Klöckner & Co SE
A Leading Multi Metal Distributor
Berenberg and Goldman Sachs
Fourth German Corporate Conference
Munich
CFO
Marcus Ketter
September 22, 2015
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”, “endeavor”, “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
Agenda
3
Overview01
Highlights H1 and update on strategy
Financials
Outlook
02
03
04
Appendix05
Outlook04
Klöckner & Co SE at a glance01
CustomersDistributor / Service CenterProducers
Products:
• Klöckner & Co is one of the largest producer-
independent distributors of steel and metal products and
one of the leading steel service center companies
• Distribution and service platform with around
220 locations worldwide
• Key figures for 2014
Shipments: 6.6 million tons
Sales: €6.5 billion
EBITDA: €191 million
Services:
• Machinery
and
mechanical
engineering
• Yellow Goods
• White Goods
• Miscellaneous
• Automotive
• Commercial/
residential
construction
• Infrastructure
4
37%
12%
32%
19%
Global reach – local presence01
• With around 220 locations in 15 countries we assure local availability for our customers
• Austria
• Belgium
• Brazil
• China
• England
• France
• Germany
• Ireland
• Mexico
• Netherlands
• Puerto Rico
• Scotland
• Spain
• Switzerland
• USA
USA:
36%
Brazil:
<1%
China:
<1%
D:
24%
F/BE:
13%
CH:
15%
NL:
3%UK:
6%
ES: 2%
Europe:
63%
5
As of December 2014
Exit planned
for year end
2015
1%
Reliance
Ryerson
TK
Samuel
O'Neal
Russel
Macsteel
Metals USA
PNA
Namasco
Others
Europe
US
2007 2014
5%Arcelor Mittal
ThyssenKrupp
KCO
Salzgitter
Tata
Others
7%Arcelor Mittal
ThyssenKrupp
KCO
Salzgitter
Tata
Others
3%Reliance
Ryerson
KloecknerMetals
ThyssenKrupp
Others
• Position in the US significantly improved whereas market share in Europe is expected to remain
stable despite heavy restructuring measures
Klöckner is together with TK the second largest steel and metal distributor in Europe
and number three in the US01
Source: Eurometal, Purchasing Magazine, Service Center News
ThyssenKrupp
6
~3,000
~1,200
Still weak steel demand in Europe and high global overcapacities01
Overcapacity of steel by region (2014)
Source: Worldsteel
Steel demand total (in mt)
EU-28
2013201220112010200920082007 2014 2015e
200
180
160
140
120
100
80
60
40
20
-24%
NAFTA
2013201220112010200920082007 2014 2015e
140
120
100
80
60
40
20
+1%-1%
+2%
NAFTA
~20
South
America
~25
Europe
~80China
~270India
~20
CIS
~35Japan
~20
Other:~115
World:~585
Source: Bank of America Merrill Lynch, own estimates; in mt
7
Difficult start in 2015 due to price collapse in the US at the beginning of the year01
8
40%
50%
60%
70%
80%
90%
100%
Worldwide capacity utilization
Jun 08
92.7%
Dec 08
59.8%
Apr 10
84.4%
Dec 10
74.5%
Jun 11
83.4%
Dec 12
72.0%
Feb 13
80.5%
Jul 15
68.4%
Dec 13
72.7%
Mar 14
78.8%Feb 15
73.4%
Steel price development HRC
300
350
400
450
500
550
600
650
700
750
800
Q4 2014 Q1 2015 Q2 2015Q3 2014
Europe ($/mt) China ($/mt)USA ($/mt)
Agenda
9
Overview01
Highlights H1 and update on strategy
Financials
Outlook
02
03
04
Appendix05
Outlook04
Q2: Improving environment in CH, mixed in the US and still weak in France02
10
• Exchange rate related price erosion halted
• More favorable procurement opportunities outside Switzerland due to stronger Swiss Franc “Euro discount”
• Steel demand from construction industry remains healthy
• Easing import pressure led to slight recovery of steel prices after strong downturn but attempts to increase prices further not successful
• Continuing weak volume development in the oil & gas sector and agriculture but increasing demand in all other sectors
• Filing of trade cases could help to bring market in better balance but inventories still too high and unknown volumes of imported steel still in ports
• Construction market remains in crisis mode despite increasing GDP
• Large scale commodity business with weak demand and heavy pressure on prices
• Only moderate recovery of steel demand expected in the coming years
EBITDA in H1 heavily impacted by adverse market effects02
11
CommentsEBITDA impactQ2 yoy
36
56
2
KCO
WIN
Effect
2
Price
Effect
-19
Volume
Effect
-15
Q2
2014*
Q2
2015
(rep.)
-17
Restruc-
turing
costs
-52
Net f/x
effects
2
OPEX
8
Other
Effects
( mainly
IFRIC
21)
Market related
GP effect of €-34m
Q2
2015
(bef.
restr.)
H1 yoy
46
101
-52
Net f/x
effects
3
OPEX
1
Other
Effects
( mainly
IFRIC
21)
-7
KCO
WIN
Effect
5
Price
Effect
-41
Volume
Effect
-7
Restruc-
turing
costs
H1
2015
(rep.)
-16
H1
2014*H1
2015
(bef.
restr.)* Before initial application of IFRIC 21.
Market related
GP effect of €-57m
• Results significantly burdened by
negative market effects of -€34m in
Q2 and totally -€57m in H1
• Negative volume effect of €15m in
Q2 and €16m in H1 due to
continuously weak markets esp. in
the US
• Negative price effect of €19m in
Q2 and €41m in H1 mainly due to
deteriorating prices in the US and
f/x related also in CH
• Income statement figures highly
skewed by currency effects
excl. f/x effect +€32m
excl. f/x effect +€60m
excl. f/x effect -€30m
excl. f/x effect -€57m
KCO WIN significantly extended towards KCO WIN+02
12
All countries France* Further European
countries China Total
Scope
• Operating
optimization
• Decreasing
complexity and
focusing on the
proximity business
• Further reduction of
commodity business
and downsizing of
administrative
functions
• Full exit
Measures
• Optimized pricing
• Sales force
effectiveness
• Purchasing
excellence
• Warehouse
management and
logistics
• Consolidation and
closure of 11 sites
• Headcount reduction
of ~310
• Forced exit of large
customer commodity
business
• Downsizing of
country holding
• Consolidation and
closure of 5 sites
• Headcount reduction
of ~260
• Downsizing of
country holdings
• Closure of
SSC in
Changshu
• Headcount
reduction of
~35
* Measures which are submitted to the workers` council for an opinion.
+• Consoli-
dation
and
closure
of
17 sites
• Head-
count
reduction
of ~600
KCO WIN+ effects02
13
• EBITDA effect
• Total one-off effects of €52m
• Overall KCO WIN+ effect of up to €60m from 2017 onwards
• Existing measures adjusted against the background of deteriorating market conditions
• New measures with incremental effect of €30m in the coming two years
• Significant share thereof already in 2016
• Cash effect
• Cash out to be overcompensated by working capital release in 2016
• Additional positive midterm effect through asset sales
2014/2015
2016/2017
Total annual EBITDA impact of up to €60m from 2017 onwards
€26m
~€30m
€21m
already realized
“Klöckner & Co 2020“ growth strategy to drive the change02
14
Klöckner & Co 2020
Growth and
optimization
Operations
External &
internal growth
Digitalization
Products and
services
• Development and group wide rollout of innovative digital tools by kloeckner.i to
further increase customer benefits
• Digital integration of customers and suppliers across a wide range of interfaces
• Entry into Industry 4.0 business through digital networks with machines
automatically ordering new stock
• Additional staffing at kloeckner.i from currently 15 to 20 employees until year-end
• Extension of 3D-Laser-Center in the UK and starting up new tube laser in the US
• Significant expansion of investments in higher value-added products and services
• KCO WIN+ including additional restructuring measures in France and further
structural optimization measures in other European countries
• Acquisition of higher value-added business intended until year-end
• Regional focus on the US market due to good growth perspectives
Current focus
Differentiation
Developing of first integrated digital service platform for steel and metal distribution02
Customer side:
• Onboarding of first customers started this month
• Full roll-out in H1 2016
Supplier side:
• Supplier integration started
• Ongoing ideation and prototyping with partners
15
Agenda
16
Overview01
Highlights H1 and update on strategy
Financials
Outlook
02
03
04
Appendix05
Outlook04
Main factors for profitability in 201503
17
• Foreign currency changes: USA-Euro and CHF-Euro (somehow GDP)
• Import pressure and price decrease of 24% in the USA
• “Euro-Discount”-Pressure in Switzerland in Q1 & Q2
• Restructuring in France, UK, Switzerland, China (closed) and country
headquarters
• No market support in the USA and Europe
• Prices in Q3 trickling down further
1,698
1,600
1,455
1,572
1,680 1,675
1,577
1,697 1,693
Q22013
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
1,690
1,617
1,492
1,633
1,720
1,690
1,555
1,6611,645
Q22013
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Shipments and sales03
Sales (€m)Shipments (Tto)
• Decrease yoy and qoq driven by the weak
market situation in Europe and Americas
• yoy increase despite lower shipments due to
strong US Dollar and Swiss Franc
• Sales decreased qoq in less pronounced than
shipments
18
-4.4%
-1.0%
+0.8%
-0.3%
Gross profit and EBITDA – strong sequential upward momentum03
19
Gross profit* (€m) / Gross margin* (%)
• Gross margin with 19.2% stable yoy
• qoq gross margin improved from 18.2% by 1.0%p
• EBITDA before restructuring burdened by weak
market situation
• EBITDA margin before restructuring therefore down
by 1.4%p to 2.1% yoy but improved qoq by 1.5%p
305
296
288
302
325 325
309 310
325
Q22013
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
* Before restructuring cost.
** Prior year amount restated due to the inital application of IFRIC 21 (Levies).
EBITDA* (€m) / EBITDA margin* (%)
18.018.5
19.819.2 19.3
19.4 19.6
18.2
19.2
4339 40 39
5861
33
10
36
Q22013
Q32013
Q42013
Q12014**
Q22014**
Q32014**
Q42014**
Q12015
Q22015
2.5 2.42.7
2.5
3.5 3.6
2.1
0.6
2.1
XX Segment performance (shipments and sales)03
20
• Shipments
• European shipments lower by 1.7%
• Americas is down by 7.9% due to a very weak market
Sales (€m)
Comments
• Sales
• Europe sales down in line with weaker market
(-1.7%). However, lower prices were compensated by
the strong Swiss Franc and the British Pound
• Americas segment sales increased due to a favorable
f/x development
733
987 970
675
-4.4%
Americas
Europe
Q2 2015
1,645
Q2 2014
1,720
-1.7%
-7.9%
Europe
+0.8%
Americas
Q2 2015
1,693
639
1,054
Q2 2014
1,680
608
1,072
Shipments (Tto)
-1.7%
+5.2%
Segment performance (gross profit and EBITDA)03
21
• Europe
• Gross margin up by 0.6%p to 21.0%
• EBITDA down yoy by €4m but strong improvement
qoq by +€21m
• EBITDA margin down yoy by 0.4%p to 2.7%
• Americas
• Gross margin down by 1.3%p to 16.2%
• EBITDA down yoy by €17m with signs of
improvement qoq (net f/x effect €2.4m)
• EBITDA margin down by 2.9%p to 2.0%
Gross profit (€m)* Comments
EBITDA (€m)*
106
222
325
+0.2%
Europe
Q2 2014
103
325
Americas
Q2 2015
219 +1.5%
-2.5%
33
29
-5
3013
58
-6
Q2 2014** Q2 2015
-39.0%
Europe 36
HQ/Consol.
Americas
-13.0%
-57.1%
* Before restructuring costs.
** Prior year amount restated due to the inital application of IFRIC 21 (Levies).
Financing and liquidity: Generating cash in downturn again03
22
Operating cash flow YTD 06/2015Comments
36
Net financial debt 06/2014 vs 06/2015
• Net financial debt reported skewed due to
translation effects and impact of f/x swaps
• On a like-for-like basis net financial debt
decreased from €579m to €419m
• Strong cash flow generation in Q2 by
release of NWC
• Business model continues to generate
cash in downturn
• Other in Q2 includes €52m restructuring
• Oper. CF YTD 06/2014: -€148m
160
F/X transl.
571
-81
NFD 06/2014
419
Net Debt
06/2015 lfl
NFD
06/2015 rep.
579
F/X swaps
Operating
reduction
of NFD
-71
Q1: Op. CF -€111m
10-15
-17
EBITDA
Q2/2015
-131
OtherEBITDA
Q1/2015
-111
Oper.
CF YTD
03/2015
10
30
Oper.
CF YTD
06/2015
Other
83
Change
in NWC
Change
in NWC
Q2: Op. CF +€96m(€m)
(€m)
Despite redemption of promissory notes and convertible sufficient financial headroom03
23
Funding portfolio - static analysis
Facility
- €m -
Committed
30.06.2015
Drawn amount (nominal
values)
30.06.2015CB put,
payback PN
Syndicated Loan 360 0
ABS (Europe, US) 606 285 285
ABL (US) 290 72 72
Promissory Notes 133 134 0
Convertible 2010 186 185 0
Bilateral Facilities 337 199 199
Total Debt* 1,912 875 556
Cash 304 50
Net Debt 571 571
* Excl. interest accrued and equity component of convertible bond.
Maturity profile of main facilities (in €m)
186133 360300
245
290
31
2016
Apr.
854
2018 Thereafter
378
2017
19
2015
Dec.
18
Holding facilitiesABS
Promissory notes
Bilaterals
ABS EUABL US
Convertible
65
Investor
put right
Agenda
24
Overview01
Highlights H1 and update on strategy
Financials
Outlook
02
03
04
Appendix05
Outlook04
EBITDA break-even analysis 2013-201704
25
1) Assumes re-investment in line with depreciation.
2) Excludes restructuring impairment losses of €24m in 2013.
3) Assumes repayment of Convertibles and Promissory Notes through cash and min. average cash of €110 million, excludes impact of Frefer put option of €3m in 2013.
7661
4636 34
54
56
71 75
51
37
3424 18
2015
131
182
2013
127
2017
154
2014
61
141
2016
Financial result(3)
Amortization(1)
Depreciation(2)
Mainly
Convertible ’14:
and
Promissory Note
In case of no-put:
./. ≤15.9mIn case of no-put:
+ <8m
In case of no-put:
+ <8m
Mainly
Convertible ’14:
and
Promissory Note
and F/X
Mainly
Convertible ’15:
and
Promissory Note
ppappappa
ppa
FY
Segment specific business outlook 201504
US
Real steel demand
Europe
+0-1% +0-1%
Construction industry
Manufacturing, machinery and
mechanical engineering, etc.
Automotive industry
26
Energy industry
Outlook 04
• FY 2015
• Sales to be slightly up; negative effect of anticipated lower steel price level to be
overcompensated by currency effects
• EBITDA before restructuring measures expected to be significantly down
27
Agenda
28
Overview01
Highlights H1 and update on strategy
Financials
Outlook
02
03
04
Appendix05
Outlook04
Quarterly results and FY results 2012-201505
(€m)Q2
2015
Q1
2015
Q4
2014*
Q3
2014*
Q2
2014*
Q1
2014*
Q4
2013
Q3
2013
Q2
2013
FY
2014
FY
2013
FY
2012**
Shipments (Tto) 1,645 1,661 1,555 1,690 1,720 1,633 1,492 1,617 1,690 6,598 6,445 7,068
Sales 1,693 1,697 1,577 1,675 1,680 1,572 1,455 1,600 1,698 6,504 6,378 7,388
Gross profit 320 310 309 325 325 302 284 296 305 1,261 1,188 1,288
% margin 18.9 18.2 19.6 19.4 19.3 19.2 19.5 18.5 18.0 19.4 18.6 17.4
EBITDA rep. -17 10 33 61 58 39 16 36 43 191 124 60
% margin -1.0 0.6 2.1 3.6 3.5 2.5 1.1 2.3 2.5 2.9 2.0 0.8
EBIT -44 -15 8 38 36 17 -36 10 17 98 -6 -105
Financial result -13 -12 -13 -14 -16 -17 -17 -19 -19 -59 -73 -80
Income before taxes -56 -27 -4 24 19 0 -52 -8 -2 39 -79 -185
Income taxes 1 6 1 -8 -7 -2 -7 -3 -2 -17 -12 -18
Net income -55 -22 -4 16 12 -2 -59 -11 -4 22 -90 -203
Minority interests -1 0 -1 0 0 0 -5 0 0 0 -6 -3
Net income KlöCo -54 -21 -4 16 12 -2 -54 -11 -4 22 -85 -200
EPS basic (€) -0.54 -0.22 -0.04 0.16 0.12 -0.02 -0.54 -0.11 -0.04 0.22 -0.85 -2.00
EPS diluted (€) -0.54 -0.22 -0.04 0.16 0.12 -0.02 -0.54 -0.11 -0.04 0.22 -0.85 -2.00
* Restated due to initial application of IFRIC 21.
** Restated due to initial application IAS 19 revised 2011.
29
Segment performance05E
uro
pe
Am
ericas
EBITDA*,** before restructuring (€m)
Shipments (Tto) Sales (€m) EBITDA* before restructuring (€m)
Restructuring costs (€m) Q3 2013 Q4 2013 Q2 2015
Europe 13 52
Americas 2 11 ** Including pension release: Q2 2013 €7m, in Q3 2013 €6m and Q4 2013 €1m
and sale of French La Courneuve site €13m.
Shipments (Tto) Sales (€m)
30
941
903
839
956987
957
893
979 970
Q22013
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
1,061
1,006
935
1,015
1,072
1,041
973
1,025
1,054
Q22013
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
2826
34
23
33 34
18
8
29
Q22013
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
749
714
653
677
733 733
662
682675
Q22013
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
637594
520557
608634
604
672639
Q22013
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
20 20
13
21
29 30
20
7
13
Q22013
Q32013
Q42013
Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
-1.7% -1.7%
-7.9% +5.2%
* 2014 amounts restated due to the inital application of IFRIC 21 (Levies).
Profit & loss 201505
(€m) Q2 2015 Q2 2014*
Sales 1,693 1,680
Gross profit 320 325
Personnel costs -193 -146
Other operating expenses (net) -144 -121
EBITDA -17 58
Depreciation & Amortization -27 -23
EBIT -44 36
Financial result -13 -16
EBT -56 19
Taxes 1 -7
Net income -55 12
Minorities -1 0
Net income attributable to KCO shareholders -54 12
* 2014 restated for the initial application of IFRIC 21.
31
• Equity ratio further healthy at 38%
• Net debt of €571m
• Gearing* at 41%
• NWC increased from €1,321m to €1,452m
Strong balance sheet05
* Gearing = Net debt/Equity attributable to shareholders of
Klöckner & Co SE less goodwill from business
combinations subsequent to May 23, 2013.
Comments
Assets
746 918
304316108146
1,318
1,103
Other current assets
Liquidity
3,714
Trade receivables
Inventories
Non-current assets 1,168
3,629
1,216
426
743 682
328 330
781 869
348
Equity
Pensions
Other liabilities
Trade payables
Financial liabilities
1,407
3,629 3,714
1,429
Equity & liabilities
39%38%
Jun 30, 2015Dec 31, 2014 Dec 31, 2014 Jun 30, 2015
32
Sales by markets, products and industries05
As of December 31, 2014
Sales by markets Sales by industry
Sales by product
33
Current shareholder structure05
Geographical breakdown of identified
institutional investors• Identified institutional investors
account for 66%
• German investors incl. retail
dominate
• Top 10 shareholdings represent
around 35%
• Retail shareholders represent 31%
Comments
As of July 2015
34
Rest of World 8%
Rest of EU 3%
US 50%
France 8%
Germany 20%
UK 7%
Switzerland 4%
Current shareholder structure05
35
Voting Rights Announcements according to WpHG (Security Trading Act)*
*) The table lists all shareholders, whose Klöckner & Co SE voting shares currently exceed one of the notification thresholds under section 21 clause 1 WpHG, based on notification.
Date of publication Subject to compulsory notification Portion of voting
stock
29/07/2015 UBS Group AG 3.53%
28/07/2015 Swoctem GmbH / Friedhelm Loh 10.38%
27/05/2015 Federated Global Investment Management Corp. 5.06%
04/03/2015 Franklin Mutual Series Funds 3.07%
02/06/2014 Interfer Holding GmbH 4.98%
07/04/2014 Templeton Investment Counsel, LLC 5.02%
18/03/2014 Franklin Mutual Advisors – included therein:
Franklin Templeton Investment Funds (3.15%)
5.35%
08/01/2013 Franklin Templeton Investments Corp. 4.99%
02/02/2012 Dimensional Holdings Inc. /
Dimensional Fund Advisors LP
3.06%
Products 05
36
Hollow SectionsFlat Products
Long Products Stainless / Aluminium
Products / Services 05
37
Coils Decoiling / Cutting / Slitting
Cutting to Length / Bending Surface treatment
Services 05
38
3D-Laser 3D-Laser
3D-LaserLaser cutting / Flame cutting
Appendix05
Contact details Investor Relations
Christian Pokropp, Head of Investor Relations & Corporate Communications
Phone: +49 203 307 2050
Fax: +49 203 307 5025
Email: [email protected]
Internet: www.kloeckner.com
Financial calendar 2015/2016
November 3, 2015 Q3 interim report 2015
March 1, 2016 Annual Financial Statements 2015
May 4, 2016 Q1 interim report 2016
May 13, 2016 Annual General Meeting 2016, Düsseldorf
August 4, 2016 Q2 interim report 2016
November 3, 2016 Q3 interim report 2016
39
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