What happened this week: As usual at this time of the year the situation is getting difficult and more complicated by the day. In Europe the only reason for this is the abattoir buying and the emotions involved – mainly after the holidays. Very often - and again in 2003 – is a weak second quarter followed by optimism and enthusiasm for the time after the holidays. Hardly ever - since the fall of the iron curtain - however has September brought any confirmation for the change to the better in the leather business. So, the market situation is getting again two or threefold. The leather business and the hide demand is still reasonable from Asia, from the automotive tanners and from very selected specialty tanners. What is completely missing is the bread and butter business from the main European tanning centres. This can be compensated for some weeks and certainly easier ways during the summer, but when the kill returns and everyone is desperate for improving business conditions the mood and emotions can

change quickly. And this is what we think has happened during the week. As further the week proceeded as more the negative or better said concerning sentiments started to dominate. Fair reports have been said not to be positive, tanners in the Mediterranean complaining about the lack of orders, payment delays and last but not least also clear signs that the strong appetite for immediate shipments from Asia is reducing. From the supply side are kills in Europe now finally expected to normalize or even expected to see their annual highs in the coming 4-8 weeks. All this would not be concerning or worrying at all if the expectations wouldn’t have been so high. It is less the problem of the facts, rather than the problem of the timing and the volatility of the market. With the sharp increase of buying prices for September and the USD value being now 5 % lower than 3 weeks ago, the equation in Europe doesn’t work out anymore and this needs an adequate re-adjustment of abattoir prices back to market levels again. Looking back at the business of the week than sales number were reasonable, but revenues

not. So, the next weeks will tell if it was a wise decision not to refrain from the market and to manage all inquiries in the best way possible with the clear intention to finish all negotiations in a sale. While in Asia it was easier again and only the USD rate was the determining factor, was Europe by far more complicated and it needed all efforts to find the final compromise. In general prices in € were about 2-3 % below the top levels obtained in the previous weeks  The kill: On its steady and seasonal way up. With the weather conditions being now very favourable we believe, that the kill will now settle until we see colder and wetter conditions which will support the numbers again. Weights are still insufficient and we are not too optimistic for better times. What do we expect?  The coming two weeks will certainly be the junction for some time. New abattoir prices and further news about the demand will pave the way for prices. It will need a strong recovery in interest to prevent the market from price adjustments before the real picture emerges by mid October. The coming week will certainly favour buyers and offer a softer tone, before a new base is laid.