klöckner & co - roadshow presentation october 2008
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Klöckner & Co SE
A Leading Multi Metal Distributor
October 2008
Gisbert RühlCFO
2
Agenda
2.
Strategy update
Appendix
3.
Market update
4.
Q2/H1 financial review
5.
Targets and outlook
1.
Overview
3
Klöckner & Co at a glanceKlöckner & Co
Leading producer-independent steel and metal distributor in the European and North American markets combined
Network with more than 260 distribution locations in Europe and North America
More than 10,000 employees
Key financials FC 2008-
Sales:
> €7 billion-
Operating EBITDA:
> €500 million
GB
23%
21%
14%
10%
5%
9%
1%
13%Germany/
Austria
France/Belgium Spain
Nether-lands
EasternEurope
Switzerland
Canada
4%
Sales split by markets
As of December 2007
Steel-flat Products
Steel-long Products
Special and
Quality Steel
Aluminum
Other Products
30%
32%
10%
9%
6%
13%
Sales split by product
As of July 2008
Other
Machinery/Manufacturing
Auto-
motive
42%
25%
6%
27%
Sales split by industry
As of December 2007
Construction USA
Tubes
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
> 210,000 customersNo customer with more than 1% of salesAverage order size of €2,500Wide range of industries and marketsService more important than price
Purchase volume p.a. of >6 million tonsDiversified set of worldwide approx. 70 suppliers
Klöckner & Co’s value chain
5
Record results and ongoing
profitable growth
Highlights 2008
Extraordinary Q2 and half year record results
Further expansion especially through the acquisition of Temtco in the US
Disposal of KVT (CH) with high tax free income and cash contribution completed
Sale of the automotive-related Canadian Namasco Ltd. concluded
Business optimization program “STAR” fully on track
Transformation of Klöckner & Co AG into a SE (Societas Europaea) completed
6
Agenda
2.
Strategy update
Appendix
3.
Market update
4. Q2/H1 financial review
5.
Targets and outlook
1.
Overview
7
Profitable growth
Grow more thanthe market
Continuous businessoptimization
1 Accretive
acquisitions driving market
consolidation
2 STAR Programto optimize•
Purchasing
•
Logistics•
Distribution network
Profitable growth through value-added distribution and services within multi metals to companies in Europe and North America
Profitable growth through value-added distribution and services within multi metals to companies in Europe and North America
8
Country Acquired Company Sales (FY)
Mar 2008 Temtco €226 millionJan 2008 Multitubes €5 million
2008 Ytd 2 acquisitions €231 millionSep 2007 Lehner
& Tonossi €9 millionSep 2007 Interpipe €14 millionSep 2007 ScanSteel €7 millionAug 2007 Metalsnab €36 millionJun
2007 Westok €26 millionMay 2007 Premier Steel €23 millionApr
2007 Zweygart €11 millionApr 2007 Max Carl €15 millionApr 2007 Edelstahlservice €17 millionApr 2007 Primary Steel €360 millionApr 2007 Teuling €14 millionJan 2007 Tournier €35 million
2007 12 acquisitions €567 million2006 4 acquisitions €108 million
€141 million
€567 million
Continued expansion through accretive acquisitions1
12
42
2005 2006 2007
Acquisitions Sales
€231 million
2008
€108 million
2
9
Expected EBITDA contribution in 2008 from investments of about €260 million for acquisitions made in 2007
€90 - €100 million
Expected EBITDA contribution in 2008 from investments of about €130 million for acquisitions made in 2008 so far
€40 million (partially consolidated)
€55 million (annualized)
Continued expansion through accretive acquisitions1
10
Phase II (2008 onwards)
STAR program fully on track2
Phase I (2005 -
2008)
Overall targets:Central purchasing on country levelImprovement of distribution networkImprovement of inventory management
2006:
~ €20 million2007:
~ €40 million2008:
~ €20 million~ €80 million
Upside potential
Overall targets:European sourcingOngoing improvement of logistics and distribution network
Upside potential
2008
~ €10 million2009:
~ €30 million2010:
~ €20 million~ €60 million
€16 million realized in H1
11
Agenda
2.
Strategy update
Appendix
3.
Market update
4. Q2/H1 financial review
5.
Targets and outlook
1.
Overview
12
Steel prices started to soften
Demand in the EU will be effected by further slowdown mainly in Spain and UKUS demand development will stay weakSteel prices peaked in Q3Despite current steel price decreases they will remain on a relatively high level, supported by:
Normal inventory levelsLower Chinese exportsHigh raw material costs which will keep cash costs on a high level supporting continuing supply disciplineHigh capacity utilization driven by world wide slower but relatively robust demandIncreased pricing power of producers due to higher consolidation in Europe and North America
Steel market will remain supply constrained
13
Agenda
2.
Strategy update
Appendix
3.
Market update
4. Q2/H1 financial review
5.
Targets and outlook
1.
Overview
14
Financial highlights Q2/H1 2008
290
321
3,582
3,475
H12008
87
103
1,650
1,663
Q2 2007
75.3166126.3197EBIT
65.0195107.0212EBITDA
12.03,19916.51,922Sales
5.53,2925.51,755Volume (Ttons)
Δ%H1 2007Δ%Q2
2008(€m)
15
Summary income statement Q2/H1 2008
(€m) Q22008
Q22007 Δ% H1
2008H1
2007 Δ%
Volume
(Ttons) 1,755 1,663 5.5 3,475 3,292 5.5Sales 1,922 1,650 16.5 3,582 3,199 12.0Gross profit% margin
46224.0
32819.8
41.021.2
80322.4
63519.8
26.413.1
EBITDA% margin
21211.0
1036.2
107.077.4
3219.0
1956.1
65.047.5
EBITFinancial result
197-17
87-52
126.3-67.9
290-34
166-63
75.3-46.1
Income before
taxes 180 35 419.1 256 103 149.4Income taxes -55 -12 372.6 -79 -33 137.3Minority interests 3 4 -18.4 5 10 -53.2Net income 122 19 538.2 173 59 191.6EPS
€
(basic) 2.63 0.41 541.5 3.72 1.28 190.6EPS
€
(diluted) 2.48 0.41 504.9 3.54 1.28 176.6
16
Underlying EBITDA again improved
Underlying EBITDA H1 2008
16.3
-30.1
46.5
130.3-
10.5-12.2
126.63.7
Δ
189.6
-10.3
199.9
188.2-
4.57.2
194.6-6.4
H12007
205.9
-40.4
246.4
318.5-82.115.0-5.0
321.2-2.7
H12008
Underlying EBITDA excluding Acquisitions
●
Acquisitions (LTM*)
Operating EBITDA●
Windfall effects●
Exchange rate effects●
Special expense effects
Underlying EBITDA
EBITDA as reported●
One-offs
(€m)
* LTM: Last twelve months
17
Includes acquisition-related sales of M€63 for H1 2008* in Europe and sales of M€226 for H1 2008* in North America
Segment performance H1 2008
Comments(€m) Europe North America
HQ/Consol. Total
Volume
(Ttons)H1 2008 2,434 1,041 - 3,475H1 2007 2,422 870 - 3,292Δ
% 0.4 19.7 - 5.5Sales
H1 2008 2,882 700 - 3,582H1 2007 2,713 486 - 3,199Δ
% 6.2 44.1 - 12.0EBITDA
H1 2008 234 93 -6 321% margin 8.1 13.3 - 9.0H1 2007 178 33 -16 195% margin 6.6 6.7 - 6.1Δ
% EBITDA 31.3 185.5 - 65.0* Sales of acquired companies for the first
twelve months of their consolidation
18
Balance sheet H1 2008
1,0721,6523,612
8581,3801,0431,376
8563,612
267124
1,2361,199
786
June 30, 2008
930Trade receivables956Inventories735Long-term assets
154Cash & cash equivalents191Other assets
610-
thereof trade payables969Total short-term liabilities
1,152Total long-term liabilities845Equity
2,966Total assets
813-
thereof financial liabilities
December 31, 2007(€m)
2,966Total equity and liabilities
746Net financial debt*1,323Net working capital*
Comments
Financial debt:•
Syndicated loan: €404 million
•
ABS: €322
million•
Bilateral credits: €195 million
•
Convertible: €275
million
Net Working Capital:•
Sales-, acquisition-
and price-driven
* Including Canada and KVT
19
Statement of cash flow
Comments(€m) H12008
H12007
Operating CF 317 188
Changes in net working capital -274 -303
Others -40 -25
Cash flow from operating activities 3 -140Inflow from disposals of fixed assets/others 8 15
Outflow from investments in fixed assets* -282 -366
Cash flow from investing activities -274 -351Changes in financial liabilities 296 531
Net interest payments -16 -51
Dividends -38 -45
Cash flow from financing activities 242 435
Total cash flow -29 -56
Operating CF more than fully covered the investments in net working capital
Investing CF mainly impacted by increased stake in Swiss Holding and acquisition of Temtco
CF from financing activities driven by acquisitions
*and acquisition of subsidiaries
20
Agenda
2.
Strategy update
Appendix
3.
Market update
4. Q2/H1 financial review
5.
Targets and outlook
1.
Overview
21
General financial targets/limits and guidance
125.2%< 150%Gearing (Net financial debt/Equity)
2.2x< 3.0xLeverage (Net financial debt/EBITDA LTM)
6.9%> 6%Underlying EBITDA margin
12.0%> 10% p.a.Top line sales growth
ActualH1 2008
Generaltarget/limit
Challenging financial targets throughout the cycle
22
Outlook 2008
For the full year 2008, we expect the following key figures:
Sales of more than €7 billion
EBITDA before one-offs of more than €500 million
Reported EBITDA including divestments of more than €770 million
Net income of more than €500 million
The raised outlook is based on record half year results and still overall favorable market environment for the steel distribution industry going forward despite a weaker global economic development and is supported by the following effects:
Positive contribution from STAR program
Positive contribution from acquisitions made in 2007 and in 2008
Further stock gains in the course of H2 2008
Outlook raised again –
2008 results far above 2007
23
Agenda
2.
Strategy update
Appendix
3.
Market update
4. Q2/H1 financial review
5.
Targets and outlook
1.
Overview
24
November 14: Q3 Interim Report
Financial calendar 2008 and contact details
Financial calendar 2008
Christina Kiessling Jenny Hilgers
Phone: +49 203 307 2122 Phone: +49 203 307 2123Fax: +49 203 307 5025 Fax: +49 203 307 5025
E-mail: ir@kloeckner.de Internet: www.kloeckner.de
Contact details Investor Relations
25
B D
F
E
CH ACZ
PL
LT
RO
NLCN
USA
GBIRL
More than 260 distribution locations in Europe and NA
USA 30 D/A 23 F/B 75 CH 35 E 54
GB 26 IRL 1 NL 5 Eastern Europe 13
BU
26
Largest independent multi metal distributor
Europe (2007)
Source:
company reports, own estimates
ArcelorMittal
(Distribution approx. 5%)
ThyssenKrupp
BE Group
Other
mill-tied
and independent distributors
11.1%
9.8%
6.4%
1.0%71.7%
Klöckner & Co
Source:
Purchasing Magazine (May 2008), own estimates
North America (2007)
Steel Technologies
Namasco (Klöckner & Co)
Ryerson Reliance Steel
Samuel, Son & Co
ThyssenKrupp Materials NA
Worthington Steel
Carpenter Technology
McJunkin
O'Neal Steel
Mac-Steel
A.M. Castle
4.2%
2.8%
2.2%
2.2%
1.0%1.0%0.9%
1.3%
1.2%1.1%
1.3%
1.8%
1.7%
1.0%
5.1%
Other
71.2%
Russel
Metals
Metals USA
Structure: 50-60% through distribution, service centersSize in value: ~€100bnCompanies: ~1,300 only independent distributors
Structure: 67% through distribution, service centersSize in value: ~€71–91bnCompanies: ~3,000 few mill-tied, most independent
PNA Group
27
(€m) Q22008
Q1 2008
Q4 2007
Q3
2007
Q22007
Q12007
Q42006
Q32006
Q22006
Q12006
FY2007
FY2006
FY2005*
Volume (Ttons) 1,755 1,720 1,585 1,601 1,663 1,629 1,453 1,467 1,605 1,601 6,478 6,127 5,868
Sales 1,922 1,660 1,492 1,583 1,650 1,550 1,398 1,394 1,418 1,323 6,274 5,532 4,964
Gross profit 462 340 300 286 328 307 294 313 316 285 1,221 1,208 987
% margin 24.0 20.5 20.1 18.0 19.8 19.8 21.0 22.5 22.3 21.5 19.5 21.8 19.9
EBITDA 212 109 83 93 103 92 70 143 104 79 371 395 197
% margin 11.0 6.6 5.6 5.9 6.2 5.9 4.9 10.3 7.3 6.0 5.9 7.1 4.0
EBIT 197 93 65 76 87 78 55 128 89 64 307 337 135
Financial result -17 -17 -17 -17 -52 -10 -12 -24 -14 -14 -97 -64 -54
Income before taxes 180 76 48 59 35 68 43 105 75 50 210 273 81
Income taxes -55 -24 -6 -14 -12 -22 16 -20 -22 -13 -54 -39 -29
Minority interests 3 2 4 8 4 6 5 8 9 6 23 28 16
Net income 122 51 37 37 19 40 54 76 45 31 133 206 36
EPS basic (€) 2.63 1.09 0.80 0.79 0.41 0.86 1.16 1.64 0.97 - 2.87 4.44 -
EPS diluted (in €) 2.48 1.06 0.80 0.78 0.41 0.86 1.16 1.64 0.97 - 2.87 4.44 -
Quarterly results and FY results 2008/2007/2006/2005
*
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).
28
Debt facilities
(€m) Old debtstructure
Change indebt structure
New debtstructure
ABS Europe 380 +40 420
ABS USA 60 +30 90
Total 440 +70 510
Syndicated loan - +600 600
Bilateral credit agreements 480 -100 380
Total senior bank facilities 480 +500 980
Convertible bond - +325 325
High yield bond 170 -170 -
Total facilities 1,090 +725 1,815
29
Geographical breakdown of identified institutional investors
Current shareholder structure
Comments
Identified institutional investors account for 74%
US based investors still dominate but share decreased in favor of UK (up from 14% as of Sept. 2007)
Top 10 individual shareholdings represent around 48%
Rest of World < 1% (geographical breakdown)
Retail share increased from 11% to almost 14%
Rest of Europe
US
United Kingdom
Germany
SpainSwitzerland
Source: Survey
Thomson Financial (as of Febr. 08)
20%
4%4%
24%
41%
7%
30
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
31
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.
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