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FLSmidth risks being held liable for cartel penalty on former subsidiary

Message to the Copenhagen Stock Exchange, No. 30-2005

On Wednesday 30 November, the European Commission imposed penalties on 16 European plastic product manufacturers for participation in an illegal cartel from 1982 to 2001 (see also FLSmidth Stock Exchange announcement No. 17 - 2004 issued on 14 May 2004). Among the companies in question is Trioplast Wittenheim SA - a formerly FLSmidth-owned French company then named Silvallac S.A. - on which a penalty of 17.85m euro has been imposed.
No penalty has therefore been imposed on FLSmidth & Co. nor on FLS Plast - as construed in the press coverage of the Commission's decision. However, according to the Commission's decision, via their former ownership of Trioplast Wittenheim SA, FLSmidth & Co. and FLS Plast are together with Trioplast Industrier AB jointly and severally liable towards the Commission for payment of the penalty by Trioplast Wittenheim SA up to a maximum amount of 15.3m euro.
Once Trioplast Wittenheim SA pays the penalty imposed, there will therefore be no penalty to pay for FLSmidth & Co. and FLS Plast. If, contrary to expectations, the Trioplast Group should not pay the penalty, the Commission will have a claim against FLSmidth & Co. and FLS Plast of maximum 15.3m euro (= approximately DKK 116m). Should this situation arise, FLSmidth & Co. and FLS Plast will have full right of recourse against Trioplast Wittenheim SA and partial right of recourse against Trioplast Industrier AB.
As stated in the FLSmidth Stock Exchange announcement of 14 May 2004, during the entire course of events FLSmidth & Co. and FLS Plast have had no knowledge of the alleged cartel - and they therefore consider the Commission's decision unjustified.
According to the Commission, the illegal cartel began in 1982 and continued until 2001. The FLSmidth Group acquired Silvallac from the French-based Saint Gobain Group in 1990 and owned it until January 1999. In other words, there is no question of the FLSmidth Group having participated in forming a cartel - on the contrary, FLSmidth & Co. and FLS Plast had no knowledge of the cartel which was established long before the company was acquired and apparently continued after it was sold to Trioplast Industrier AB, the Swedish plastic products manufacturer.
According to the European Commission, the full decision including the Commission's reasons and assessments of the evidence will not be sent to the companies affected until the beginning of next
week at the earliest. On receiving a copy of the full decision, FLSmidth will undertake a thorough legal analysis of it on which basis a decision will be made whether to refer it to the European Court.
Even though FLSmidth at the present is therefore unable to quantify the full financial implications of the penalty imposed by the European Commission, the risk of being held liable gives FLSmidth & Co. no occasion to revise its latest earnings forecast.
Please address any questions regarding this announcement to Mr Torben Seemann Hansen, Vice President, Corporate Public Relations, FLSmidth, at tel. +45 36 18 10 00.
Yours faithfully
Torben Seemann Hansen
Corporate Public Relations