Klöckner & Co SEA Leading Multi Metal Distributor
Baader Investment Conference 2012
MunichHead of Investor Relations & Corporate Communications
Dr. Thilo Theilen
September 25, 2012
Disclaimer
This presentation contains forward-looking statements which reflect the current views of the management of Klöckner & Co SE with respect to future events. They generally are designated by the words “expect”, “assume”, “presume”, “intend”, “estimate”, “strive for”, “aim for”, “plan”, “will”, “strive”, “outlook” and comparable expressions and generally contain information that relates to expectations or goals for economic conditions, sales proceeds or other yardsticks for the success of the enterprise. Forward-looking statements are based on currently valid plans, estimates and expectations. You therefore should view them with caution. Such statements are subject to risks and factors of uncertainty, most of which are difficult to assess and which generally are outside of the control of Klöckner & Co SE. The relevant factors include the effects of significant strategic and operational initiatives, including the acquisition or disposition of companies. If these or other risks and factors of uncertainty occur or if the assumptions on which the statements are based turn out to be incorrect, the actual results of Klöckner & Co SE can deviate significantly from those that are expressed or implied in these statements. Klöckner & Co SE cannot give any guarantee that the expectations or goals will be attained. Klöckner & Co SE – notwithstanding existing obligations under laws pertaining to capital markets –rejects any responsibility for updating the forward-looking statements through taking into consideration new information or future events or other things.
In addition to the key data prepared in accordance with International Financial Reporting Standards, Klöckner & Co SE is presenting non-GAAP key data such as EBITDA, EBIT, Net Working Capital and net financial liabilities that are not a component of the accounting regulations. These key data are to be viewed as supplementary to, but not as a substitute for data prepared in accordance with International Financial Reporting Standards. Non-GAAP key data are not subject to IFRS or any other generally applicable accounting regulations. Other companies may base these concepts upon other definitions.
2
01
Klöckner & Co SE – The Group01
Overview Q2 and update on restructuring
Financials Q2 2012
Outlook
02
03
04
Agenda
3
Appendix05
Klöckner & Co SE at a glance
4
01
CustomersDistributor/ Service CenterProducersProducts:
Klöckner & Co SE Largest producer-independent steel and
metal distributor and one of the leading steel service center companies in the European and American markets combined
Distribution and service platform with around 290 locations
Key figures for 2011Turnover: 6.7 million tonsSales: €7.1 billionEBITDA: €217 million
Services: Machinery
and mechanical engineering
Yellow Goods White Goods Miscellaneous
Automotive
Commercial/ residential construction
Infrastructure
Business model
5
01
Suppliers Sourcing Products and services
Logistics /distribution
• As a producer-independent distributor, our customers benefit from our diverse national and international procurement options
Customers
• Procurement of large quantities
• Strategic partnerships
• Extensive product range
• Excellent product and processing quality
• Wide-ranging service provision
• Local presence• Individual
delivery, including 24-hour-service
• More than 170,000 customers
• Average normal order size approx. €2,000
• Service and availability more important than price
Holistic solution from covering procurement, logistics and processing
Klöckner & Co value chain
Industries and markets
6
01
Internationality marks our industriesand markets:
• In addition to companies in theconstruction industry as well asmachinery and mechanical engineering, we serve customers in the automotiveand chemical industry, ship-building andin fields of household appliance, consumer goods and energy.
• Around 3/4 of our sales are generated abroad.
• We have a global network of around 290 distribution and service locations and employ around 11,200 employees.
28% USAFrance/Belgium 16%
Switzerland 13%
UK 6%
28% Germany/EECSpain 4%
Sales by markets
Netherlands 3%Brazil 1%
China <1%
Machinery and mechanical 24% engineering
Miscellaneous 11%
Local dealers 10%
Household appliances/Consumer goods 7%
37% Construction industry
Automotive industry 11%
Sales by industry
As of December 2011
Products and services
7
01
Our product range is divided intofollowing segments:
• Long products• Flat products• Tubes and hollow sections• Stainless steel and quality steel• Aluminum• Special products such as plastics,
ironware and accessories
We offer extensive services:• Cutting and splitting of steel strips,
cutting to length, flame cutting, CNC turning/milling, surface treatment, etc.
• Furthermore we provide our customers with technical advice, storage facilities and just-in-time delivery
As of December 2011
24% Long productsQuality steel/Stainless steel 8%
Aluminium 7%
Tubes 6%
42% Flat productsOthers 13%
Sales by product
Klöckner & Co SE – The Group01
Overview Q2 and update on restructuring
Financials Q2 2012
Outlook
02
03
04
Agenda
8
Appendix05
Overview Q2 2012
• Turnover increased by 5.7% yoy driven by acquisitions and organic growth in USA and sequentially flat (+0.4% vs Q1)
• European turnover down -7.9% yoy also due to exiting low margin business whereas Americas up 34.2% yoy (organically up 10.0%)
• Sales increased by 4.2% yoy and by 0.9% sequentially
• EBITDA at €50m met guidance of €50-60m before restructuring despite worsening market environment (rep. EBITDA €33m incl. €17m for restructuring expenses mainly in Spain)
• Achievement of last years’ EBITDA in current fiscal year mainly due to worsening situation in Europe rather unlikely
• Scope of restructuring measures significantly expanded, initial measures almost concluded
• Expansion into US-automotive sector by building a Steel-Service-Center on the site of ThyssenKrupp plant in Alabama
• External CFO appointed to start latest Jan 1, 2013
9
02
• Steel demand currently around 25% below peak and not expected to recover shortly
• Overcapacity persisting also on distribution level until shakeout wave
• Early anticipation with assumed demand -5% in January created headroom for restructuring ahead of others
• Restructuring to adopt to current level of activity to avoid losses and position ourselves for a potential recovery
• Facing a phase with meager profitability, but balance sheet’s good shape should not be at risk
10
Europe USA
• Further market growth, albeit currently with reduced pace
• Successful integration of Macsteel enables us to outgrow the market
• Nevertheless, margins currently affected by price erosion in carbon also due to high USD and import situation
• Despite recent slowdown in economic development further market recovery most likely in the US
• We further outgrow the market by increasing contractual business to create a solid base for future uptick
• Key market for future growth also with organic measures due to the superior structural attractiveness of the US steel distribution and service center market
Restruc-turing
Growth
Global market assessment and our reaction02
Europe/Macsteel• Europe: expense reductions • US: realizing synergies w/
Macsteel
• Cuts in administration costs and sales overheads
• Reduction of low-margin commodity business
• Expanding higher value-added activities
€70m
520 out of 700 already
€13m
General measures
Intensified measures in specific countries02
From Q2 2012 on Step 1
September 2011
Spain + EEC France• Additional structural measures in
Spain• Withdrawal from EEC
• Realignment of France organization including structural measures
• Spain:• Closure of 11 sites• New network structure
and logistics concept
• EEC:• Full exit of EEC
• Closure of ~10 sites• Unified sales department in
each region• Logistics optimization• New network structure
€20m
600
€17m for Spain in Q2 + €15-20m for France in Q3
Focusing on structural changes
+
11
*Excluding potential disposal effects of EEC and Spanish properties
Step 2
Scope
Measures
EBITDA impact
Employee reduction
One-offs* booked in EBITDA
5
10
15
20
25
Despite difficult market environment fundamental values exist02
12
Yield (CB 2007 until 9/8/2011, CB 2014 from 9/9/2011 on)
1,407
1,6521,720
1,407
1,006
779
702 637
868
1,072 1,090
1,017
1,163
1,713 1,692
1,5341,656 1,685
Q12008
Q22008
Q32008
Q42008
Q12009
Q22009
Q32009
Q42009
Q12010
Q22010
Q32010
Q42010
Q12011
Q22011
Q32011
Q42011
Q12012
Q22012
NWC Market cap Net debt
~700current
1,507
1,692
747
571
345
704
1,041
1,187
1,456
965 1,107
1,397
1,573
2,055
929990 1,087
799
573471580 582
322118 -139
904
1,072
690
-150150
233 137227
600
Yield in %
500
1,000
1,500
2,000
NWC – net debt vs. market capitalization and CB yields(€m)
€m
245
~340
571
~400
Klöckner & Co SE – The Group01
Overview Q2 and update on restructuring
Financials Q2 2012
Outlook
02
03
04
Agenda
13
Appendix05
Financials Q2 201203
EBITDA
Sales
Gross profit
Turnover
1,763 Tto
+5.7%
Q2 2011 Q2 2012
1,863 Tto €1,885m€1,964m
+4.2%
Q2 2012Q2 2011
€62m
-18.5%
Q2 2012Q2 2011€50m*
€337m €340m
+0.7%
Q2 2012Q2 2011
14
*adjusted EBITDA Restructuring costs
Financials H1 201203
EBITDA
Sales
Gross profit
Turnover
3,260 Tto
+14.1%3,720 Tto
€3,472m
€3,909m+12.6%
€166m€98m*
-41.0%€691m €683m
-1.0%
15
H1 2011 H1 2012 H1 2012H1 2011
H1 2012H1 2011 H1 2012H1 2011
*adjusted EBITDA Restructuring costs
EBITDA (€m) / EBITDA-margin (%)
Gross profit and EBITDA03
Gross profit (€m) / Gross-margin (%)
• Gross profit-margin on the level of Q1 adjusted forrestructuring costs, despite competitive environmentin Europe
• EBITDA in Q2 decreased qoq also due torestructuring of €17m
• EBITDA adjusted for restructuring €50m
16
Before restructuring costs
344
17.5
331
294 275
353 337318 307
344
340
23.4
21.0 20.6
22.3
17.9 16.8 17.6 17.7 17.3
Q22010
Q32010
Q42010
Q12011
Q22011
Q32011
Q42011
Q12012
Q22012
50
2.6
100
6148
104
62
37
14
45
33
7.1
4.33.6
6.6
3.3
1.9
0.8
2.3
1.7
Q22010
Q32010
Q42010
Q12011
Q22011
Q32011
Q42011
Q12012
Q22012
-4%p
236 232 228297
520
634 602
722 727
Q22010
Q32010
Q42010
Q12011
Q22011
Q32011
Q42011
Q12012
Q22012
Segment performance Q2 201203
Turnover (Tto) Sales (€m) EBITDA (€m)
Turnover (Tto) Sales (€m) EBITDA (€m)
Eur
ope
Am
eric
as
-9.4%
* Without acquisitions in 2011** Restructuring costs of €3m in Q1 and €17m in Q2
17
+39.7%/+16.1%*
1,1621,084 1,029
1,164 1,1921,067
9901,105 1,097
Q22010
Q32010
Q42010
Q12011
Q22011
Q32011
Q42011
Q12012
Q22012
1,180 1,169 1,1041,290
1,3651,251
1,1371,223
1,237
Q22010
Q32010
Q42010
Q12011
Q22011
Q32011
Q42011
Q12012
Q22012
93
60
45
81
50
24
1220**
36**
Q22010
Q32010
Q42010
Q12011
Q22011
Q32011
Q42011
Q12012
Q22012
286 284 289 334
571698 646
752766
Q22010
Q32010
Q42010
Q12011
Q22011
Q32011
Q42011
Q12012
Q22012
13
5 7
30
23
15 13
29
21
Q22010
Q32010
Q42010
Q12011
Q22011
Q32011
Q42011
Q12012
Q22012
-7.9%
+34.2%/+10.0%*
19
Net income and EPS03
• Net income adjusted for restructuring and impairments still slightly positive with €3m
• Net income includes €17m restructuring already within EBITDA, €30m impairments partly offset by €6m income from adjustment of Frefer put liability and €10m ppa effects
• Taxes negatively impacted due to non-recognition of tax assets on losses incurred in Q2
Comments
18
EPS basic (€)*
Net income (€m)
* adjusted for capital increase** Before restructuring expenses and impairments
0.69
0.21 0.25
0.65
0.07
-0.11-0.27
-0.10
Q22010
Q32010
Q42010
Q12011
Q22011
Q32011
Q42011
Q12012
47
15 17
44
5
-12-27 -10
Q22010
Q32010
Q42010
Q12011
Q22011
Q32011
Q42011
Q12012
(€m) H1 2012 Q2 2012
Stock write-downs – 4 – 4
Personnel expenses – 10 – 7
Other restructuring expenses – 6 – 6
EBITDA impact – 20 – 17Impairments Eastern Europe and Spain – 9 – 9
Restructuring expenses total – 29 – 26
• Goodwill impairment in Brazil of €21m due to ongoing weaker macro environment
3**
Q2
0.03**
Q22012
-0.38
-38
2012Q2
NWC and net debt almost stable sequentially03
Cash flow reconciliation in Q2 2012 (€m)
19
60,0
EBITDAChange in
NWC Taxes Other
CF fromoperatingactivities Capex Free CF
Development of net financial debt in Q2 2012(€m)
* exchange rate effects, interest
Q1
CF fromoperatingactivities Capex Other* Q2
33
5 -7
-1
30
-8
22
-573
+30-8
-31
-582
Strong balance sheet03
*Gearing = Net debt/Equity attributable to shareholders of Klöckner & Co SE less goodwill from businesscombinations subsequent to May 28, 2010
**Total capital = net debt plus equity (w/o minorities)
Comments
• Equity ratio of 37%
• Net debt of €582m
• Gearing* at 36%
• Net debt to total capital** at 25%
• NWC increased by €151m to €1,685m ytd
• NWC/sales at new normal ~21%
50%
25.2%
29.7%
23.3%
2.1%
19.7%
Balance sheet total June 30, 2012: €4,938m
36.5%
30.2%
33.3%
Non-currentassets1,244
Inventories1,465
Trade receivables1,153
Other currentassets 102
Liquidity974
Equity1,804
Non-current Liabilities1,491
Current liabilities1,643
100%
0%
20
Balanced maturity profile despite repayment of Convertible in July 201203
Facility (€m) CommittedDrawn amount
June 30, 2012* December 31, 2011*
Bilateral Facilities1) 615 200 126
Other Bonds 14 14 20
ABS2) 519 193 175
Syndicated Loan 500 226 226
Promissory Note 343 345 349
Total Senior Debt 1,991 978 896
Convertible 20073) 4) 325 329 319
Convertible 20093) 98 86 86
Convertible 20103) 186 163 157
Total Debt 2,600 1,556 1,458
Cash 4) 974 987
Net Debt 582 471
€m June 30, 2012
Adjusted equity 1,635
Net debt 582
Gearing5) 36%
Maturity profile of committed facilities and drawn amounts (€m)
Committed facilities
Drawn amounts
6444)
124
1,035
296
5013944)
95
447
266 382
2012 2013 2014 2015 Thereafter
21
*Including interest1) Including finance lease2) On April 25th, 2012 the European ABS was extendend until May 2014 and the volume reduced by €60 million to € 360 million 3) Drawn amount excludes equity component4) Repayment of convertible bond of €325 million in July 2012 out of cash5) Net debt/Equity attributable to shareholders of Klöckner & Co SE less goodwill from business combinations subsequent to May 28, 2010
Klöckner & Co SE – The Group01
Overview Q2 and update on restructuring
Financials Q2 2012
Outlook
02
03
04
Agenda
22
Appendix05
Outlook
• Macro assumptions• In Europe, our base assumption continues to be business as it is for the remainder of the year• In the US, recent macro news point to a slowdown in H2
• Q3 2012• Turnover in Q3 expected to be slightly down vs Q2• EBITDA in Q3 expected to be €25-35m before restructuring costs
• FY 2012• Turnover and sales still expected to increase year on year despite challenging market
environment• Achievement of prior year EBITDA not anymore realistic given H2 EBITDA bef. restructuring
expected to be below the €98m in H1
04
23
Klöckner & Co SE – The Group01
Overview Q2 and update on restructuring
Financials Q2 2012
Outlook
02
03
04
Agenda
24
Appendix05
Appendix05
25
Financial calendar 2012/2013
November 7, 2012 Q3 interim report 2012
March 6, 2013 Annual Financial Statements 2012
May 8, 2013 Q1 interim report 2013
May 24, 2013 Annual General Meeting 2013
August 7, 2013 Q2 interim report 2013
November 6, 2013 Q3 interim report 2013
Contact details Investor Relations Dr. Thilo Theilen, Head of Investor Relations & Corporate Communications
Phone: +49 203 307 2050
Fax: +49 203 307 5025
E-mail: [email protected]
Internet: www.kloeckner.de
Quarterly results and FY results 2007-201205
26
(€m) Q22012
Q12012
Q42011
Q3 2011
Q2 2011
Q1 2011
Q4 2010
Q3 2010
Q2 2010
FY2011
FY 2010
FY2009
FY 2008
FY 2007
Turnover (Tto) 1,863 1,857 1,636 1,765 1,763 1,498 1,318 1,368 1,448 6,661 5,314 4,119 5,974 6,478
Sales 1,964 1,945 1,739 1,885 1,885 1,587 1,332 1,401 1,416 7,095 5,198 3,860 6,750 6,274
Gross profit 340 344 307 318 337 353 275 294 331 1,315 1,136 645 1,366 1,221
% margin 17.3 17.7 17.6 16.8 17.9 22.3 20.6 21.0 23.4 18.5 21.9 16.7 20.2 19.5
EBITDA 33 45 14 37 62 104 48 61 100 217 238 -68 601 371
% margin 1.7 2.3 0.8 1.9 3.3 6.6 3.6 4.3 7.1 3.1 4.6 -1.8 8.9 5.9
EBIT -23 18 -18 8 36 86 24 39 78 111 152 -178 533 307
Financial result -18 -24 -21 -22 -21 -19 -19 -16 -17 -84 -67 -62 -70 -97
Income before taxes -41 -6 -39 -15 15 66 5 22 61 27 84 -240 463 210
Income taxes 3 -4 12 3 -9 -22 12 -7 -14 -17 -4 54 -79 -54
Net income -38 -10 -27 -12 5 44 17 15 47 10 80 -186 384 156
Minority interests 0 0 -1 -1 0 1 1 1 1 -1 3 3 -14 23
Net income KlöCo -38 -10 -27 -11 5 43 16 14 46 12 78 -188 398 133
EPS basic (€) -0.38 -0.10 -0.27 -0.11 0.07 0.65 0.25 0.21 0.69 0.14 1.17 -3.61 8.56 2.87
EPS diluted (€) -0.38 -0.10 -0.27 -0.11 0.07 0.60 0.25 0.21 0.69 0.14 1.17 -3.61 8.11 2.87
Strong Growth: 24 acquisitions since the IPO05
27
Acquisitions1) Acquired sales1),2)
€141m
€567m
€108m
24
12
2
2005 2006 2007 2008 2009 2010
4
€231m
€712m
2011
2
€1.15bn
¹ Date of announcement 2 Sales in the year prior to acquisitions
Country Acquired 1) Company Sales (FY)2)
GER Mar 2010 Becker Stahl-Service €600m
CH Jan 2010 Bläsi €32m
2010 4 acquisitions €712m
US Mar 2008 Temtco €226m
UK Jan 2008 Multitubes €5m
2008 2 acquisitions €231m
CH Sep 2007 Lehner & Tonossi €9m
UK Sep 2007 Interpipe €14m
US Sep 2007 ScanSteel €7m
BG Aug 2007 Metalsnab €36m
UK Jun 2007 Westok €26m
US May 2007 Premier Steel €23m
GER Apr 2007 Zweygart €11m
GER Apr 2007 Max Carl €15m
GER Apr 2007 Edelstahlservice €17m
US Apr 2007 Primary Steel €360m
NL Apr 2007 Teuling €14m
F Jan 2007 Tournier €35m
2007 12 acquisitions €567m2006 4 acquisitions €108m
USA Dec 2010 Lake Steel €50m
USA Sep 2010 Angeles Welding €30m
Brazil May 2011 Frefer €150m
USA April 2011 Macsteel €1bn
2011 2 acquisitions €1,150m
Comments
Balance sheet as of June 30, 201205
28
(€m) June 30, 2012 December 31, 2011
Non-current assets 1,244 1,295
Inventories 1,465 1,362
Trade receivables 1,153 922
Cash & Cash equivalents 974 987
Other assets 102 140
Total assets 4,938 4,706
Equity 1,804 1,843
Total non-current liabilities 1,491 1,526
thereof financial liabilities 1,054 1,068
Total current liabilities 1,643 1,337
thereof trade payables 933 750
Total equity and liabilities 4,938 4,706
Net working capital 1,685 1,534
Net financial debt 582 471
Shareholders’ equity:• Stable at 37%
Financial debt:• Gearing at 36%• Gross debt of €1.6bn and
cash position of €1.0bn result in a net debt position of €582m
NWC:• Increase mainly due to
seasonal effects
(€m) Q2 2012 Q2 2011 ∆ in %*
Sales 1,964 1,885 +4.2
Gross profit 340 337 +0.7
Personnel costs -162 -146 -10.9
Other operating expenses -152 -141 -8.4
EBITDA 33 62 -46.2
Depreciation, Amortization, Impairments -56 -26 -117.0
EBIT -23 36 -165.6
Financial result -18 -21 +16.3
EBT -41 15 -379.0
Taxes 3 -9 +132.2
Net income -38 5 -800.9
Minorities 0 0
Net income attributable to KCO shareholders -38 5 -786.9
05
29
* earnings impact
Profit & loss Q2 2012 vs. Q2 2011Profit & loss Q2 2012 vs. Q2 2011
Segment performance Q2 2012
30
(€m) Europe Americas HQ/Consol. Total
Turnover (Tto)
Q2 2012 1.097 766 1.863
Q2 2011 1.192 571 1.763
∆ % -7,9 34,2 5,7
Sales
Q2 2012 1.237 727 1.964
Q2 2011 1.365 520 1.885
∆ % -9,4 39,7 4,2
EBITDA
Q2 2012 19 21 -7 33
% margin 1,5 2,9 1,7
Q2 2011 50 23 -11 62
% margin 3,6 4,4 3,3
∆ % EBITDA -61,6 -8,2 -46,2
• Excl. MSCUSA and Frefer turnover increase in Americas was 10.0% and sales increase was 16.1% yoy
• Without acquisitions total turnover decreased by 4.0% and total sales by 4.8% yoy
Comments
05
Current shareholder structure05
31
Geographical breakdown of identified institutional investors
Comments
• Identified institutional investors account for 47%
• German investors incl. retail dominate
• Top 10 shareholdings represent around 31%
• Retail shareholders represent 34%• 100% freefloat
As of June 2012
Other World 7%
US 30%
Other EU 17%
Switzerland 5%
France 9%
Germany 28%
UK 4%
Our symbol
the earsattentive to customer needs
the eyeslooking forward to new developments
the nosesniffing out opportunitiesto improve performance
the ballsymbolic of our role to fetchand carry for our customers
the legsalways moving fast to keep up withthe demands of the customers
32