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Roadshow DZBankOctober 20, 2009
Klöckner & Co SE
The
Leading
Independent Multi Metal Distributor
Dr. Thilo
Theilen Head of Investor Relations
2
Disclaimer
This presentation contains forward-looking statements. These statements use words like “believes”, “assumes”, “expects” or similar formulations. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of our company and those either expressed or implied by these statements. These factors include, among other things:
Downturns in the business cycle of the industries in which we compete;
Increases in the prices of our raw materials, especially if we are unable to pass these costs along to customers;
Fluctuation in international currency exchange rates as well as changes in the general economic 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 conform them 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").
Securities of Klöckner & Co, 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. persons (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 pursuant to an exemption from such registration.
3
Agenda
1. Business Overview
3. Financials
Appendix
2. Strategy
4
Distributor in the sweet spot
Local customersGlobal suppliers
Suppliers Sourcing Products and services
Logistics/
Distribution Customers
Global Sourcing in competitive sizesStrategic partnershipsFrame contractsLeverage one supplier against the otherNo speculative trading
One-stop-shop with wide product range of high-quality productsValue added processing services Quality assurance
Efficient inventory managementLocal presenceTailor-made logistics including on-time delivery within 24 hours
~185,000 customersNo customer with more than 1% of salesAverage order size up to €2,000Wide range of industries and marketsService more important than price
Purchase volume p.a. of >5 million tonsDiversified set of worldwide approx. 70 suppliers
Klöckner & Co’s value chain
5
Klöckner & Co at a glance
Klöckner & 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 split by markets
As of December 2008
Sales split by product
As of December 2008
Sales split by industry
As of December 2008
Eastern Europe; 1%
USA; 19%
The Netherlands; 6%
Spain; 8%
UK; 9%
Switzerland; 13%
France/Belgium; 21%
Germany/Austria; 23%
Construction; 42%
Industrial machinery and equipment;
24%
On-sellers; 10%
Appliances/durable goods manufacturers; 7%
Automotive; 6%
Other; 11%
Tubes; 10%
Quality steel/stainless
steel; 9%
Aluminum; 6%
Other; 12%
Long products/sectional steel;
32%
Flat products; 31%
6
High cash flow generation in a downturn market
1 Source: Datastream ² 1999 to 2005 unaudited pro-forma figures, cash flow adjusted for M&A activity
FCF (€m²)
46620165
211
69 112 80147 126 86
147 158
-111999 2000 2001 2002 2003 2004 2005 2006 2007 2008 H1 2008 H2 2008 H1 2009
151 220 150 156 140349
197395 371
600321 279
-163
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 H1 2008 H2 2008 H1 2009Year
HRC Western Europe prices $/ton¹
Sales (€bn²)
EBITDA (€m²)
4.55.3
4.2 4.0 3.8
4.85.0
5.56.3
3.5 3.2
2.1
6.7
0
200
400
600
800
1,000
1,200
1,400
7
Prices for carbon and stainless steel products have improved in the US and Europe
Distribution stocking levels at record lows in the US and in Europe, with demand stabilizing
Utilization rates in the US and Europe have increased due to a stronger apparent demand
Steel inventories in the US at all time lows and back to H1 2008 levels in terms of months of sales
Source: SBB
Steel prices are recovering
Source: Metals Service Center Institute
5500
6500
7500
8500
9500
10500
11500
12500
13500
Jan
08
Mar
09
May
08
Jul 0
8
Sep
08
Nov
08
Jan
09
Mar
09
May
09
Jul 0
9
Inve
ntor
ies
(Tto
)1,5
2,0
2,5
3,0
3,5
4,0
Mon
ths
of s
hipm
ents
Inventories Months
200300400500600700800900
100011001200
Jan
06
Apr 0
6
Jul 0
6
Oct
07
Jan
07
Apr 0
7
Jul 0
7
Oct
07
Jan
08
Apr 0
8
July
08
Oct
08
Jan
09
Apr 0
9
Jul 0
9
Oct
09
Stee
l pric
es (€
/t)
HRC-Europe HRC-US
Medium sections-Europe Beams-US
Stee
l pric
es(€
/t fo
rEur
ope;
$/t
forU
S)Stocks on all time lows, prices have picked up in last months
8
Agenda
1. Business Overview
3. Financials
Appendix
2. Strategy
9
After managing the crisis back on track with Wave 3
Crisis management Managing growth again
Cost cutting
NWC-/ debt-reduction
Safeguard financing
Waves 1 and 2
Wave 3
Efficiency program Continuous improvement
Acquisition strategy
Organic growth
Growth capital
10
October 08 Summer 09
Wave 1
Wave 2
Approx. half of targeted €100m net savings in 2009 (incl. STAR) already realized¹ Company estimates
€100m net savings targeted in 2009, thereof €35-40m fixed costs¹
1,500 headcount reduction targeted (15% of total workforce) and almost fully achieved²
Safeguard liquidity / net working capital management: net working capital decreased from €1.7bn (Q3/2008) to €779m (Q2/2009)Safeguard financing: €300m syndicated loan and €505m ABS facilities now without performance covenants
Capex cut < €25m, so far €9.9m as of Q2/2009
Acquisitions suspended
March 09
Wave 3
² As of July 30, 2009
Cost
cutting: Cost
oriented
programs
implemented
11
Cost cutting: Structural
improvements will be maintained
Sales
NWC as % of sales
100
100
Volume
Net cost
base
European sourcing and distribution optimization expected to lead to sustained lower inventories
Initiated fixed cost savings expected to be maintained
Sustainable improvements increase competitiveness in next upturn
12
€35-40m fixed cost savings in 2009, annualized fixed cost savings of
€50-60m
Cost cutting: Saving target >€100m for 2009
€100m net savings target 2009
Personnel
50%
Shipping
20%
Operating
supplies/ tools
15%
Repair/
maintenance
10%
Other
5%
Reduction of >1,500 jobs or >15% of total workforce
13
NWC-/debt-reduction: Fast adaptation to current situation
Destocking
Q1/2008 Q2/2008 Q3/2008 Q4/2008 Q1/2009 Q2/2009
NWC
€bn
Net debt Stock to shipment
Q1/2008 Q2/2008 Q3/2008 Q4/2008 Q1/2009 Q2/2009
€bn
0.69
1.07
0.570.32
0.12
0.90
Q1/2008 Q2/2008 Q3/2008 Q4/2008 Q1/2009 Q2/2009
Stock levels of KCO in million to
0.89
1.32 1.251.011.21
0.75
Q1/2008 Q2/2008 Q3/2008 Q4/2008 Q1/2009 Q2/2009
Stock to quarterly shipment ratioTurnover in million to
1.07
1.76
1.351.15
1.72
1.05
0.70 0.750.93
0.710.87 0.83
1.401.65
1.01
1.721.41
0.78
-43% -55%
-89%
14
SalesSourcing Warehousing / Distribution
Centralization of sourcing functionSupplier concentrationThird country sourcing
Warehouse network optimization (incl. site closure)Concentration of stock in single locationsOptimization of internal and external logistics
Customer segmentation by size and tradeProfitability oriented pricing and service offeringReigniting dormant accounts
Product Portfolio / Service Offering
Product portfolio optimization (profitability / capital requirements)Increasing share of value added services
Sharing of products within GroupEliminating slow/no movers
Processes / IT Systems (Enabler)
Standardizing processesIntroduction of standardized SAP suit and data model (article codes, inventory management, etc.)
Shared servicesActivity based costing (ProDacapo)
Efficiency
program: Ongoing
improvement
15
Financial structure
Bank debt Securitized debt
Capital markets debt
AcquisitionsNWC
43%
26%
31%
€325mConvertible Bond 2007
€400mBilateral Facilities
€505mABS
€300mSyndicated
Loan
€98m Convertible Bond 2009
Funds for future growth
> €1,200m predominantly for organic growth
Strong financial power for organic growth
€1,205m
16
Summer 09
Wave 3
Pro-active market initiatives to leverage improved competitive position
Market / customer segmentation- Focus on under-penetrated regions / customer segments
- Leverage existing product / service offering and competitive strength
- Increase share of wallet with current accounts
- Improve / adjust sales force management and incentivation
Product portfolio management- Improve product mix by expanding higher margin business
- Drive value added services
Pricing strategy- Adjust pricing to segment / product approach
Wave 2Wave 1
Organic
growth: Driving
market
share
17
Financial structure
Bank debt Securitized debt
Capital markets debt
AcquisitionsNWC
43%
26%
31%
€325mConvertible Bond 2007
€400mBilateral Facilities
€505mABS
€300mSyndicated
Loan
€98m Convertible Bond 2009
Funds for future growth
€193mRightsIssue
€938mEquity
pre Rights Issue
> €600m predominantly for growth through acquisitions
€1,131m €616m
Strong financial power for growth through acquisitions
Equity
18
Achieve profitable growth
Strengthen purchasing power vs. suppliers for core group products
Strengthen country specific market positions
Expand footprint outside construction industry
Focus on geographical core markets in EU, NA and EEC to leverage existing network
Western Europe
NAFTA
Steel ProducerSteel Distributor
Steel DistributorTop 6 -20
Top 5
65%17%
18%Others
Top 5
31%
69%
Steel ProducerOthers
Top 5
39%
61%
OthersOthersTop 6 -20
Top 5
18%
32%50%
Significant acquisition potential in fragmented markets
Source: Company data, Eurometal, broker research
Consolidation among steel producers is well ahead of highly fragmented distribution sector M&A strategy
Profitability above group averageStrong synergy potential in purchasing, admin and warehousing with low integration riskEV/EBITDA multiple between 4x and 6x EBITDA EPS-accretive from year one
Target selection criteria
Track record of 18 successful acquisitions since IPO shows ability to integrate companies and extract synergies
19
Leading producer-independent multi-metal distributor
Source: Public information Note: Average exchange rate $/€ 2008: 0.6831 Includes complete Steel Solutions and Services 2 Mill-tied distributors
Largest independent multi-metal distributor
Independence provides:- Sourcing flexibility- Ability to obtain steel at market prices, even in tight
markets- Better ability to react to changes in supply and
demand, as products are sourced from a variety of suppliers
- Mill-tied distributors competing against customers of the mills
2008 European competitive landscapeEurope: ~3,000 market participants
Sales 2008 in €bn
0
4
8
12
16
AM3S TKM Klöckner& Co
RelianceSteel
Ryerson McJunkinRedman
1,2 2
Mill-tied distributors¹
Other independent distributors²
62%38%
Source: Eurometal (2009), public information, based on turnover in tons 1 Top 3 mill-tied distributors ArcelorMittal/ ThyssenKrupp/ Corus ² Klöckner & Co is largest independent distributor
2008 North American competitive landscapeNorth America: ~1,200 market participants
Mill-tied distributors
Rank Company Mkt. Share
1 Reliance Steel 5.7%
2 Ryerson Inc 3.5%
3 McJunkin Red Man 2.6%
4 Samuel, Son & Co. 2.1% … 10 Klöckner-Namasco 1.2%
11 A.M. Castle & Co 0.9%
…
Top 15 combined 28.2%
Other independent
distributors
Top 15
28.2%
63.7%
8.1%
Source: Metal Center News (Sept. 2009), Purchasing Magazine (April 2009), based on sales
15.8
10.4
3.66.7 6.0
2.9
20
€141m
€567m
€231m
€108m
Acquisitions1 Acquired sales1,2
€5mMultitubesJan 2008
€226mTemtcoMar 2008
€9mLehner & TonossiSep 2007
€231m2 acquisitions2008
€14mInterpipeSep 2007
€7mScanSteelSep 2007
€36mMetalsnabAug 2007
€108m4 acquisitions 2006€567m12 acquisitions2007
€35mTournierJan 2007
€14mTeulingApr 2007
€360mPrimary SteelApr 2007
€17mEdelstahlservice Apr 2007
€15mMax CarlApr 2007
€11mZweygartApr 2007
€23mPremier SteelMay 2007
€26mWestokJun 2007
Sales (FY)²Acquired¹ CompanyCountry
¹ As of announcement ² Figures refer to the latest fiscal years, prior to the acquisitions of the companies
2
4
12
2
2005 2006 2007 2008
Successful
acquisition-led
growth track
record
21
We stick to our targets
Roadshow Presentation April
2006
Underlying sales growth
Underlying EBITDA margin
Gearing (Net financial debt/Equity)
> 10% p.a.
> 6%
< 75%
Starting 2010
Starting 2011
Revised
22
Agenda
1. Business Overview
3. Financials
Appendix
2. Strategy
23
Selected income statement data
Years ended December 31 Six months ended June 30 (€m) 2006 2007 2008 2008 H1 2009 H1 Sales 5,532 6,274 6,750 3,582 2,054
Volume (Ttons) 6,127 6,478 5,974 3,475 2,121
Other operating income 94 97 371 21 25
Change in inventory 1 0 4 11 -3 -11
Cost of materials -4,325 -5,058 -5,394 -2,777 -1,804
Personnel expenses -478 -509 -546 -264 -228
Other operating expenses -428 -438 -592 -238 -199
Income from investments 0 1 0 0 0
EBITDA 395 371 600 321 -163
Depreciation, amortisation and impairments -58 -64 -67 -31 -34
EBIT 337 307 533 290 -197
Financial result -64 -97 -70 -33 -31
Income before taxes 273 210 463 257 -228
Income taxes -38 -54 -79 -79 53
Net income2 235 156 384 178 -175
1 Change in inventory represents the difference in amount of work in progress and finished goods at period end compared to the beginning of the period, adjusted for currency effects. Most of our inventory consists of merchandise, changes of which are not reflected in this item, but included in cost of materials
2 Gross of minority interests
24
Organic volume development in North America -37.7%
Includes acquisition-related sales of €8m for Q2/2009 in North America
Comments
Segment performance Q2 2009
(€m) Europe North America
HQ/Consol. Total
Volume
(Ttons)
Q2 2009 815 238 - 1,053Q2 2008 1,223 532 - 1,755
Δ
% -33.3 -55.1 - -39.9Sales
Q2 2009 798 161 - 959Q2 2008 1,523 399 - 1,922
Δ
% -47.6 -59.7 - -50.1EBITDA
Q2 2009 3 -25 -8 -31% margin 0.3 -15.8 - -3.2
Q2 2008 150 67 -5 212% margin 9.9 16.7 - 11.0
Δ
% EBITDA -98.3 -138.2 - -114.6
25
690571
322
118
Q3/2008 Q4/2008 Q1/2009 Q2/2009
1.71.4
1.00.8
Q3/2008 Q4/2008 Q1/2009 Q2/2009
Weak operating cash flow in H1 2009 offset by release of working capital
Strong cash flow generation led to fall in net debt to €118m end of June 2009
2006 2007 2008 2008 H1 2009 H1
Operating CF 354 328 386 317 -170
Changes in net working capital -195 -105 -87 -274 639
Others -28 -114 -112 -40 -1
Cash flow from operating activities 132 109 187 3 468
Inflow from disposals of fixed assets/ others
102 38 388 8 6
Outflow from investm ents in fixed assets/ others
-92 -417 -316 -282 -8
Cash flow from investing activities 10 -378 72 -274 -2
Proceeds from capital increase 98 62 0 0 26
Changes in financial liabilities -136 357 -46 296 -149
Net interest paym ents -46 -78 -38 -16 -22
Cash flow from financing activities¹ -90 295 -123 242 -145
Total cash flow 52 25 136 -29 321
Cash flow statement over time (€m)
1 Includes dividend payments
Working capital over time
-18%-29%
€bn
-22%
Net debt over time
-17%
-44%
€m
-63%
26
€43m
€227m
€72m
€325m
€26m
€351m
2009 2010 2011 2012 2013 2014
ABS Syndicated loan Convertible 2007¹ Convertible 2009¹ Drawn amount Facility Committed FY 2008 H1 2009
Bilateral Facilities 400 65 66
ABS 505 213 69
Syndicated Loan 300 298 227
Total Senior Debt 1,205 576 362
Convertible 2007¹ 325 280 289
Convertible 2009¹ 98 0 72
Finance leases 11 12 11
Total Debt 1,639 867 733
Cash 297 616
Total Net debt 571 118
Net debt and liquidity overview
Current maturity profile of drawn amountsOverview of net indebtedness (€m)
Additional flexibility through renegotiated covenants, which are now free of performance measures
1 Drawn amount excludes equity component
27
Agenda
1. Business Overview
3. Financials
Appendix
2. Strategy
28
Contact details Investor Relations
Dr. Thilo Theilen, Head of IR
Phone: +49 203 307 2050
Fax: +49 203 307 5025
E-mail: [email protected]
Internet: www.kloeckner.de
Financial calendar 2009
November 13: Q3 Interim Report
Financial calendar 2009 and contact details
29
(€m) Q2 2009
Q1 2009
Q4 2008
Q3
2008
Q22008
Q12008
FY2008
FY2007
FY2006
FY2005*
Volume (Ttons) 1,053 1,068 1,151 1,348 1,755 1,720 5,974 6,478 6,127 5,868Sales 959 1,095 1,394 1.773 1,922 1,660 6,750 6,274 5,532 4,964Gross profit 161 78 173 390 462 340 1,366 1,221 1,208 987% margin 16.8 7.1 12.4 22.0 24.0 20.5 20.2 19.5 21.8 19.9EBITDA -31 -132 -134 413 212 109 600 371 395 197% margin -3.2 -12.0 -9.6 23.3 11.0 6.6 8.9 5.9 7.1 4.0EBIT -48 -149 -152 395 197 93 533 307 337 135Financial result -15 -16 -18 -18 -17 -17 -70 -97 -64 -54Income before taxes -63 -165 -171 378 180 76 463 210 273 81
Income taxes 16 38 29 -30 -55 -24 -79 -54 -39 -29Minority interests -1 -2 -15 -4 3 -2 -14 23 28 16Net income -48 -126 -126 351 122 51 398 133 206 36EPS basic (€) -1.04 -2.70 -2.72 7.56 2.63 1.09 8.56 2.87 4.44 -EPS diluted (€) -0.85 -2.43 -2.44 7.01 2.48 1.06 8.11 2.87 4.44 -
Quarterly results and FY results 2005-2009
* 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
Factors impacting EBITDA Q2 2009
Impact Amount (€m) Comments
Windfall losses* -40 to -60
Declining prices affected almost all productsEffect difficult to quantify due to strong dynamics and very limited purchases
Volume losses* -100 to -120 Impact of poor economic environment
Special expense effects* 40 to 50Mainly driven by price related releases of inventory devaluation reserves at quarter end
Acquisitions / divestitures -16 Mainly affected by divestiture of KVT and Canada
One-offs 1 Sale of property in France
Exchange rate effects -2
* Company estimates
31
* Net debt / equity
€1,128m
min €500m
max 150%
Q21
Minimum Equity Covenants Maximum Gearing*
Existing
covenants
on Syndicated
Loan
and European ABS
Non performance related covenants leaves us with lots of headroom
Q21:
1 Pro-forma figures after rights issue
Equity ratio currently at 38% Gearing currently at -6.4%
€0 0%
32
Selected balance sheet data
Years ended December 31 Six months ended June 30 (€m) 2006 2007 2008¹ 2008 H1 2009 H1 Non-current assets 579 735 812 794 775 Intangible assets 32 198 236 227 222 Property, plant, equipment 501 482 479 473 465 Current assets 1,972 2,231 2,272 2,826 1,983 Inventories 841 956 1,001 1,199 604 Trade receivables 933 930 799 1,236 591 Cash and cash equivalent² 130 154 297 124 616 Total assets 2,552 2,966 3,084 3,620 2,759 Non-current liabilities 744 1,152 1,177 1,377 1,108 Provision for pensions and similar obligations 193 188 180 183 183 Other provisions (including deferred tax liabilities) 126 142 124 142 259 Financial liabilities 416 813 813 1,043 626 Current liabilities 1,009 969 826 1,380 713 Other provisions (including deferred tax liabilities) 186 144 285 168 115 Financial liabilities 65 73 48 151 100 Other liabilities 89 92 82 102 74 Trade payables 639 610 392 858 417 Total liabilities 1,752 2,121 2,002 2,757 1,821 Equity (including minority interests) 799 845 1,081 863 938
¹ Comparative amounts for 2008 restated due to initial application of IFRIC 14² Cash and cash equivalents include cash, cash equivalents and marketable securities and, for the year ended December 31, 2008, EUR 3.1m in restricted cash and, for the six months ended June 30,
2009, EUR 0.7m in restricted cash. In 2007, EUR 3.5m of additional cash, and in the six months ended June 30, 2008, EUR 2.1m of additional cash as held in our Canadian subsidiary Namasco Limited (shown separately as assets held for sale). As of June 30, 2008, additional EUR 5.1m cash was held for sale in our Swiss subsidiary KVT
33
Cash flow statement
Years ended December 31 (€m) 2006 2007 2008¹ H1 2008¹ H1 2009 Net income 235 156 384 178 -174 Income taxes (benefit) 38 54 79 79 -54 Financial result 64 97 70 34 31 Depreciation and amortization 57 64 67 31 34 Other non-cash expenses and income -0 -3 63 -1 -4 Gain on disposal of subsidiaries and other non-current assets -40 -40 -277 -3 -4 Operating cash flow 354 328 386 317 -170 Changes in provisions 9 -46 -1 36 -26 Changes in other assets and liabilities
Inventories -160 -71 -6 -224 404 Trade receivables -134 29 143 -297 213 Other assets -1 -18 -43 -73 39 Trade payables 99 -64 -224 247 22 Other liabilities 10 -1 25 38 -24
Income taxes paid -46 -49 -93 -41 10 Cash flow from operating activities 132 109 187 3 468 Proceeds from the sale of non-current assets and assets held for sale 102 38 12 8 6 Proceeds from the disposal of consolidated subsidiaries 0 0 376 0 0 Payments for intangible assets, property, plant and equipment -48 -61 -48 -22 -10 Acquisition of subsidiaries -44 -356 -264 -260 0 Margin deposits for derivative transactions 0 0 -3 0 2 Cash flow from investing activities 10 -378 72 -274 -2 Capital increase 98 62 0 0 26 Dividends 0 -37 -37 -37 0 Minority interest -6 -10 -2 -1 0 Borrowings 222 1,270 425 346 114 Repayment of financial liabilities -358 -913 -471 -50 -263 Interest paid -50 -82 -45 -19 -26 Interest received 4 4 7 3 4 Cash flow from financing activities -90 295 -123 242 -145 Changes in cash and cash equivalents 52 25 136 -29 321
¹ Comparative amounts for 2008 restated due to initial application of IFRIC 14
34
Current shareholder structure
Source: Survey Thomson Financial (as of July 2009)
Identified institutional investors account for 64%
UK based investors dominate (Franklin remains Klöckner biggest investor with 8.91% of the total shares outstanding)
Top 10 shareholdings represent around 29%
Retail shareholders represent 28%
100% free float
CommentsGeographical breakdown of identified institutional investors
Germany27%
United Kingdom32%
US
16%
9%
Rest of Europe
4%Switzerland
France 11%1%
Rest of the World
35
Our symbol
the earsattentive to customer needs
the eyeslooking forward to new developments
the nosesniffing out opportunities to improve performance
the ballsymbolic of our role to fetch and carry for our customers
the legsalways moving fast to keep up with the demands of the customers