Currencies
The Group has operations and subsidiaries in a large number of countries outside Euroland, and a significant portion of its Sales and costs are denominated in non-Euro currencies, mainly in US dollars and British Pounds.  The currencies in these countries may be subject to fluctuations in exchange rates.  Although the Group attempts to hedge the net currency exposure of the orders to mitigate the currency risk, currency fluctuations can result in the recognition of exchange rate losses in the Group’s financial statements.  Developments of exchange rates may also have translation effects on the Group’s Sales and Earnings, whose values are converted into Euros.  In addition, shifts in exchange rates may affect Andritz’s position relative to its competitors, although most of the main competitors of Andritz are also based in Euroland.  As some of Andritz’s major customers are based outside Euroland, changes in exchange rates could lead to a delay of project decisions by those customers.  Also, the Shareholders’ Equity of the Andritz Group is not hedged and is thus susceptible to being affected by changes in the exchange rate.  

Competitive position
The Andritz Group does business in very competitive markets.  Some of the markets in which the Group competes are highly fragmented, with a few large, international manufacturers competing against each other and against a high number of smaller, local companies.  This has, in some cases, adversely impacted sales margins realized by certain of the Group’s businesses.  The Andritz Group invests approximately 3% of total Sales in Research and Development and has so far been able to offer its customers the latest technological developments.  There is, however, no assurance that the Group can maintain and defend this position in the future.  

Acquisition and integration of complementary businesses
One of the Group’s strategies is to become a comprehensive supplier of systems and equipment in all of its Business Areas through organic growth and complementary acquisitions.  In the course of implementing this strategy since 1990, the Group has acquired and integrated a number of businesses with worldwide operations.  However, no assurance can be given that the Group will be successful in identifying and acquiring appropriate acquisition candidates in the future, or that suitable candidates will be available, or that sufficient financing will be available.  Furthermore, although Andritz has an excellent track record of integrating newly acquired businesses, it is possible that in connection with future acquisitions, the integration will not succeed and that planned objectives and synergies are not realized or the Group may be exposed to new risks that have not been properly managed.  

Legal proceedings
In the course of its normal business, the Andritz Group is party to numerous legal proceedings before both administrative and judicial courts and bodies and arbitration tribunals.  The substantial majority of such proceedings are of a nature considered typical of the Group’s business.  Where appropriate, provisions are made to cover the expected outcome of proceedings to which Group companies are a party, to the extent that negative outcomes are likely and reliable estimates can be made.  However, even when provisions are made, there is no guarantee that these will always be sufficient.

As of December 31, 2004 Andritz Inc., a subsidiary of the Andritz Group, is one of many defendants in a total of approximately 85 asbestos cases in the USA.   In aggregate, the cases involve approximately 19,500 plaintiffs.  Nearly all of these cases involve claims by multiple plaintiffs against multiple defendants.  Andritz Inc. does not believe it should be found liable in connection with any of these claims and plans to vigorously defend each claim.  

For further information on asbestos litigation, please see pages 110ff. of this report.