2004 and 2003, respectively, has been pledged as security for long-term debt.ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS12. Other Liabilities(in TEUR) 2004 2003Payables to associated companies 125 297Other personnel related costs 44,410 40,164Other order related costs 44,471 51,726Deferred income 3,515 1,093Other 57,313 55,601149,834 148,881H. Notes to the Consolidated Income Statement13. Sales(in TEUR) 2004 2003Contract revenue recognised as sales in the period 944,988 767,380Other 536,359 457,6101,481,347 1,224,99014. Other Operating Income(in TEUR) 2004 2003Profit on disposal of fixed assets excluding financial assets 3,691 371Exchange rate gains 9,390 9,919Rental income 1,582 1,584Other 6,136 8,22520,799 20,09910315. Personnel Expenses(in TEUR) 2004 2003Wages 59,050 53,516Salaries 197,267 181,676Pension expenses 10,499 22,166Severance expenses 5,551 606Social security and payroll related duties 37,601 35,171Other social payments 12,738 11,662322,706 304,79716. Other Operating Expenses(in TEUR) 2004 2003Exchange rate losses 14,821 6,647Sales expenses 89,503 76,740Administration expenses 23,826 23,877Other 81,133 69,164209,283 176,428ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS17. Financial Results(in TEUR) 2004 2003Income / expenses from associated companies (1,543) (419)Other interest and similar income 8,454 6,469Interest and similar expenses (6,475) (5,463)Interest result 1,979 1,006Income / expenses from investments 64 95Adjustments of financial assets 304 83Profit/losses on disposal of short-term securities (4) (43)Adjustment to market value of short-term securities 293 (336)Other income / expenses from financing activities 657 (201)1,093 38618. Income Taxes(in TEUR) 2004 2003Current tax expense (18,187) (20,810)Deferred tax income relating to the origination and reversal of temporary differences (4,643) 2,009(22,830) (18,801)104Changes in the deferred income tax account consist of the following:(in TEUR) 2004 2003Deferred tax assets 18,876 17,696Liabilities for deferred taxes (50,546) (45,803)Balance as at 31 December, as previously stated (31,670) (28,107)Deferred tax expense relating to the origination andreversal of temporary differencesincome statement charge (280) 4,040charged to equity (4,889) (7,603)(36,839) (31,670)thereofDeferred tax assets 21,854 18,876Liabilities for deferred taxes (58,693) (50,546)ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSThe reconciliation of the effective tax rate to the tax rate used is as follows:(in TEUR) 2004 2003Earnings before taxes (EBT) 77,228 49,318Tax at the applicable tax rate (34% in 2004 and 2003) (26,257) (16,768)Non-deductable amortization of goodwill (5,673) (4,828)Tax effect ofadjustment of using new taxes 9,762 (425)other changes (662) 3,220(22,830) (18,801)Current income tax 18,187 20,810Changes in deferred taxes charged to the income statement (4,643) 2,009Income tax effects related to tax rate changes are the result of the decrease of Austrian tax rate from 34% to 25%from 2005 on.Deferred tax assets and liabilities for deferred taxes as at 31 December 2004 and 2003 are the result of the followingtemporary valuation and accounting differences between book values in the IFRS consolidated financial statementsand the relevant tax bases:2004 2003Deferred taxDeferred tax(in TEUR) Asset Liability Asset LiabilityIntangible assets 1,575 (435) 1,390 (1,146)Tangible assets 2,634 (8,405) 1,416 (10,064)Financial assets 193 (46) 5 (33)Inventories 121,636 (3,132) 137,554 (441)Receivables 6,476 (19,826) 509 (26,251)Short-term securities and shares 0 (89) 0 (113)Other assets 338 (268) 0 (6)132,852 (32,201) 140,874 (38,054)Provisions 16,584 (23,159) 20,026 (29,735)Liabilities 4,520 (128,287) 8,159 (123,172)Deferred income 10,075 0 7,996 (141)31,179 (151,446) 36,181 (153,048)Tax loss carry-forwards 7,539 0 5,495 0Deferred tax assets / liabilities 171,570 (183,647) 182,550 (191,102)Valuation allowance for deferred tax assets (14,060) 0 (12,959) 0Other deferred taxes from consolidation (1,425) 0 (615) 0IAS 39 reserve 0 (9,277) 0 (9,544)Offset within legal tax units and jurisdiction (134,231) 134,231 (150,100) 150,100Net deferred tax assets and liabilities 21,854 (58,693) 18,876 (50,546)105ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS19. Earnings per ShareBasic earnings per share (see Consolidated Income Statement) are calculated by dividing the net profit for theperiod attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding duringthe period.I. Segment InformationSegment information is prepared on the following basis:Business segmentsThe Andritz Group conducts the majority of its business activities in the following areas:a. Pulp and Paper (P+P)b. Rolling Mills and Strip Processing Lines (WB)c. Environment and Process (EP)d. Feed Technology (FT)All other minor business activities are included in “Other”.Geographical segmentsThe Group’s activities are conducted predominantly in Europe, North America and Asia.1062004Business segment dataOtherand(in TEUR) P + P WB EP FT transition TotalSales 884,652 235,356 217,941 99,588 43,810 1,481,347Segment result before amortizationof goodwill 64,812 12,141 9,916 2,204 3,746 92,819Total assets 392,170 75,460 156,511 59,376 469,869 1,153,386Total liabilities 433,786 102,197 96,227 21,897 22,198 876,305Capital expenditure 14,304 3,192 7,879 1,622 2,371 29,368Depreciation and amortization of tangibleand intangible fixed assets 13,055 2,152 2,682 2,880 1,770 22,539Share of net profit / loss of associates (1,601) 0 58 0 0 (1,543)Investment in associates 1,428 0 674 0 0 2,102Geographical segment dataRest ofthe worldNorthand con-(in TEUR) Europe America Asia solidation TotalExternal sales 587,839 248,105 442,802 202,601 1,481,347Total assets 1,356,505 220,957 35,086 (459,162) 1,153,386Capital expenditure 20,298 6,449 2,031 590 29,368ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTS2003Business segment dataOtherand(in TEUR) P + P WB EP FT transition TotalSales 810,276 173,142 110,353 99,177 32,042 1,224,990Segment result before amortizationof goodwill 49,135 4,413 1,485 4,801 3,299 63,133Total assets 444,333 65,418 87,272 68,631 301,258 966,912Total liabilities 384,590 67,943 47,007 25,991 202,281 727,812Capital expenditure 9,301 1,419 1,545 6,637 1,647 20,549Depreciation and amortization of tangibleand intangible fixed assets 14,763 2,171 1,828 2,626 (151) 21,237Share of net profit / loss of associates (419) 0 0 0 0 (419)Investment in associates 3,022 0 0 0 0 3,022Geographical segment dataRest ofthe worldNorthand con-(in TEUR) Europe America Asia solidation TotalExternal sales 645,049 259,729 236,738 83,474 1,224,990Total assets 1,170,450 178,547 18,533 (400,618) 966,912Capital expenditure 15,829 2,232 2,237 251 20,549107J. Notes to Cash Flow StatementsCash flows from acquisition of subsidiariesBusiness area Total Total(in TEUR) P+P WB EP 2004 2003Cash and cash equivalent (1,028) 0 (1,511) (2,539) (4,449)Receivables (836) 0 (20,235) (21,071) (6,886)Inventories (186) (2,500) (13,898) (16,584) (5,170)Property, plant and equipment (34) (1,450) (8,060) (9,544) (14,027)Financial assets 0 0 (613) (613) (160)Financial debt 0 0 2,834 2,834 9,553Accounts payable and accrued expenses 2,775 0 39,307 42,082 11,673Net assets / liabilities acquired 691 (3,950) (2,176) (5,435) (9,466)Cash and cash equivalent 1,028 0 1,511 2,539 4,449Goodwill (1,080) (37) (1,344) (2,461) (8,678)Changes in minority interests 142 0 0 142 (248)Net cash flow 781 (3,987) (2,009) (5,215) (13,943)ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSK. Financial Instrumentsa. Foreign Exchange Risk ManagementThe Group mostly enters into fixed forward foreign exchange contracts in managing its foreign exchange risk resultingfrom cash flows from current business activities. Transaction risk is calculated in each foreign currency and includescurrency denominated assets and liabilities and certain off-balance sheet items such as highly probable future cashflows for firm commitments and highly probable purchases and sales. The currency risks of the Group occur due to thefact that the Group operates and has production and sales in different countries worldwide. The Group has designatedthe major part of its forward exchange contracts as cash flow hedges and carries them at fair value.b. Liquidity RisksThe group’s policy is to maintain sufficient cash and cash equivalents or have available funding through an adequateamount of credit facilities to meet its commitments. Any excess cash is invested mostly in listed securities which areactively traded.c. Credit RisksCredit risks, or the risk of counterparties defaulting, are controlled by the application of credit approvals, limits andmonitoring procedures. Where appropriate, the corporation obtains guarantees from governmental export agencies orsimilar private institutions to reduce the risk of a counterpart defaulting. Credit risk associated with the investment ofliquid funds and securities is limited by the fact that the Group works only with financial partners who can demonstratesound creditworthiness. For some financial assets and financial liabilities the Group has a legally enforceable right toset off. These amounts are only reported on a net basis. For all existing risks, valuation allowances are included, sothat the Managing Board believes that no other credit risk will occur.108d. Interest RiskIn June 2002 the company has issued a bond for a nominal value of MEUR 100 with a repayment period of 6 yearsand nominal interest rate of 6% p.a. For this bond an interest swap has been used to hedge the risk from the fixedinterest rate of the bond. By this interest swap the fixed interest rate has been changed for the whole repayment periodto a variable interest rate based on 1 month’s Euribor.The Managing Board believes that the exposure to interest rate risk of remaining financial assets and liabilities isnegligible. Consequently, additional derivative instruments for hedging of these interest risks are not used within theGroup.The weighted average effective interest rates at the balance sheet date were as follows:2004 2003Cash on current accounts 1.4% 0.9%Short term deposits 2.2% 4.1%Securities, short term 3.5% 3.9%Securities, long term 2.7% 3.1%Overdraft on current accounts 2.3% 3.0%Short term loans 3.5% 4.1%Long term loans 5.0% 5.0%Bond 3.2% 3.2%ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSe. Fair Value of Financial InstrumentsFair value estimationThe fair value of forward foreign exchange contracts is determined using forward exchange market rates at the balancesheet date.At the balance sheet date, the fair values of forward contracts designated as cash flow hedges were as follows:Remaining periodnot exceed- more than Total Total(in TEUR) ing 1 year 1 year 2004 2003US dollars 22,010 1,747 23,757 24,110Swedish crowns (17) 0 (17) 30Singapore dollars 5,573 3,116 8,689 7,511Other currencies 407 0 407 (70)27,973 4,863 32,836 31,581Fair values of forward contracts designated as cash flow hedges are included directly in equity.(in TEUR) 2004 2003Forward contracts with positive fair values 37,815 33,175Forward contracts with negative fair values (4,979) (1,594)32,836 31,581The fair value of the interest swap was EUR 9,666 thousand as of end at 2004 (EUR 9,019 thousand as of end of2003).109The Group’s principal financial instruments not carried at fair value are trade receivables, finance instruments andother current assets, trade and other payables, bank overdrafts, long-term borrowings.Cash and cash equivalents, current investments and other non-current financial assetsThe carrying amount of cash and other financial assets approximates fair value due to the relatively short-termmaturity of these financial instruments.Non-current and current securitiesThe fair values of publicly traded instruments are stated based on quoted market prices. For all other instrumentsfor which there are no quoted market prices, a reasonable estimate of fair value has been calculated based on theexpected cash flows or the underlying net asset base for each investment. Non-current securities of the Group areclassified as “available for sale” and are valued at their quoted market price at the balance sheet date.Receivables and payablesThe historical cost carrying amounts of receivables and payables which are all subject to normal trade credit termscorrespond basically to their fair values.Short-term borrowingsThe carrying amount approximates fair value because of the short period to maturity of those instruments.Long-term borrowingsThe fair value of the long-term debts is based on the current rates available for debt with the same maturity profile.The fair value of non-current borrowings and other payables with variable interest rates approximates their carryingamounts.The carrying amount is equal to the estimated fair value of the Group’s financial instruments. The interest risk ofthe bond has been hedged by an interest swap. Management believes that the exposure to interest rate risk of theremaining financial assets and liabilities is negligible.ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSIAS 39-ReserveThe table below shows the movements in the hedging reserve in equity in respect to gains and losses on forwardcontracts designated as cash flow hedges during the period.(in TEUR) 2004 2003Balance as at 1 January 18,511 8,601Movements in the period:Gains and losses from changes in fair value 14,635 20,972Deferred income taxes thereon (4,096) (7,119)Transfers to income statement (12,764) (5,974)Deferred income taxes thereon 4,363 2,031Balance as at 31 December 20,649 18,511L. LeasesThe Group and its subsidiaries have entered into various operating lease agreements for machinery, offices and otherfacilities as lessees. Lease terms do not contain restrictions on the Group’s activities concerning dividends, additionaldebt or further leasing. Rent expense amounts to EUR 13,656 thousand in 2004 and EUR 11,420 thousand in 2003respectively.Future lease payments under non-cancelable operating lease are as follows:(in TEUR) 2004 2003110Next year 4,260 3,1741 year to 5 years 8,587 11,147After 5 years 4,203 2017,050 14,341M. CommitmentsCommitments arising from contracts for expenditure on property, plant and equipment are only in the normal courseof business. For 2004 these commitments amount to EUR 3,026 thousand and for 2003 to EUR 494 thousand.N. Contingent Liabilitiesa. LitigationVarious legal actions and claims are pending or may be asserted in the future against Group companies from litigationsand claims incidental to the ordinary course of business. These mainly include product liability claims and contractualand intellectual property disputes. Related risks have been analysed as to likelihood of occurrence. Althoughthe outcome of these matters cannot always be ascertained with precision, the Managing Board believes that theoutcome of these legal actions and claims, individually or in the aggregate, will not have a material adverse effect onthe Company’s business, liquidity, result of operations or financial position.As of December 31, 2004, Andritz Inc., as subsidiary of the Company, was one of many defendants in a total ofapproximately 85 asbestos cases in the US. Nearly all of these cases involve claims by multiple plaintiffs against multipledefendants. In aggregate the cases involve a total of approximately 19,500 plaintiffs. Andritz Inc. does not believeit should be found liable in connection with any of these claims and plans to vigorously defend each claim. As the vastmajority of claims against Andritz Inc. have not as yet been stated with specificity it is not possible for Andritz Inc. toassess the full extent of its potential exposure to asbestos litigation, which could be significant. Andritz Inc. has not hada judgment of liability rendered against it in connection with an asbestos claim. During the last years, approximately22 asbestos cases and about 4,150 claims against Andritz have been dismissed, and one claim has been resolvedANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSmutually without Andritz incurring any significant liability or expense. It is possible that the final adjudication or settlementof such proceedings could have a material adverse effect on the Company’s business, results of operationsand financial condition. The Group believes it has several potential sources of recovery including insurance and/orcontractual indemnities from the previous owners of the relevant businesses of Andritz Inc. Whether any indemnitiesand/or insurance will apply depends on the particular facts of each plaintiff’s claim. Because the claims against Andritzin most cases have not as yet been stated with specificity and for the reasons set forth below, it is not possible for theGroup to assess the amount of its expected recovery. Moreover, certain indemnitors or insurers have contested andothers may contest the applicability of the indemnity or insurance in question, and there can be no assurance that theGroup will prevail in any dispute relating to the applicability of such insurance or indemnity to existing or future claimsagainst a Group company.b. Other Contingencies(in TEUR) 2004 2003Outstanding bank guarantees concerning contracts with customers 217,219 172,333Other contingencies 10,660 6,621According to several contracts the customer is entitled to hold retention until the end of the warranty period. Inorder to redeem these retentions bank guarantees were submitted to the customer. In addition, other bank and companyguarantees were issued as guarantees for advance and progress payments from customers. The managementbelieves that the provisions for warranties and the shown liabilities are sufficient. No additional financial outflows fromthese guarantees are expected. In some cases Andritz has similar retention agreements with suppliers. In order tosettle these retentions Andritz receives bank guarantees from the suppliers.O. Related Party TransactionsOnly minor business relations exist with the shareholders.The shareholders are:111Free Float 72%Certus Beteiligungs-GmbH 26%Management 2%Emoluments of the Managing BoardA provision of EUR 4,185 thousand in 2004 (EUR 4,012 thousand in 2003) has been recorded for pensions of formermembers of the Managing Board and their dependants; the current year expense for these pensions amounted to EUR524 thousand for 2004 (EUR 140 thousand for 2003).Directors’ total remuneration for 2004 amounted to EUR 4,135 thousand (thereof EUR 2,891 thousand for profitrelated bonuses) and for 2003 to EUR 3,633 thousand.ANDRITZ 2004

NOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSP. List of Consolidated SubsidiariesOwnership InterestMaterial Affiliated Companies Place of Incorporation direct indirect112Andritz Denmark A/S Esbjerg/Denmark 100%Sprout-Matador A/S Esbjerg/Denmark 100%Andritz (USA), Inc. Arlington/Texas (USA) 100%Andritz Inc. Muncy/Pennsylvania (USA) 100%Andritz-Ruthner, Inc. Arlington/Texas (USA) 100%Andritz Bird Inc. Houston/Texas 100%Andritz S.A.S. Velizy/France 100%Andritz Selas S.A.S. Gennevilliers/France 100%Andritz Ingenieria S.A. Madrid/Spain 100%Andritz GmbH Hemer/Germany 100%Sundwig GmbH Hemer/Germany 75%Andritz Fiedler GmbH & Co KG Regensburg/Germany 100%Andritz Separation GmbH Cologne/Germany 100%Andritz Fliessbettsysteme GmbH Ravensburg/Germany 100%Andritz Kaiser GmbH Bretten-Gölshausen/Germany 100%Andritz Filtrationstechnik GmbH Selb/Germany 100%Andritz Oy Helsinki/Finland 100%Savonlinna Works Oy Savonlinna/Finland 100%Andritz Ltd./Ltèe. Montreal/Canada 100%Andritz Fiber Drying Ltd. Lachine/Canada 100%Andritz AB Örnsköldsvik/Sweden 100%Andritz Fiber Drying AB Växjö/Sweden 100%Andritz Ltd. Chesterfield/UK 100%Andritz-Kenflo Foshan Pump Co. Ltd. Foshan/China 60%Andritz Technologies Ltd. Foshan/China 100%Andritz Dies & Rolls B.V. Geldrop/Netherlands 100%Andritz Brasil Ltda. Curitiba/Brazil 100%Graz, February 16, 2005Wolfgang Leitner Markku Hänninen Franz Hofmann Friedrich Papst Bernhard RebernikANDRITZ 2004

REPORT OF THE SUPERVISORYBOARD OF ANDRITZ AGREPORT OF THESUPERVISORYBOARDThe Supervisory Board was regularly informed by the Managing Board both verbally and in writingof the status of the Company, its development, and major business transactions. The transactionsthat were subject to approval by the Supervisory Board were investigated and reviewed togetherwith the Managing Board.Gregor Böhm withdrew from the Supervisory Board in 2004. At the 97 th Annual General Meeting,Klaus Ritter was elected as a new member of the Supervisory Board.113The Financial Statement of Andritz AG and the Consolidated Financial Statements as of December31, 2004, as well as the Status Reports for 2004, were audited (also including the accounts) byAuditor Wirtschaftsprüfungs- und Steuerberatungsgesellschaft m.b.H, Vienna, who had beenappointed as auditors by the Meeting of Shareholders and who certified the Financial Statements.The Supervisory Board examined the Financial Statements certified by the Auditors, as well asthe proposed appropriation of profit and the report of the Managing Board, and concurs with theresult of the Audit.The Supervisory Board approved the Financial Statements, which are herewith adopted in compliancewith Article 125 paragraph 2 of the Corporation Act.Kurt Stiassny Graz, March 2005Chairman of the Supervisory BoardANDRITZ 2004

ADDRESSESEUROPE114EUROPEAUSTRIAHeadquarters:Andritz AGStattegger Strasse 188045 GrazAustriaPhone: +43 316 6902 0Fax: +43 316 6902 415welcome@andritz.comAndritz Separation GmbHADDRESSESStattegger Strasse 188045 GrazAustriaPhone: +43 316 6902 2318Fax: +43 316 6902 463separation@andritz.comAndritz AGEibesbrunnergasse 201120 ViennaAustriaRolling Mills andStrip Processing LinesPhone: +43 1 81 195 0Fax: +43 1 81 37 645ruthner@andritz.comMechanical Pulping SystemsPhone: +43 1 81 195 0Fax: +43 1 81 55 358mechanicalpulp@andritz.comChemical Systems,Fiberline, Recovery SystemsPhone: +43 1 81 195 6266Fax: +43 1 81 195 6301chemsys.at@andritz.comfiberline.at@andritz.comrecovery.at@andritz.comAnstalt fürStrömungsmaschinenGesellschaft mbHAndritzer Reichsstrasse 68B8045 GrazAustriaPhone: +43 316 692 728 0Fax: +43 316 691 575astro@astroe.atEuropean Mill Service GmbHAndritzer Reichsstrasse 44/1/38045 GrazAustriaPhone: +43 316 691 200Fax: +43 316 691 200 99office@em-service.comCZECH REPUBLICAndritz spol s.r.o.Na Hrázce 710500 09 Hradec KrálovéCzech RepublicPhone: +420 495 518 220Fax: +420 495 272 423pulppaper-service.ce@andritz.comDENMARKSprout-Matador A/SGlentevej 5-76705 EsbjergDenmarkPhone: +45 72 160 300Fax: +45 72 160 301sprout-matador.dk@andritz.comFINLANDAndritz OyTammasaarenkatu 100180 HelsinkiFinlandPhone: +358 20 450 5555Fax: +358 20 450 5109pulpandpaper.fi@andritz.comAndritz OyKeskikankaantie 915860 HollolaFinlandPhone: +358 20 450 5555Fax: +358 20 450 6711woodprocessing@andritz.comAndritz OyKyminlinnantie 648600 KotkaFinlandPhone: +358 20 450 5555Fax: +358 20 450 5540pulpandpaper.fi@andritz.comChemical SystemsFax: +358 20 450 5190FiberlineFax: +358 20 450 5062Fiber Preparation SystemsFax: +358 20 450 5422Pulp and Paper Mill ServicesAddress: Lasimestarintie 5Fax: +358 20 450 5048RecoveryFax: + 358 20 450 5444Andritz OyLypsyniemenkatu 557200 SavonlinnaFinlandPhone: +358 20 450 5555Fax: +358 20 450 6220pulpandpaper.fi@andritz.comChemical SystemsFax: +358 20 450 6213FiberlineFax: +358 20 450 6336Fiber Preparation SystemsFax: +358 20 450 6384Pulp and Paper Mill ServicesFax: +358 20 450 6446Andritz OyRelanderinkatu 278200 VarkausFinlandPhone: +358 20 450 5555Fax: +358 20 450 5974pulpandpaper.fi@andritz.comRecoveryFax: +358 20 450 5974Pulp Mill ServicesFax: +358 20 450 5975Andritz OyHermiankatu 8D33720 TampereFinlandPhone: +358 3 359 3900Fax: +358 3 359 3933pulpandpaper.fi@andritz.comSavonlinna Works OyLypsyniemenkatu 557200 SavonlinnaFinlandPhone: +358 20 450 6000Fax: +358 20 450 6239savonlinnaworks@andritz.comFRANCEAndritz S.A.S.2-4 Avenue de l’Europe - Bât. A78140 Vélizy-VillacoublayFranceANDRITZ 2004

EUROPEADDRESSESPhone: +33 1 39 26 05 50Fax: +33 1 39 26 05 66environ.fr@andritz.comAndritz S.A.S.Allée de la Garenne - Z.I.Le Buxerioux36000 ChâteaurouxFrancePhone: +33 2 54 61 3333Fax: +33 2 54 61 3300environ.fr@andritz.comAndritz Fiedler S.A.SZ.A. Les Priédons Sud86140 Scorbé-ClairvauxFrancePhone: +33 549 93 93 81Fax: +33 549 93 93 80pulpandpaper.fr@andritz.comAndritz Selas S.A.S.7 rue du Fossé BlancBâtiment C192230 GennevilliersFrancePhone: +33 1 40 80 34 00Fax: +33 1 40 80 34 38welcome.selas@andritz.comUMT S.A.S.Site d’Activités des Grillonnières37270 Saint Martin Le BeauFrancePhone: +33 247 50 6364Fax: +33 247 50 2066umt.fr@andritz.comGERMANYAndritz GmbHStephanopeler Strasse 2258675 Hemer-SundwigGermanyPhone: +49 2372 54 0Fax: +49 2372 54 400welcome@hem.andritz.comAndritz GmbHZweigniederlassung KirchheimTannenbergstrasse 13973230 Kirchheim/TeckGermanyPhone: +49 7021 50 74 0Fax: +49 7021 50 74 10pulpandpaper.de@andritz.comhydro.de@andritz.comAndritz Fiedler GmbH &Co. KGWeidener Strasse 993057 RegensburgGermanyPhone: +49 941 6401 0Fax: +49 941 6241 4pulppaper-service.ce@andritz.comAndritz Filtrationstechnik GmbHGebrüder-Netzsch-Strasse 1995100 SelbGermanyPhone: +49 9287 75 706Fax: +49 9287 75 707filtration.de@andritz.comAndritz Fließbett SystemeGmbHEscher-Wyss-Strasse 2588212 RavensburgGermanyPhone: +49 751 83 2287Fax: +49 751 83 3033environ.de@andritz.comAndritz AGBüro WestSchluerweg 746286 DorstenGermanyPhone: +49 2369 2067 290Fax: +49 2369 2067 291ulrich.jacobs@andritz.comAndritz Kaiser GmbHGewerbestrasse 3075015 Bretten-GölshausenGermanyPhone: +49 7252 910 01Fax: +49 7252 910 199andritz.kaiser@andritz.comAndritz Separation GmbHDillenburger Strasse 10051105 CologneGermanyPhone: +49 221 9856 107 / 208Fax: +49 221 9856 119 / 202separation.de@andritz.comSundwig GmbHStephanopeler Strasse 2258675 Hemer-SundwigGermanyPhone: +49 2372 54 0Fax: +49 2372 54 200welcome@sundwig.deUniversal Milling Technologyeine Zweigniederlassung derAndritz GmbHIndustriestrasse 15a40822 MettmannGermanyPhone: +49 2104 91970Fax: +49 2104 12054umt.de@andritz.comGREAT BRITAINAndritz Ltd.R&B Technology CentreSpeedwell RoadParkhouse EastNewcastle-under-LymeStaffordshire, ST5 7RGGreat BritainPhone: +44 1782 56 5656Fax: +44 1782 56 6130environ.uk@andritz.comAndritz Ltd.ET DivisionSuite 5LNorth Mill, BridgefootBelper, DE56 1YDGreat BritainPhone: +44 1773 599 540Fax: +44 1773 599 541environ.uk@andritz.comAndritz Selas Engineering Ltd.Suite 5L, Business CentreNorth Mill, BridgefootBelper, Derbyshire, DE56 1YDGreat BritainPhone: +44 1773 829 954Fax: +44 1773 829 985welcome.selas@andritz.comUMT Ltd.Stockholm RoadSutton Fields Industrial EstateHull, HU7 0XLGreat BritainPhone: +44 1482 825 119Fax: +44 1482 839 806umt.uk@andritz.comNETHERLANDSAndritz B.V.Nijverheidsweg 3C1785 AA Den HelderNetherlandsPhone: +31 2236 33474Fax: +31 2236 37781separation.nl@andritz.com115ANDRITZ 2004

ADDRESSESEUROPE/AMERICAS116Andritz Dies & Rolls B.V.Spaarpot 1125667 KZ GeldropNetherlandsPhone: +31 40 262 7777Fax: +31 40 262 7751adr.nl@andritz.comThermtec B.V.Wijnhaven 763011 WT RotterdamNetherlandsPhone: +31 10 413 7628+31 10 280 1660Fax: +31 10 404 7356welcome@thermtec.nlPOLANDAndritz AGSpólka AkcyjnaPrzedstawicielstwo w PolsceAleje Jerozolimskie 21402 - 486 WarsawPolandPhone: +48 22 87399 40Fax: +48 22 87399 39pulpandpaper.pl@andritz.comhydro.pl@andritz.comSLOVAKIAAndritz Jochman s.r.oRadlinského 19052 01 Spišská Nová VesSlovakiaPhone: +421 53 4198 110Fax: +421 53 4198 161filtration.sk@andritz.comSPAINAndritz Ingeniería S.A.Agustin y Antonia, 1228700 S. Sebastián de los ReyesMadridSpainPhone: +34 91 663 6409Fax: +34 91 651 1931environ.es@andritz.comAndritz Ingeniería S.A.Calle Riera, 11-bajos08190 Sant Cugat del VallésBarcelonaSpainPhone: +34 93 674 9482Fax: +34 93 674 9315pulpandpaper.es@andritz.comAndritz ABGävlegatan 22113 30 StockholmSwedenPhone: +46 8 736 2500Fax: +46 8 736 2529pulpandpaper.se@andritz.comAndritz Fiber Drying ABKvarnvägen351 87 VäxjöSwedenPhone: +46 470 70 63 00Fax: +46 470 70 63 80fiber-drying.se@andritz.comSWITZERLANDAndritz 3Sys AGOberdorfweg 95610 WohlenSwitzerlandPhone: +41 56 618 46 80Fax: +41 56 618 46 81environ.ch@andritz.comAMERICASRUSSIALLC Andritz4 th Krasnoarmeiskaya Street 4A198005 St. PetersburgRussiaPhone: +7 812 316 0913Fax: +7 812 110 1582pulpandpaper.ru@andritz.comooo FiedlerOffice 233Proffsojuznaja Street 125117647 MoscowRussiaPhone: +7 095 99 81 472Fax: +7 095 92 61 863pulppaper-service.ne@andritz.comNetzsch Representative OfficeMoscowLeninski Prospekt, 95-a, office 576119313 MoscowRussiaPhone: +7 095 956 3836+7 095 956 9086Fax: +7 095 956 9087separation.ru@andritz.comSWEDENAndritz ABArtullsvägen 1891 21 ÖrnsköldsvikSwedenPhone: +46 660 29 53 00Fax: +46 660 29 53 99pulpandpaper.se@andritz.comAndritz ABIvarshyttevägen 4776 33 HedemoraSwedenPhone: +46 225 635 50Fax: +46 225 635 51pulpandpaper.se@andritz.comAndritz ABSödra Kyrkogatan 6652 24 KarlstadSwedenPhone: +46 54 55 54 50Fax: +46 54 55 54 59pulpandpaper.se@andritz.comBRAZILHeadquarters:Andritz Brasil Ltda.Rua Presidente Faria,248 - 10 andar - Centro80020-290 - Curitiba - PRBrazilPhone: +55 41 304 7611Fax: +55 41 224 0014pulpandpaper.br@andritz.commechanicalpulp.br@andritz.comenviron.br@andritz.comAndritz Brasil Ltda.Rua Tabapuã, 627 - Conj. 92 -Itaim Bibi04533-012 - São Paulo - SPBrazilPhone: +55 11 3168 6114Fax: +55 11 3078 5098woodprocessing.br@andritz.comAndritz Brasil Ltda.Av. Presidente Castelo Branco,1577 - Sala 203 - Carapina29160-004 - Serra - ESBrazilPhone: +55 27 3338 3607Fax: +55 27 3318 1761pulp-service.br@andritz.comANDRITZ 2004

AMERICASADDRESSESAndritz Brasil Ltda.Rua C, Quadra 6, Lotes 3, 4, 9e10, Distrito Industrial,45820-490 - Eunápolis - BABrazilpulpandpaper.br@andritz.comAndritz Separation Industria eComércio de Equipamentos deFiltracâo Ltda.Rua Hermann Weege, 2383 -Prédio 4 - Centro89.107-000 Pomerode - SCBrazilPhone: +55 47 387 8240Fax: +55 47 387 8440filtration.bra@andritz.comSprout-Matador do Brasil Ltda.Rua Dona Eugenia, 811CEP 90630-150, Porto Alegre/RSBrazilPhone: +55 51 3219 9281Fax: +55 51 3217 3307sprout-matador.br@andritz.comCANADAAndritz Ltd./Ltée.2260-32 nd Avenue/32 ième AvenueLachine, Quebec H8T 3H4CanadaPhone: +1 514 631 7700Fax: +1 514 631 3995mechanicalpulp.ca@andritz.comwoodprocessing@andritz.comAndritz Ltd./Ltée.DRT Service Center45 Roy Blvd.BrantfordOntario N3R 7K1CanadaPhone: +1 519 754 4590Fax: +1 519 754 4594pulppaper-service.na@andritz.comAndritz Ltd./Ltée.Service Center3448-78 AvenueEdmontonAlberta T6B 2X9CanadaPhone: +1 780 465 3344Fax: +1 780 440 4354pulppaper-service.na@andritz.comAndritz Bird Inc.A Division of Andritz Ltd.Saskatoon Service Center2600 Wentz AvenueSaskatoonSaskatchewan S7K 2L1CanadaPhone: +1 306 931 0801Fax: +1 306 931 2442separation.ca@andritz.comAndritz Fiber Drying Ltd.2260-32 nd Avenue/32 ième AvenueLachine, Quebec H8T 3H4CanadaPhone: +1 514 631 7700Fax: +1 514 631 8355fiber-drying.ca@andritz.comCHILEAndritz Chile LimitadaSeminaro 202Puerto MonttChilePhone: +56 65 434 366Fax: +56 65 434 367sprout-matador.cl@andritz.comAndritz Chile Ltda.Isidora Goyenechea 3600,Oficina 202Las Condes, SantiagoChilePhone: +56 2 462 4600Fax: +56 2 462 4646patrick.oshea@andritz.comAndritz Chile Ltda.Angol 436, Oficina 805ConcepciónChilePhone: +56 41 211 030Fax: +56 41 210 794pulppaper-service.cl@andritz.comUSAAndritz Inc.1115 Northmeadow ParkwayRoswell, GA 30076-3857USAPhone: +1 770 640 2500Fax: +1 770 640 9454pulpandpaper.us@andritz.comFiberlineFax: +1 770 640 2569Chemical SystemsFax: +1 770 640 2681RecoveryFax: +1 770 640 2569Project ManagementFax: +1 770 640 2681Pulp and Paper Mill ServicesFax: +1 770 640 2521Wood ProcessingFax: +1 770 640 2595Andritz Inc.35 Sherman StreetMuncy, PA 17756USAPhone: +1 570 546 8211Fax: +1 570 546 1306pulpandpaper.us@andritz.comsprout-matador.us@andritz.comEngineered Wear Products/Pulp and PaperFax: +1 570 546 1312durametal@andritz.comAndritz Inc.101 Ridge StreetGlens Falls, NY 12801USAPhone: +1 518 793 5111Fax: +1 518 745 1917Fiber Preparation SystemsFax: +1 518 745 2858fiberprep.us@andritz.comPulp and Paper Mill ServicesFax: +1 518 745 7005pulppaper-service.na@andritz.comFiberline R&D FacilityFax: +1 518 745 2971Andritz Inc.R&D Facility3200 Upper Valley PikeSpringfield, OH 45504USAPhone: +1 937 390 3400Fax: +1 937 390 6827Andritz Inc.Service Center101 Bamberg DrivePell City, AL 35125USAPhone: +1 205 338 3331Fax: +1 205 338 3334pulppaper-service.na@andritz.com117ANDRITZ 2004

ADDRESSESAMERICAS/ASIAAndritz Inc.TS Division8259 Melrose DriveLenexa, KS 66214USAPhone: +1 913 541 1703Fax: +1 913 541 1631Andritz Inc.Engineered Wear Products/Pulp and Paper9560 S.W. Herman RoadTualatin, OR 97062USAPhone: +1 503 692 0850Fax: +1 503 692 1169durametal@andritz.comAndritz Bird Inc.1600 Boston-Providence HighwayWalpole, MA 02081USAPhone: +1 508 404 1400Fax: +1 508 668 6855separation.us@andritz.comAndritz-Ruthner, Inc.1010 Commercial Blvd. SouthArlington, TX 76001USAPhone: +1 817 465 5611Fax: +1 817 468 3961environ.us@andritz.comAndritz-Ruthner, Inc.125 Technology Drive,Southpoint Industrial ParkCanonsburg, PA 15317USAPhone: +1 724 745 7599Fax: +1 724 745 9570welcome@andritz-na.comCyberMetrics Inc.1050-D Nine North DriveAlpharetta, GA 30004USAPhone: + 1 770 740 2071Fax: + 1 770 740 2074cybermetrics@andritz.comASIACHINAAndritz AGRepresentative Office Beijing2702-03 CITIC Building19 Jian Guo Men Wai Dajie100004 BeijingChinaPhone: +86 10 8526 2720Fax: +86 10 6500 6413andritz@public.bta.net.cnAndritz Filtrationstechnik GmbHOffice ShanghaiRoom 2402,Unicom International Tower547 Tianmu West RoadShanghai, 200070ChinaPhone: +86 21 635 32 712Fax: +86 21 635 37 266filtration.cn@andritz.com118Andritz Bird Inc.Lakeland Service Center2721 Mine and Mill RoadLakeland, FL 33801USAPhone: +1 863 665 5811Fax: +1 863 665 5851separation.us.fl@andritz.comIDEAS Simulation Inc.125 Clairemont Avenue, Suite 570Decatur, GA 30030USAPhone: +1 404 370 1350Fax: +1 404 378 3813ideas-sales@ideas-simulation.comAndritz-Kenflo FoshanPump Co., Ltd.14 He Bin RoadFoshan, Guangdong 528000ChinaPhone: +86 757 8283 6920Fax: +86 757 8281 7010andritz-kenflo@andritz.comAndritz Bird Inc.Houston Service Center12734 Tanner RoadHouston, TX 77041USAPhone: +1 713 856 1750Fax: +1 713 856 1751separation.us.tx@andritz.comAndritz Bird Inc.Scott Depot Service CenterErskine LaneP.O. Box 199Scott Depot, WV 25560USAPhone: +1 304 757 2678Fax: +1 304 757 2689separation.us.wv@andritz.comAndritz Filter Press Inc.119 Pickerinig WayExton, PA 19341USAPhone: +1 610 280 4404Fax: +1 610 363 0971filtration.us@andritz.comIDEAS Simulation Inc.1801 Roeder Ave., Suite 112Bellingham, WA 98225USAPhone: +1 360 714 0787Fax: +1 360 752 1337ideas-sales@ideas-simulation.comAndritz Tissue Inc.101 South Main Street, Suite 400Janesville, WI 53545USAPhone: +1 608 758 5920Fax: +1 608 758 5935tissue.na@andritz.comVENEZUELASprout-Matador A/SAv. Atlantico no. 159-71Trigal Norte, ValenciaEstado CaraboboVenezuelaPhone: +58 241 842 2515Fax: +58 241 843 3709niben@telcel.net.veAndritz-ShanghaiRepresentative OfficeAurora International PlazaRoom 606No. 99, Fucheng Road, Pudong200120 ShanghaiChinaPhone: +86 21 5058 3688Fax: +86 21 5058 3988andritz.sh@china.comAndritz Technologies Ltd.9 Tian Bao Road,Foshan, Guangdong 528000ChinaPhone: +86 757 8296 9222Fax: +86 757 8296 9289fiberprep.cn@andritz.comenviron.cn@andritz.compulppaper-service.cn@andritz.comhydro.cn@andritz.comANDRITZ 2004

ASIA/AUSTRALIA/AFRICAADDRESSESAndritz Technologies Ltd.Tianjin OfficeRoom 807-808, No. 125 WeidiRoadTainxin BuildingTianjin, 300074ChinaPhone: +86 22 2840 8469Fax: +86 22 2840 8467environ.cn@andritz.comAndritz Technologies Ltd.Beijing Branch officeAdd: Room 802Hong Yu Building, 7 Xueyuan RoadHaidian DistrictBeijing 100083ChinaPhone: +86 10 5131 3700Fax: +86 10 8230 6637filtration.cn@andritz.comINDIAAndritz OyIndia Liaison OfficeBuilding No. 7, Flat No. 204-206Local Shopping CentreMadangir RoadNew Delhi - 110 066IndiaPhone: +91 11 2905 2094+91 11 2905 2883Fax: +91 11 2905 3227pulpandpaper.in@andritz.comAndritz Technologies Pvt. Ltd.Makam Plaza, 2 nd FloorNo. 63/1, 3 rd Main Road18 th Cross, MalleswaramBangalore - 560 055IndiaPhone: +91 80 2346 5995 / 96Fax: +91 80 2346 5997andritz@vsnl.comAndritz Separation PrivateLimitedPlot No. 1961-B Asiad ColonyAnna Nagar Western ExtensionChennai 600 101IndiaPhone: +91 44 2615 3750+91 44 2615 3751Fax: +91 44 2615 4741separation.in@andritz.comEnmas Andritz Private LimitedV Floor, Guna Buildings Annexe,304-305443 Anna Salai, TeynampetChennai 600 018IndiaPhone: +91 44 2433 8050 / 51Fax: +91 44 2433 2412eal@vsnl.comINDONESIAPT. AndritzGedung Bank Panin Pusat,3 rd FloorJI. Jend. Sudirman 1Senayan, Jakarta 10270IndonesiaPhone: +62 21 725 0137Fax: +62 21 571 0896pulpandpaper.id@andritz.comJAPANAndritz K. K.Toyo-cho, Shinei Bldg., 7F4-chome 3-1 Toyo, Koto-kuTokyo135-0016 JapanPhone: +81 3 5634 3450Fax: +81 3 5634 3460pulpandpaper.jp@andritz.comSINGAPOREAndritz Singapore Pte. Ltd.9 A Joo Koon CrescentSingapore 629023Phone: +65 6863 4465Fax: +65 6863 4482separation.sg@andritz.comNew address from July 1, 2005:25 Tuas Ave 4Singapore 639375TAIWANAndritz AG, Austria,Representative Office TaipeiNo. 200 Keelung RoadSuite 408Sec. 1, TaipeiTaiwanPhone: +886 2 2722 7475Fax: +886 2 2722 7476separation.tw@andritz.comTHAILANDFiedler International GmbHEmpire Tower, Unit 2303195 South Sathorn RoadYannawa, SathornBangkok 10120ThailandPhone: +66 2 670 17 55Fax: +66 2 670 17 56pulppaper-service.asp@andritz.comAUSTRALIAAndritz Pty Ltd.56-58 Gaine RoadDandenong South, Victoria 3175AustraliaPhone: +61 38 795 9800Fax: +61 39 799 4899pulpandpaper.au@andritz.comenviron.au@andritz.comfeed.au@andritz.comAFRICASOUTH AFRICAAndritz (Pty) Ltd.Suite 13, 2 nd FloorGranada Centre22 Chartwell DriveUmhlanga 4319DurbanSouth AfricaPhone: +27 561 72 71Fax: +27 561 62 65pulpandpaper.za@andritz.comAndritz (Pty) Ltd.241 Albert Amon RoadMillennium Business ParkMeadowdale x7EdenvaleSouth AfricaPhone: +27 11 454 3350Fax: +27 11 454 3381separation.za@andritz.com119ANDRITZ 2004

TECHNICAL GLOSSARY120TECHNICALGLOSSARYAir-dried pulpPulp is described technically as air-dried whenits moisture content is in equilibrium with the ambientatmosphere. Commercially, pulp is usuallydescribed as air-dried when the moisture contentof the pulp is 10%.AnnealingProcess in which metal is heated, retained at asuitable temperature, then cooled rapidly or slowlyto reduce internal stress. As a result, the metalbecomes softer and more workable, particularly incold processes.APMP/P-RCAlkaline Peroxide Mechanical Pulping is a refiningprocess preceded by multi-stage impregnationwith alkaline peroxide bleach liquors. The woodchips are compressed and destructured prior toaddition of the bleach liquors. APMP systems canoperate without a post bleach plant since bleachingtakes place up front in the process. P-RCAPMP is a technology that distributes chemicalsbetween the impregnation steps and a small interstagebleach tower located between the primaryand secondary refining stages. “P-RC” stands forPreconditioning-Refiner Chemical.BCTMPBleached Chemi-Thermo Mechanical Pulping.The prefix “B” indicates that a post bleach plant,most commonly alkaline peroxide, follows theCTMP pulping step.Black liquorMixture of spent cooking chemicals and dissolvedwood material remaining after sulphate cooking.Black liquor is recovered during pulp washing,concentrated by evaporation, and burned in therecovery boiler to regenerate the cooking chemicalsand also produce energy for the mill.BrownstockThe pulp obtained directly from the cookingprocess, before intercellular materials and cookingliquors have been removed.CelluloseThe primary constituent of pulp. Chemically,cellulose is a long-chained carbohydrate consistingof repeating chains of a single simple sugar,glucose.Chemical pulpA generic term which describes pulp producedby chemical (as opposed to mechanical) processes.These chemical processes include kraft(sulphate) and sulphite processes.Chemical recoveryIn chemical pulping, the collection, recovery, andregeneration of cooking chemicals so that they canbe utilized again in the process.ChippingA process in a woodroom area in which thedebarked logs are converted into chips for pulpingor refining processes. Chipping is typically doneby horizontally or gravity-fed disc chippers.CrescentFormerSheet forming section in a tissue machine, withthe pulp suspension jet-out of the headbox flowingbetween a felt and a wire both moving at thesame speed.CTMPChemi-Thermo Mechanical Pulping is a pressurizedrefining process which is preceded by theaddition of sulphite in a single impregnation stage.The refining pressure for CTMP is usually lowerthan for TMP since the sulphite treatment lowersthe softening temperature of the wood lignin. Byaltering the parameters of the process (chemicalconcentration, temperature, etc.) it is possible tocustomize the pulp for particular end uses. CTMPmay be bleached, in which case it is known asBCTMP.DeinkingA process in which most of the ink, filler, andother extraneous material is removed from printedand/or unprinted recovered paper. The result is apulp which can be used in the manufacture of newpaper, including tissue, printing, writing, and officepapers.DelignificationRemoval of lignin from wood fibers (celluloseand hemi-cellulose). This is performed primarily inthe cooking process and further carried out in thewashing and bleaching process. In bleaching, ECFpulp mills use chlorine compounds (chlorine dioxide)for this process, although it can be achievedwith oxygen, hydrogen peroxide, or ozone (whichdo not create organochlorines).ANDRITZ 2004

TECHNICAL GLOSSARYDigesterA pressure vessel, typically cylindrical used totreat wood chips or other cellulosic materials withchemicals under elevated pressure and temperature,so as to produce pulp for papermaking.DIPDeinked Pulp. Pulp produced from deinkedwastepaper, like old newsprint and old magazines.Most DIP is used in integrated paper mills, butsome is sold on the market, in which case it isusually dried or wet-lapped.DispersionA process stage in the treatment of recycledfibers. Several process stages are needed toremove the impurities (e.g. glue, ink) from thefibers. It is impossible, however, to eliminate allimpurities. Dispersing reduces these particles tosuch a small size that they are no longer detrimentalto paper quality.ECFElemental Chlorine-Free pulp. Pulp bleachedwithout the use of any elemental chlorine. However,chlorine compounds (e.g. chlorine dioxide) may beused in the bleaching process.EPCEngineer-Procure-Construct. A project deliverywhere one supplier assumes total responsibility forproduct and project engineering, equipment andconstruction procurement, and on-site construction.ExtrusionA continuous process in which animal feedcomponents are cooked under pressure in acombination of frictional and steam heat in orderto expand the resulting product and convert it intofeed granulate. This process is very common inproduction of pet food, fish feed, and cereals.FiberlineThe machines and process systems involved inconverting wood chips into pulp. Process stepscan include cooking, washing, screening, knotseparation, refining, and, if required, bleaching.GradeA class or level of quality of pulp or paper whichis distinguished from other pulps or paper on thebasis of its use, appearance, quality, manufacturinghistory, raw materials, or a combination ofthese factors.Green liquorAqueous solution of the smelt resulting from theburning of thickened waste liquor in the recoveryboiler. Mainly consists of sodium carbonate andsodium sulphide.GSMGrams per Square Meter, or g/m 2 . A measure ofthe basis weight of paper and board, or its grammage.HammermillMachine used for pulverizing raw materials forvarious applications including animal feed andpreconditioning for refining applications; the rawmaterials are hammered by a series of steel hammers.The pulverized material exits through ascreen plate with apertures. The size of the aperturesand hammers, including the number of hammers,can be changed to achieve desired results.HCHigh Consistency. Pulp suspension with a consistencyof 18–40%.HeadboxLocated at the wet end of a paper machine,the headbox delivers a uniform jet of paper slurry(furnish or stock) having essentially the same widthas the paper web to be produced. The word isderived from earlier days when the hydrostatichead within the box was sufficient to deliver a jetvelocity matching the speed of the forming fabric.Today, the pressure within a modern headbox ismaintained by pumps and controls.Hexenuronic acidAcid formed during chemical pulping that reactswith several bleaching chemicals, thus increasingtheir consumption. The elimination of hexenuronicacid reduces the need for bleaching chemicals andlowers the production costs of bleached pulp. Italso helps to keep the pulp’s brightness longer.Kraft pulpThe Kraft process is the world’s predominantchemical pulping process because of the strengthof pulp it produces. The process involves cooking(digesting) wood chips in an alkaline solution,where the active cooking agent is a mixture ofsodium hydroxide and sodium sulphide. The dis-121ANDRITZ 2004

TECHNICAL GLOSSARY122solved lignin is later removed, leaving behind thecellulose fibers. The term “kraft” is interchangeablewith “sulphate” and is derived from a Germanword which means “strong.”LCLow Consistency. Pulp suspension with a consistencyof 1–6%.LigninOne of the three main constituents of wood,along with cellulose and hemi-cellulose. Ligninacts as the cementing agent in wood, binding thecellulose fibers together.Lime kilnA long, slowly rotating kiln used to reburn limemud (calcium carbonate) to form calcium oxide,which can be re-used in causticization.LMD-FilterThe LMD-Filter is a lime mud precoat filterdesigned to achieve optimum dry solids withexcellent washing efficiency for lime mud. Thefilter ensures efficient lime kiln operation at lowheat consumption. “LMD” stands for “Lime MudDrying.”LMD lime kilnA rotary kiln with an external dryer for lime mud.LMD stands for “Lime Mud Drying.”Market pulpPulp produced from wood, and sold on the openmarket, as opposed to that which is produced forinternal consumption by an integrated paper millor affiliated mill.MCMedium Consistency. Pulp suspension with aconsistency of 6–18%.MDFMedium Density Fiberboard. Board made ofmechanical pulp from the refiner process.Mechanical pulpA generic term describing pulps produced by amechanical (as opposed to a chemical) process.Also known as “high-yield” pulp as the processesutilize a higher proportion of the wood raw materialthan the chemical processes. There are a largenumber of mechanical pulping processes includingGWD, PGW, RMP, TMP, CTMP, APMP, CMP, etc.Mechanical pulps are produced using either grindersor refiners. Mechanical pulps are used principallyin the production of newsprint, magazinepapers, printing papers, specialty papers, tissue,toweling, paperboard, and wallboard.NBSKNorthern Bleached Softwood Kraft. The industry’sbenchmark grade of pulp for pricing andinventory data. Produced primarily in Canada andthe Nordic countries. Some NBSK is also producedin the Northwestern USA and Russia.NCGNon-Condensable Gas. Odorous dischargesfrom mill processes that in previous years werevented to the atmosphere. Today, NCGs are collectedand disposed of to meet environmentalregulations and to stop the nuisance role thesegases play with surrounding communities.NO xNitrogen Oxide. A major component of gaseousemissions from a boiler or lime kiln.NorscanA term describing the group of five countrieswhich have historically been the world’s principalproducers of market pulp – Canada, USA,Sweden, Finland, and Norway.PicklingProcess for chemical treatment of oxidized steel,applied to obtain a clean metallic surface. Here,the steel is dipped into a hot bath of diluted sulphuricor hydrochloric acid.PrimeLineThe PrimeLine tissue machine system isfully modularized for the production of customizedtissue grades. It includes the PrimeFlowheadbox, PrimeForm former, the PrimePressor TissueFlex shoe press, PrimeDry T-ribYankee, EquiDry Yankee hood, PrimeReel,and PrimeControl automation system. EachPrimeLine component is selected for specificquality requirements from standard tissue gradesto super-soft tissue products.RecausticizingA process by which green liquor from sulphatepulping is converted to white liquor, thus allowingthe cooking chemicals to be re-used. In causticization,sodium carbonate of green liquor isconverted to sodium hydroxide by using calciumoxide. Lime mud, which is formed in causticizationreactions, is reburnt in the lime kiln.ANDRITZ 2004

TECHNICAL GLOSSARYRecovery boilerIn kraft pulping, a special boiler where the blackliquor from the cooking process is burned, afterconcentrating it in an evaporation process. Theresidual carbon is burned and the inorganic sodiumsalts are melted and recovered.Recycled fiberFiber derived from wastepaper which has beenrecycled.Recycled paperPaper which has been made partly or whollyfrom recycled fiber.RefinerMachine used to grind pulp between two discs.Refiners can operate at low consistency or athigher consistencies. At low consistencies thematerial is fed to the refiner using a pump. Athigher consistency levels conveying devices areused. Other refiner types are used for breakingdown wood chips into fibers.Rolling millPlant in which steel strip is formed between tworolls rotating at the same speed in opposite directions.RTSRetention time, Temperature, Speed refining.A TMP process, which produces better qualitymechanical pulp at lower energy consumption.Improved fiber properties are obtained by rapidheat treatment of the fibers at higher temperatures,while optical properties are preserved due to thelow retention time. The process is operated athigher refiner disc speeds, most commonly 2,300rpm.SludgeWaste created during the biological process oftreating effluent from a manufacturing or municipalwastewater process.Stock pumpSpecial centrifugal pump for water and fibersuspensions.TADThrough-Air Drying. Process for tissue dryingwith the paper web running over a perforated drumwhere hot air is blown through the web.TCFTotally Chlorine Free. Pulp bleached withoutthe use of chlorine or chlorinated chemical compounds.TissueA general term indicating a class of papers whichinclude grades such as toilet, facial, napkin, towels,wipes, and special sanitary papers. Desirablecharacteristics in these types of tissue papers aresoftness, strength, and freedom from lint. Tissuepapers are divided into three major categories:At-Home (or Consumer), Away-from-Home (orCommercial & Industrial), and Specialty.TMPThermo-Mechanical Pulping is a refining processin which wood chips are refined in a pressurizedrefiner. The process can involve from one tothree refining stages in the mainline; however, twostages are most common. The higher temperatureshelp soften the chips, which results in higherpulp strength compared to atmospherically refinedpulps (RMP). TMP relies on mechanical energyrather than chemicals to convert wood into pulp.TMP pulps are most commonly used in newsprintand magazine papers.Virgin fibersThe raw material for making paper, producedeither chemically or mechanically by removing thecellulose fibers from the structure of the wood orfrom other materials, such as used/recycled rags,bagasse, and straw.Wet endSection at the beginning of a paper or pulpdewatering machine. At the wet end, the pulpenters the machine and the bulk of the water isremoved by dewatering, suction, and press rollsin order to obtain a paper web that can be fedthrough a drying section.White liquorA strongly alkaline solution used in the cooking(digesting) process. Mainly consists of sodiumhydroxide and sodium sulphide.123ANDRITZ 2004

FINANCIAL GLOSSARYFINANCIAL124GLOSSARYATXAustrian Traded Index.Price index calculated by the Vienna StockExchange, containing the most actively tradedshares on the Vienna Stock Exchange. The ATXcomprises approx. 20 shares, weighted in theindex according to market capitalization.ATX PrimePrice index calculated by the Vienna StockExchange and containing all the shares of the ATXPrime Market segment.Authorized capitalAuthorization by resolution of the shareholders’meeting allowing the managing board to increasethe share capital by a maximum of 50% within fiveyears by issuing new shares.ChartGraph showing the daily, weekly or monthlyprices for a particular share for a certain period.Continuous tradingContinuous handling of all orders where priceand quantity requested match up. Transactionscan be concluded at any time during the openinghours of the stock exchange.DividendThat part of a company’s profits paid out tothe shareholders. The amount of the dividend isproposed by the managing board of a companyand approved in a resolution by the shareholders’meeting.EBIT(D)AEarnings before Interests, Taxes, (Depreciation),and Amortization of goodwill.This earnings measure is of particular interest incases where companies have large amounts offixed assets which are subject to heavy depreciationcharges or in the case where a company hasa large amount of acquired intangible assets on itsbooks and is thus subject to large amortization.EBITDA is a good measure of comparing companieswithin industries.EBITEarnings before Interests and Taxes.The EBIT is part of the profit and loss accounts;also often called “operating profit.”Ex-dividendThe price of the share is lowered by the amountof the dividend paid a few days before the day adividend is paid out.Free floatPortion of a company’s shares that is held by alarge number of private and institutional investors.IFRSInternational Financial Reporting Standards.IFRS are international accounting standardsintended to guarantee better comparability ofannual accounts presented by companies fromdifferent countries.IPOInitial Public Offering.Admission of a company to list its shares on thestock exchange by selling company shares to thepublic.ANDRITZ 2004

FINANCIAL GLOSSARYInvestor RelationsInterface between the company and the financialcommunity. An Investor Relations departmentshould regularly provide transparent, comprehensiveand up-to-date information on developmentswithin the company to shareholders, financial analystsand investors.ISINInternational Securities Identification Number.Individual identification number of a securityenabling computerized international registration ofa security.Market capitalizationThe market price of a listed company. This iscalculated by multiplying the current share price bythe number of company shares.MEURMillion EurosNo par value shareShare with no par value and which refers to acertain interest in the company without stating afixed amount.Par valueFace value of a security. This is the amount theshareholder has contributed to the nominal sharecapital of the company. The par value gives noindication of the actual value of the share.Prime marketMarket segment of the Vienna Stock Exchangewhich contains stocks that are admitted to listingon the Official Market or Semi-Official Market andmeet special additional listing criteria.RoadshowThe management of a listed company presentsthe company’s activities, strategies and long-termprospects to national and international institutionalinvestors and retail shareholders.ShareCertificate that represents a certain stake in thenominal capital of a stock company.Shareholders’ meetingBody of a stock company which usually meets atleast once a year and takes resolutions on importantcompany matters according to company law.Share capital increaseIncrease in the nominal capital of a stock company.Equity capital is paid into the company.SPOSecondary Public Offering.Selling of further shares of a company that isalready publicly listed.VolatilityMeasure of the average fluctuation of a shareprice over a certain period. In statistics, the volatilityis equal to the standard deviation.WBIWiener Börse Index (Vienna Stock ExchangeIndex).The WBI contains all shares listed on the OfficialMarket and the Semi-Official Market. The WBIas overall index reflects the development of theAustrian stock market as a whole.125ANDRITZ 2004

NOTES126ANDRITZ 2004

IMPRINTImprintAndritz AGStattegger Strasse 188045 GrazPhone: +43 316 6902 0Fax: +43 316 6902 415welcome@andritz.comwww.andritz.comFor information please contact:Michael BuchbauerCorporate Communications/Investor Relationsmichael.buchbauer@andritz.comPhone: +43 316 6902 2979Fax: +43 316 6902 465Editor:Michael BuchbauerDesign:pjure media Marketing Services GmbHPrinted by:ueber:reuter print und digimedia gmbh127ANDRITZ 2004

128INFORMATION REQUEST CARDI would like to receive information byPlease tick where applicablePostE-MailOther information:Name:Address:E-Mail address:Andritz AGInvestor RelationsStattegger Strasse 188045 GrazAustria