Klöckner & Co - Roadshow Presentation August 2010
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Klöckner & Co SE is a leading steel and metal distributor with a network of around 250 distribution locations in Europe and North America. In Q2 2010, Klöckner saw strong growth with sales up 37.4% to €1.4 billion and EBITDA increasing 423.3% to €100 million compared to Q2 2009, driven by economic recovery, price increases, cost cutting, and acquisitions. Klöckner expects volumes to be seasonally lower in Q3 but full year sales to increase over 25% and EBITDA to exceed €200 million, supported by continued economic growth and integration of acquisitions.
Klöckner & Co - Roadshow Presentation August 2010
- 1. Klöckner & Co SEKlöckner & Co SE A Leading Multi Metal Distributor Roadshow August 2010 Gisbert Rühl CEO/CFO August 2010
- 2. 00 Disclaimer This presentation contains forward-looking statements. The statements use words like “believe”, “assume”, “expect” or similar formulations. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual results financial situation development or performance oflead to material differences between the actual results, financial situation, development or performance of our company and those either expressed or implied in these statements. The factors include, among other things: • Downturns in the business cycle of the industries we compete in; • Increases in our raw material prices, especially if we are unable to pass these costs along to customers; • Fluctuations in international currency exchange rates as well as changes in the general economic climateeconomic climate • and other factors identified in this presentation. In view of these uncertainties, we caution you not to place undue reliance on these forward-looking statements. We assume no liability whatsoever to update these forward-looking statements or to have them f fconform with to future events or developments. This presentation is not an offer for sale or a solicitation of an offer to purchase any securities of Klöckner & Co SE or any of its affiliates ("Klöckner & Co"). Klöckner & Co securities including but not limited to rights shares and bonds may not be offered or soldKlöckner & Co securities, including, but not limited to, rights, shares and bonds, may not be offered or sold in the United States or to or for the account or benefit of U.S. citizens (as such term is defined in Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act")) unless registered under the Securities Act or have an exemption from such registration. 2
- 3. Agenda Overview01 Financials and performance Q2 201002 Market, Strategy & Outlook03 Appendix04 Appendix04 3
- 4. 01 Distributor in the sweet spot Suppliers Sourcing Products Logistics/ CustomersSuppliers Sourcing and services g Distribution • Purchase volume p a of Customers • Global Sourcing in competitive • One-stop-shop with wide • Efficient inventory • ~178,000 customersvolume p.a. of >5 million tons • Diversified set of suppliers worldwide in competitive sizes • Strategic partnerships • Frame contracts with wide product range of high-quality products • Value added inventory management • Local presence • Tailor-made logistics customers • No customer with more than 1% of sales • Average orderworldwide approx. 70 • Frame contracts • Leverage one supplier against the other • N l ti Value added processing services • Quality assurance logistics including on- time delivery within 24 hours • Average order size of €2,000 • Wide range of industries and markets• No speculative trading assurance markets • Service more important than price 4 Klöckner & Co’s value chainGlobal suppliers Local customers
- 5. 01 Klöckner & Co at a glance Sales by industryKlöckner & Co • Leading producer-independent steel and metal distributor in the European and North American markets combined • Network with around 250 distribution locations in Europe and North America Sales by marketsSales by product 5 Including Becker Stahl-Service Group pro-forma figures (year ending September)
- 6. Agenda Overview01 Financials and performance Q2 201002 Market, Strategy & Outlook03 Appendix04 Appendix04 6
- 7. 02 Improving financials in Q2 2010 • Strong benefit from restocking driven by economic recovery, price increases, cost cutting measures and acquisitions Sales 1 448 Tto+37.4% Volumes €1 416m+47.7% 1,053 Tto 1,448 Tto 1,180 Tto €959m €1,416m €1,049m Q2 2009 Q2 2010Q1 2010 Q2 2009 Q2 2010Q1 2010 Gross profit €331m €236 EBITDA €100m +423.3% €29m +106.0% €161m Q2 2009 Q2 2010Q1 2010 €236m €-31m Q2 2009 Q2 2010 €29m Q1 2010 7 Q2 2009 Q2 2010Q1 2010
- 8. 02 Both segments improved performance in Q2 2010 Volume (Tto) Sales (€m) EBITDA (€m) 798 1,180 47.9% 28 2%* 42.5%815 1,162 286 798 93 28.2%11.8%* 238 286 161 236 3 93 13 19.8% 46.9% Q2 09 Q2 10 Q2 09 Q2 10 -25 Q2 10Q2 09 Europe North America 8 * without BSS
- 9. 02 Strong balance sheet Q2 2010 Comments €3,435m • Equity ratio of 35% 883 1,208 Non-current assets Equity • Net debt €245m • Gearing* at 21% • NWC increase by €204m to €1,072m 880Inventories y , during Q2 852 84 1,260 Trade receivables Other Non-current liabilities 84 736 967 current assets Liquidity Current liabilities 9 * Gearing = Net debt/Equity attributable to shareholders of Klöckner & Co SE
- 10. 02 NWC and cash position reflects recovery in operations • NWC typically increases in a situation when volumes and prices go up and order activity is going down because of the summer slowdown and the anticipation of falling prices Development of NWC (in €m) Development of cash position (in €m) Inventories Receivables Payables Promissory notes other868 1,072 82 162 -40 615 736 99 -156 3 145 Inventories increased mainly due to higher price levels Inventories Operating CF CF from investing activities CF from financing activities 615 -5 35 145 Change in NWC and other assets Receivables up due to strong Payables grew at a lower rate due to less order activity act t esdue to strong sales volumes in June CF from operations -57 Q1 2010 NWC Q2 2010 NWC Q1 2010 Cash Q2 2010 Cash 10 NWC NWC Cash position Cash position
- 11. 02 Significant financial scope for growth • Maturity profile extended from 1.7 to 3.2 years and available facilities increased to €2.0bn • European ABS been extended for another 2 years, same amount €420m • Placement of €145m Promissory notes • Renewal and extension of syndicated loan from €300m to €500m in June Maturity profile of drawn amountsCredit facilities Maturity profile of drawn amounts Bilaterals incl. lease Convertibles Syndicated loan €114m €4m Credit facilities y ABS Promissory notes €325m €225m €4m AcquisitionsNWC €500m >€500m* €510m Syndicated Loan €98m Convertible Bond 2009 €145m Promissory Notes €9m €68 €32m €75m €98m €12m €7m€450m Bilateral Facilities ABS Bond 2009 €325m Convertible Bond 2007 11 2011 2013 2015 €58m 2010 €68m 2012 €75m 2014 * Including proceeds of rights issue in September 2009
- 12. Agenda Overview01 Financials and performance Q2 201002 Market, Strategy & Outlook03 Appendix04 Appendix04 12
- 13. 03 Steel prices have rallied for six consecutive months but softened in recent weeks as expected • As expected by Klöckner & Co steel prices softened in recent weeks because restarts of idled capacity exceeded demand • Prices for long products are recovering currently driven by scrap • A rebound for flat products in Q4 is also feasible if mills keep disciplined and not restarting idled capacity directly after the summer again 1,100 1,200 )inthe idled capacity directly after the summer again 800 900 1,000 peand($/st) 500 600 700 (€/t)inEurop US 200 300 400 Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May July Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Steelprices( Mar 06 May 06 Jul- 06 Sep- 06 Nov- 06 Jan- 07 Mar 07 May 06 Jul- 07 Sep- 07 Nov- 07 Jan- 08 Mar 08 May 08 July 08 Sep- 08 Nov- 08 Jan- 09 Mar 09 May 09 Jul- 09 Sep- 09 Nov- 09 Jan- 10 Mar 10 May 10 Jul- 10 S HRC-Europe HRC-US Medium sections-Europe Beams-US 13 Source: SBB
- 14. 03 Steel production is significantly outstripping steel consumption Crude steel production H1/2010 compared to H1/2009 Apparent steel consumption estimate 2010 as compared to 2009p p World +28% +11% EU 27 +44% +14%EU 27 44% 14% CIS +20% +11% Other Europe +17% +14% North America +60% +24% South America +36% +20% Asia +24% +8% of which: China +21% +7% Middle East +12% +10% Source: Worldsteel, estimates from April 14
- 15. 03 Steel inventories in Europe and the US remain on low levels 6.0120 5.0 5.5 100 110 ts 3.5 4.0 4.5 80 90 nthsofshipmen StocksIndex 2.5 3.0 3.5 60 70 Mon S 1.5 2.0 40 50 Jan-08 Mar 08 May 08 Jul-08 Sep-08 Nov-08 Jan-09 Mar 09 May 09 Jul-09 Sep-09 Nov-09 Jan-10 Mar 10 May 10y p y p y Stocks Index Europe Stocks Index US Months Europe Months US 15 Source: Metals Service Center Institute, Eurometal (all figures indexed; Jan 08 = 100)
- 16. 03 How the Company structurally improved over the past two years • Procurement Central European Sourcing levers procurement conditions • Inventories International Product-Management tightly controls inventories • Processes European operations centrally define best practices • S t IT t d t d t f ll t d d• Systems IT systems updated to fully support upgraded processes • Management New country CEO’s in Europe to support new structure, lean board • I ti ti B l b t t i l i it d t ll b ti• Incentivation Balance between entrepreneurial spirit and cross-country collaboration • Balance sheet Healthy balance sheet with prolonged maturities • Growth 2 acquisitions already completed and €500m still available• Growth 2 acquisitions already completed and €500m still available ► Flexibility and efficiency increased► Flexibility and efficiency increased ► Advantages of scale materialized ► Growth opportunities realized 16
- 17. 03 What we expect from main industries in H2 2010 served by Klöckner & Co ► Construction • We meanwhile think that construction is through the trough in Europe as well as in N th A i W l i fi t i f li ht i tNorth America. We are also seeing first signs of slight improvement • Nevertheless construction is expected to remain weak for the full year ► Machinery and mechanical engineering • Significantly increasing order intakes for machinery and mechanical engineering in H1 2010 will be translated into higher production in H2 2010 ► Automotive • Automotive is currently stronger than expected but will probably soften slightly in H2 as restocking eases and the wreckage premiums have expired. High exports will limit the contraction especially in the premium segment 17
- 18. 03 Outlook ► Third quarter • Volumes expected to be seasonally lighter than Q2 as usual• Volumes expected to be seasonally lighter than Q2 as usual • EBITDA between weather impacted Q1 and the price and volume driven Q2 ► Full year • >25% sales growth resulting from acquisitions and normalization of customers’ stock levelslevels • >200 Mio. € EBITDA (>4% EBITDA-margin) driven by economic growth, successfully integrated acquisitions and sustained cost cutting measures ► Risks • Slowdown of economic recovery i.e. because of high sovereign debt levelsy g g • Weak banking system 18
- 19. Agenda Overview01 Financials and performance Q2 201002 Market, Strategy & Outlook03 Appendix04 Appendix04 19
- 20. 04 Appendix Financial calendar 2010/2011 November 10 2010 Q3 interim report 2010November 10, 2010 Q3 interim report 2010 March 8, 2011 Annual Statement 2010 May 11, 2011 Q1 interim report 2011 May 20, 2011 Annual General Meeting 2011 August 10, 2011 Q2 interim report 2011 November 9, 2011 Q3 interim report 2011p Contact details Investor RelationsContact details Investor Relations Dr. Thilo Theilen, Head of Investor Relations & Corporate Communications Phone: +49 203 307 2050 F 49 203 307 5025Fax: +49 203 307 5025 E-mail: thilo.theilen@kloeckner.de Internet: www.kloeckner.de 20
- 21. 04 Quarterly results and FY results 2005-2010 (€m) Q2 2010 Q1 2010 Q4 2009 Q3 2009 Q2 2009 Q1 2009 FY 2009 FY 2008 FY 2007 FY 2006 FY 2005* Volume (Ttons) 1,448 1,180 966 1,033 1,053 1,068 4,119 5,974 6,478 6,127 5,868 Sales 1,416 1,049 873 934 959 1,095 3,860 6,750 6,274 5,532 4,964 Gross profit 331 236 198 208 161 78 645 1 366 1 221 1 208 987Gross profit 331 236 198 208 161 78 645 1,366 1,221 1,208 987 % margin 23.4 22.5 22.6 22.3 16.8 7.1 16.7 20.2 19.5 21.8 19.9 EBITDA 100 29 83 11 -31 -132 -68 601 371 395 197 % margin 7.1 2.8 9.5 1.2 -3.2 -12.0 -1.8 8.9 5.9 7.1 4.0% margin 7.1 2.8 9.5 1.2 3.2 12.0 1.8 8.9 5.9 7.1 4.0 EBIT 78 11 26 -7 -48 -149 -178 533 307 337 135 Financial result -17 -15 -16 -14 -15 -16 -62 -70 -97 -64 -54 Income before taxes 61 -4 9 -21 -63 -165 -240 463 210 273 81 Income taxes -14 6 3 -2 16 38 54 -79 -54 -39 -29 Net income 47 2 12 -23 -47 -127 -186 384 156 235 52 Minority interests 1 1 3 0 1 -2 3 -14 23 28 16 Net income KlöCo 46 1 9 -23 -48 -126 -188 398 133 206 36 EPS basic (€) 0.69 0.02 0.56 -0.42 -1.04 -2.70 -3.61 8.56 2.87 4.44 - EPS diluted (€) 0.69 0.02 0.56 -0.42 -0.85 -2.43 -3.61 8.11 2.87 4.44 - 21 ROCE (%) - - - - - - -12.6 25.7 17.1 24.7 19.0 * Pro-forma consolidated figures for FY 2005, without release of negative goodwill of €139 million and without transaction costs of €39 million, without restructuring expenses of €17 million (incurred Q4) and without activity disposal of €1.9 million (incurred Q4).
- 22. 04 Balance sheet as of June 30, 2010 (€m) June 30, 2010 Dec. 31, 2009 Comments Non-current assets 883 712 Inventories 880 571 Shareholders’ equity: • Decreased from 41% to 35% mainly due to BSS Trade receivables 852 464 Cash & Cash equivalents 736 827 Other assets 84 139 y • Would be at 45% if cash were used for debt reduction Financial debt:Other assets 84 139 Total assets 3,435 2,713 Equity 1,208 1,123 Financial debt: • Gearing at 21% • Net debt position due to purchase price Total non-current liabilities 1,260 927 thereof financial liabilities 887 619 Total current liabilities 967 663 payment for BSS and Bläsi AG and NWC build-up NWC: thereof trade payables 660 398 Total equity and liabilities 3,435 2,713 Net working capital 1,072 637 NWC: • Swing mainly driven by BSS consolidation and pickup in business 22 Net financial debt 245 -150
- 23. 04 Statement of cash flow H1 Comments(€m) H1 2010 H1 2009 • NWC changes due to built up of inventories and receivables Operating CF 128 -170 Changes in net working capital -266 640 Others 21 2 • Investing CF impacted by acquisitions of BSS and Bläsi Others 21 -2 Cash flow from operating activities -117 468 Inflow from disposals of fixed assets/others 2 6 Outflow from acquisitions -124 0Outflow from acquisitions -124 0 Outflow from investments in fixed assets/others -10 -8 Cash flow from investing activities -132 -2 Equity component of convertible bond 0 26Equity component of convertible bond 0 26 Changes in financial liabilities 230 -149 Net interest payments -19 -22 Repayments of shareholder loan BSS -58 0Repayments of shareholder loan BSS -58 0 Cash flow from financing activities 153 -145 Total cash flow -96 321 23
- 24. 04 Segment performance Q2 2010 (€m) Europe North America HQ/ Consol. Total Comments Volume (Ttons) Q2 2010 1,162 286 - 1,448 Q2 2009 815 238 - 1,053 • Excl. BSS volume increase in Europe was 11 8% and total volume Δ % 42.5 19.8 - 37.4 Sales Q2 2010 1 180 236 1 416 11.8% and total volume increase was 13.6% • Without BSS total sales were 31.4% yoy Q2 2010 1,180 236 - 1,416 Q2 2009 798 161 - 959 Δ % 47.9 46.9 - 47.7 EBITDA Q2 2010 93 13 -6 100 % margin 7.9 5.4 - 7.1 Q2 2009 3 -25 -9 -31 % margin 0.3 -15.8 - -3.2 Δ % EBITDA 3,442.0 -149.8 - -423.3 24 % 3, 0 9 8 3 3
- 25. 04 Current shareholder structure Geographical breakdown of identified institutional investors Comments • Identified institutional investors account for 52% • German investors dominate • Top 10 shareholdings represent around 26%Top 10 shareholdings represent around 26% • Retail shareholders represent 27% • 100% free float 25
- 26. 04 Our symbol the ears the eyesthe ears attentive to customer needs the eyes looking forward to new developments the nosethe nose sniffing out opportunities to improve performance the ball symbolic of our role to fetchsymbolic of our role to fetch and carry for our customers the legsthe legs always moving fast to keep up with the demands of the customers 26