Klöckner & Co - Roadshow Presentation April 2011
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This document provides an overview of Klöckner & Co SE, a leading multi-metal distributor, and summarizes their performance in 2010 and outlook. 1) Klöckner & Co SE achieved strong financial results in 2010, exceeding guidance targets for sales growth, EBITDA, net working capital, and gearing. They resumed dividend payments and completed four acquisitions. 2) The company's strategy, Klöckner & Co 2020, aims to make them the first global and fastest growing multi-metal distributor through globalization, growth, business optimization, and developing management and employees. They have ambitious targets for organic growth and external expansion, especially in emerging markets. 3
Klöckner & Co - Roadshow Presentation April 2011
- 1. Klöckner & Co SE A Leading Multi Metal Distributor Westcoast-Roadshow Credit Suisse April 2011 Gisbert Rühl CEO/CFO
- 2. 2 00 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.
- 3. 3 Company overview Highlights/ Financials FY 2010 Klöckner & Co 2020 Outlook Appendix 01 02 03 04 05 Agenda
- 4. CustomersDistributor / Service CenterProducers Products: Services: Klöckner & Co SE Largest manufacturer-independent steel and metal distributor in Europe and North America combined Distribution network with around 250 locations Key figures for 2010 Sales: €5.2 billion EBITDA: €238 million Sales volumes: 5.3 million tons Mechanical engineering and machinery Automotive White Goods Miscellaneous 4 Ein- bis zweizeiliger Folientitel01 Klöckner & Co SE at a glance Construction industry Steel construction Residential construction, building and underground construction
- 5. 5 Ein- bis zweizeiliger Folientitel01 Distributor in the sweet spot Suppliers Sourcing Products and services Logistics / distribution • As a manufacturing- 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 Klöckner & Co value chainGlobal suppliers Local customers
- 6. 6 01 Sales by industry BSS shifts exposure of customer industries Sales by marketsSales by product • Exposure to construction industry declined by 3.8% as intended • Automotive rose by 4.2% due to BSS • Diversification in customer industries will go on
- 7. 7 Company overview Highlights/ Financials FY 2010 Klöckner & Co 2020 Outlook Appendix 01 02 03 04 05 Agenda
- 8. 8 02 Highlights FY 2010 and until today • All results significantly improved, strong contribution from acquisitions • Klöckner & Co 2020 strategy presented, progress on track • 4 acquisitions in 2010: • Becker Stahl-Service successfully expands Groups exposure to flat steel • Bläsi acquisition in Switzerland successfully integrated • Angeles Welding: Asset deal to acquire warehouse and operations in Los Angeles • Lake Steel: Acquisition of the market leader in Texas panhandle region • MoU signed for Macsteel USA: from #10 to #3 in one step • Strong financing position for further growth in place • Resume dividend payment of 30 Eurocents per share* * Proposal to AGM
- 9. 9 02 We delivered on what we promised Guidance for FY 2010 delivered Sales growth > 25% 34.7% EBITDA > €200m €238m Net working capital < 20% of sales 19% in Q1 to Q4 Gearing < 75% 11% Equity ratio > 30% 37% Dividend payout €0.30 p. share* Restart of acquisition strategy 4 acquisitions * Proposal to AGM
- 10. 10 02 Financials FY 2010 -€68m €238mn.a. FY 2010FY 2009 EBITDA €3,860m €5,198m+34.7% FY 2010FY 2009 Sales €645m €1,136m+76.1% FY 2010FY 2009 Gross profit Sales volumes 4,119 Tto +29.0% FY 2009 FY 2010 5,314 Tto
- 11. 11 02 Cash flow being used to invest in NWC and acquisitions Development of net financial debt in 2010 (€m)Cash flow generation in 2010 (€m) * exchange rate effects, cash interest 137 35 -98CF from operating activities Acquired debt and shareholder loan Other*Investing activities incl. acquisitions Net debt Dec. 31, 2009 Net debt Dec. 31, 2010 -150 -36 -188 238 -197 -6 117 EBITDA Change in NWC Taxes Other CF from operating activities Capex Free CF 0 35 -27 8
- 12. 12 02 Profit & loss 2010 (€m) FY 2010 FY 2009 Sales 5,198 3,860 Gross profit 1,136 645 Personnel costs -487 -441 Other operating expenses -447 -400 EBITDA 238 -68 Depreciation & Amortization -86 -110 EBIT 152 -178 Interests -68 -62 EBT 84 -240 Taxes -4 54 Net income 80 -186 Minorities 2 3 Net income attributable to KCO shareholders 78 -188 Comments Sales: • +34.7%, LFL 20.4% Personnel costs: • LFL + ~6% driven by 35% higher bonus payments. Average number of employees down by 5.3% LFL Other operating expenses: • LFL + ~4% D&A: • Impairments of €41.8m in 2009, €16.2m PPA effects in 2010 Tax rate: • Cash tax savings and higher deferred taxes in connection with the BSS acquisition reduced taxes significantly
- 13. 13 02 FY 2010 Comments • Equity ratio of 37% • Net debt of €137m • Gearing at 11% • Net debt to total capital 9.7% • NWC decreased by €73m to €1,017m qoq Strong balance sheet 50% 24.5% 25.7% 20.1% 2.9% 26.8% Balance sheet total 2010: €3,491 million 37.0% 39.0% 24.0% Non-current assets Inventories Trade receivables Other Current assets Liquidity Equity Non-current liabilities Current liabilities 100% 0% 1,394 1,398 1,550 1,650 1,583 1,492 1,660 1,922 1,773 1,394 1,095 959 934 873 1,049 1,416 1,401 1,332 22% 20% 21% 23% 23% 22% 21% 21% 24% 25% 23% 20% 19% 18% 19% 19% 19% 19% Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Sales in €m NWC as % of sales (4x quarterly sales) * NWC as percentage of sales
- 14. 14 Company overview Highlights/ Financials FY 2010 Klöckner & Co 2020 Outlook Appendix 01 02 03 04 05 Agenda
- 15. 15 Ein- bis zweizeiliger Folientitel03 Klöckner & Co 2020 Globalization Being the first global multi metal distributor Growth Being the fastest growing multi metal distributor Business optimization Having leading edge processes and systems Management & employees Having best in class management and employees
- 16. 16 03 Klöckner & Co 2020: Strategy re-focused along four lines of attack • Realizing further scale benefits in purchasing and product management • Further optimization of inventory management • Closer integration of country operations • Implementation of industry leading systems and processes • Establish talent and performance management group-wide • Implement structured compensation and benefits system • Improve employer branding • Continued growth outside the construction industry to better balance customer portfolio • EBITDA-margin should be above current average at attractive multiples with transactions that are accretive from day one • Targets should be more sizeable than in the past especially in the US • Expansion of SSC business • Entry in emerging markets • From “distribute into growing market” to “push to gain customers and market share” • Improve sales performance through sales excellence program • Expanding the share mainly in the area of higher margin products • Stronger focus on value added services for industrial customer segments • Filling white spots in existing countries External growth strategy Organic growth strategy Business optimization Personnel & Management development
- 17. 17 03 22 acquisitions since the IPO, 4 in 2010 ¹ Date of announcement 2 Sales in the year prior to acquisitions Acquisitions1) Acquired sales1),2) €141m €567m €108m 2 4 12 2 2005 2006 2007 2008 2009 2010 4 €231m Acquisitionstrategysuspended €~712m 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 €567m 2006 4 acquisitions €108m USA Dec 2010 Lake Steel €~50m USA Sep 2010 Angeles Welding €~30m
- 18. 18 03 Strong financial position for further growth €m Drawn amount Facility Committed FY 2009 FY 2010* Bilateral Facilities 443 53 66 ABS 510 21 88 Syndicated Loan 500 225 226 Promissory Note 145 147 Total Senior Debt 1,598 299 527 Convertible 20071) 325 292 306 Convertible 20091) 98 77 81 Convertible 20101) 186 151 Finance leases 7 9 7 Total Debt 2,214 677 1,072 Cash 827 935 Net Debt -150 137 1) Drawn amount excludes equity component * Including interest • Promissory Notes and Convertible Bond 2010 issued to support expansion strategy Klöckner & Co 2020 • Maturity profile improved and financial headroom increased Credit facilities * Including proceeds of rights issue in September 2009 after acquisitions completed in 2010 AcquisitionsNWC Promissory notes Syndicated loan Convertible 2009 Convertible 2007 Bilateral facilities ABS Europe ABS USA Convertible 2010 €450m ~€700m* €420m €90m €500m €325m €98m €145m ~€1,500m €186m
- 19. 19 Folientitel03 Ambitious targets for global growth 15-20 million to* Get Ready Accelerate Sustain Momentum • Preparing organization for high growth • Internationalize management • Expanding footprint to emerging markets • Implement industry leading processes • Sustain growth momentum • Manage size and global footprint • Gaining growth momentum • Expand business around new anchor points especially in emerging markets 5.3 million to* 2010 2015 2020 8-10 million to* *Sales volumes
- 20. 03 Current geographic sales split and target 2020 20 0% 30%20-30% 85% 60%40-60% 15% 20-30% 2010 2010 20102020 2020 2020 17% 0% CAGR 2010-20: ~15% CAGR 2010-20: ~8% CAGR 2010-20: na 83% North America Europe Emerging Markets
- 21. Klöckner & Co 2020: Status update03 21 Organic growth Management & Personnel Development External growth • MoU signed for Macsteel Service Centers in the US • Brazil and China progressing • “Sales excellence” program initiated • SSC in Spain upgraded with BSS know how: first automotive orders • Group wide roll-out of HR reviews from Management Level 1-3 below board level started Business optimization • 10 best practice rules of how to organize a warehouse broadly implemented in Europe and transferred to the US
- 22. Plate Processing Service Center Plate Processing and Fabrication Service Center Plate Processing Service Center Hawaii Puerto RicoMexico Macsteel Map Legend Headquarters General Line Service Center Flat Rolled Processing Center Namasco Map Legend Plate Processing Service Center Plate Processing and Fabrication Service Center Plate Processing Service Center Hawaii Puerto RicoMexico Macsteel Map Legend Headquarters General Line Service Center Flat Rolled Processing Center Namasco Map Legend 22 03 Macsteel Service Center USA acquisition • Memorandum of Understanding signed, due diligence progressing • USD 1.3bn sales in 2010 • 1,200 employees • Complementary geographical/ customer coverage and products • Perfect execution of strategy to expand SSC business with industrial customers to a leading position • Additional synergies in purchasing and administration • Become #3 in multi metal distribution in one step Key facts Exposure map: 30+30 locations Strategic rationale
- 23. 23 Company overview Highlights/ Financials FY 2010 Klöckner & Co 2020 Outlook Appendix 01 02 03 04 05 Agenda
- 24. 24 04 Outlook • First quarter 2011 • Underlying demand is constantly improving • Prices recovered in late 2010 and increasing into Q2 • EBITDA expected to be significantly higher than in Q4/2010 • Full year 2011 guidance • >10% volume and sales growth on organic basis also through market share gains • Sales increasing overproportionate to sales volumes due to higher expected average prices in 2011 • Current business environment supports target of 6% EBITDA-margin, but H2 not yet foreseeable • Midterm target • Klöckner & Co 2020: Doubling sales volumes by 2015 to be reached earlier given a good seed base for acquisitions
- 25. Ein‐ bis zweizeiliger Folientitel04 Klöckner & Co management paradigm for environments of growing complexity Enables Klöckner & Co to react quickly in the face of changing environments, moving from a restructuring period to growth and vice versa Is the prerequisite for seizing opportunities that open up in a volatile environment, even in the face of great uncertainties Flexible and pro-active organization Robust balance sheet and financing Provides the basis for growth and financial cushion required to deal with unexpected shocks Clear strategic orientation acts as “guide rail” for all business activitiesStrategic orientation 25
- 26. 26 04 Klöckner & Co's unique investing proposition • Transformation since IPO: centralized purchasing, streamlined processes and logistics allowing for lower NWC and higher efficiency • With Macsteel among Top 3 distributors in each markets being served • Highly flexible business model with low fixed costs and limited capex requirement • Consolidation play in multi metal distribution with 22 acquisitions within 5 years • Expanding footprint in the more stable service center business with BSS and Macsteel • Scale effects in procurement and logistics provide high synergies with further potentials • Only player with a pan-continental setup to balance out developed countries with growth potentials in developing markets • Clearly defined aggressive growth targets based on conservative financing and strong balance sheet: growing double digit p.a. through value enhancing acquisitions
- 27. 27 Company overview Financials Q4/FY 2010 Klöckner & Co 2020 Outlook Appendix 01 02 03 04 05 Agenda
- 28. 28 05 Appendix Financial calendar 2011 May 11 Q1 interim report 2011 May 20 Annual General Meeting 2011 August 10 Q2 interim report 2011 November 9 Q3 interim report 2011 Contact details Dr. Thilo Theilen, Head of Investor Relations & Corporate Communications Phone: +49 203 307 2050 Fax: +49 203 307 5025 E-mail: thilo.theilen@kloeckner.de Internet: www.kloeckner.de
- 29. 29 05 Quarterly results and FY results 2005-2010 (€m) Q4 2010 Q3 2010 Q2 2010 Q1 2010 Q4 2009 Q3 2009 Q2 2009 Q1 2009 FY 2010 FY 2009 FY 2008 FY 2007 FY 2006 FY 2005* Volumes (Tto) 1,318 1,368 1,448 1,180 966 1,033 1,053 1,068 5,314 4,119 5,974 6,478 6,127 5,868 Sales 1,332 1,401 1,416 1,049 873 934 959 1,095 5,198 3,860 6,750 6,274 5,532 4,964 Gross profit 275 294 331 236 198 208 161 78 1,136 645 1,366 1,221 1,208 987 % margin 20.6 21.0 23.4 22.5 22.6 22.3 16.8 7.1 21.9 16.7 20.2 19.5 21.8 19.9 EBITDA 48 61 100 29 83 11 -31 -132 238 -68 601 371 395 197 % margin 3.6 4.3 7.1 2.8 9.5 1.2 -3.2 -12.0 4.6 -1.8 8.9 5.9 7.1 4.0 EBIT 24 39 78 11 26 -7 -48 -149 152 -178 533 307 337 135 Financial result -19 -16 -17 -15 -16 -14 -15 -16 -67 -62 -70 -97 -64 -54 Income before taxes 5 22 61 -4 9 -21 -63 -165 84 -240 463 210 273 81 Income taxes 12 -7 -14 6 3 -2 16 38 -4 54 -79 -54 -39 -29 Net income 17 15 47 2 12 -23 -47 -127 80 -186 384 156 235 52 Minority interests 1 0 1 1 3 0 1 -2 2 3 -14 23 28 16 Net income KlöCo 16 14 46 1 9 -23 -48 -126 78 -188 398 133 206 36 EPS basic (€) 0.25 0.21 0.69 0.02 0.56 -0.42 -1.04 -2.70 1.17 -3.61 8.56 2.87 4.44 - EPS diluted (€) 0.25 0.21 0.69 0.02 0.56 -0.42 -0.85 -2.43 1.17 -3.61 8.11 2.87 4.44 - * 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).
- 30. 30 05 Balance sheet as of December 31, 2010 (€m) Dec. 31, 2010 Dec. 31, 2009 Non-current assets 856 712 Inventories 899 571 Trade receivables 703 464 Cash & Cash equivalents 935 827 Other assets 98 139 Total assets 3,491 2,713 Equity 1,290 1,123 Total non-current liabilities 1,361 927 thereof financial liabilities 1,020 619 Total current liabilities 840 663 thereof trade payables 585 398 Total equity and liabilities 3,491 2,713 Net working capital 1,017 637 Net financial debt 137 -150 Comments Shareholders’ equity: • Decreased from 41% to 37% mainly due to BSS • Would be at 50% if cash were used for debt reduction Financial debt: • Gearing at 11% • Net debt position due to purchase price payment for BSS, Bläsi, Angeles Welding and Lake Steel and NWC build-up NWC: • Swing mainly driven by BSS consolidation and pickup in business
- 31. 31 05 Statement of cash flow Comments • NWC changes due to built up of inventories and receivables • Investing CF impacted by acquisitions of BSS, Bläsi, Angeles and Lake Steel • Financing CF mainly driven by the issuance of a Convertible Bond and Promissory Notes (€m) FY 2010 FY 2009 Operating CF 235 -158 Changes in net working capital -197 769 Others -3 -46 Cash flow from operating activities 35 565 Inflow from disposals of fixed assets/others 3 15 Outflow for acquisitions -164 -1 Outflow for investments in fixed assets/others -27 -22 Cash flow from investing activities -188 -8 Convertible bond (incl. equity component) 183 96 Issuance of shares 0 193 Changes in financial liabilities 173 -284 Net interest payments -43 -28 Repayments of shareholder loan BSS and other -61 -1 Cash flow from financing activities 252 -24 Total cash flow 99 533
- 32. 32 05 Segment performance FY 2010 (€m) Europe North America HQ/ Consol. Total Volumes (Tto) FY 2010 4,184 1,130 - 5,314 FY 2009 3,156 963 - 4,119 Δ % 32.6 17.4 - 29.0 Sales FY 2010 4,311 887 - 5,198 FY 2009 3,186 674 - 3,860 Δ % 35.3 31.5 - 34.7 EBITDA FY 2010 223 33 -18 238 % margin 5.2 3.7 - 4.6 FY 2009 57 -44 -81 -68 % margin 1.8 -6.5 - -1.8 Δ % EBITDA 293.4 n.a. - n.a. Comments • Excl. BSS volumes increase in Europe was 7.9% and total volume increase was 10.1% • Without BSS total sales were 21.3% yoy
- 33. 33 05 Geographical breakdown of identified institutional investors Current shareholder structure Comments • Identified institutional investors account for 57% • German investors incl. retail dominate • Top 10 shareholdings represent around 28% • Retail shareholders represent 28%
- 34. 34 05 Our symbol the ears attentive to customer needs the eyes looking forward to new developments the nose sniffing out opportunities to improve performance the ball symbolic of our role to fetch and carry for our customers the legs always moving fast to keep up with the demands of the customers