Klöckner & Co AG
Annual General Meeting 2008
20 June 2008
Dr. Thomas Ludwig Chairman of the Management Board
2
Agenda
Highlights 2007
Strategy
Market and Outlook 2008
Comments on the Agenda (Items 7, 10 and 11)
3
Highlights 2007
Again sales growth and high performance level
Business optimization program “STAR” fully on track
Acquisition targets achieved
Further optimization of financing
Free float 100%
Second-best operating result in the history of the Company
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Key figures 2007
(€m) 2007 2006 Δ
%
Volume in to'000 6,478 6,127 +5.7
Sales 6,274 5,532 +13.4
EBITDA 371 395 -6.1
EBIT 307 337 -9.0
Net income 156 235 -33.6
Earnings per share in € 2.87 4.44 -35.4
Net cash indebtedness 746 365 +104.4
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Key Figures Segments 2007
Sales EBITDA€m 2007 2006 2007 2006
Europe 5,197 4,670 326 366
North America 1,077 862 65 79
HQ/ Consol. - - -20 -50
Total 6,274 5,532 371 395
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60%
80%
100%
120%
140%
160%
180%
200%
02.01
.2007
02.03
.2007
02.05
.2007
02.07
.2007
02.09
.2007
02.11
.2007
02.01
.2008
02.03
.2008
02.05
.2008
Klöckner & Co MDax Dax
Share
Clear price recovery since beginning of the year
Performance 2007 until June 2008 – indexed
Inclusion in MDAX in January 2007
Share performance in the second half of 2007 came under pressure due to the US subprime crisis, the overall difficult market environment and the adjustment of our earnings forecast in October
J M M J S N J M M
2007 2008
7
Dividend
Dividend continuity
Payout ratio:
30% of Group earnings allocable to shareholders of Klöckner & Co after deduction of special effects; equals a payout of €37.2 million and a dividend of €0.80 per share
8
Agenda
Highlights 2007
Strategy
Market and Outlook 2008
Comments on the Agenda (Items 7, 10 and 11)
9
Global reach further expanded
B D
F
E
CH ACZ
PL
LT
RO
NLCN
USA
GBIRL
BU
More than 260 locations (as of June 2008)
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Position as largest multi metal distributor assured
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)
Namasco (Klöckner & Co)
Ryerson
Reliance Steel
Samuel, Son & Co
ThyssenKrupp Materials NA
Worthington Steel
Carpenter Technology
PNA Group
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
71.1%
Russel Metals
Metals USA
Steel Technologies
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Broad mix of markets, industries and products
Other
UK
Construction
Machinery/Manufacturing
Auto-motive
42%
25%
6%
27%23%
21%
14%10%
5%
9%1%
13%
Germany/ Austria
France/Belgium
Spain
Nether- lands
EasternEurope
USA
Switzerland
Canada4% Steel-flat
Products
Steel-longProducts
Tubes
Special and
Quality Steel
Aluminum
Other Products
29%
30%
10%
10%
7%
14%
Sales split by industry Sales split by markets Sales split by product
Sales 2007: €6,274 million
As of December 2007
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Grow more than
the market
Continuous business
optimization
Market consolidation through:
Driving acquisitions and Organic growth and expansion into new markets
STAR program:Optimization
PurchasingDistribution network
Profitable growth
1
2
Profitable growth
through value-added distribution and services within multi metals
in Europe and North America
Profitable growth
through value-added distribution and services within multi metals
in Europe and North America
13
Market consolidation by acquisitions in 2007
Sales in 2007: plus €567 million
Country Acquired in Company Sales*September Lehner & Tonossi €9 millionSeptember Interpipe €14 millionSeptember ScanSteel €7 millionAugust Metalsnab €36 millionJune Westok €26 millionMay Premier Steel €23 millionApril Stahlhandel Zweygart €11 millionApril Stahlhandel Max Carl €15 millionApril Edelstahlservice €17 millionApril Primary Steel €360 millionApril Teuling Staal €14 millionJanuary Tournier €35 million
*) Sales full year
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Market consolidation by acquisitions in 2008
Sales until June 2008: plus €231 million
Country Acquired in Company Sales*
March Temtco Steel €226 million
January Multitubes €5 million
*) Sales full year
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Acquisition of Temtco, a leading plate distributor
40% of the 2007-level of acquisition-related sales already achieved
High quality product portfolio: High strength quenched & tempered steel, wear-resistant steels and security steels
Sales 2007: $310 million (€226 million) with 180 employees
More than 60% of sales volume are processed products
Excellent customer base in application sectors such as energy, machinery and mechanical engineering, mining and transport
Overview
Tacoma, WA
Chicago, IL
Apache Junction, AZ
Louisville, MS
York, PA
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Investment Highlights
Complementary sales coverage combined with an additional product range offers synergy potential
- Namasco’s and Primary’s market coverage hugely expanded- Enlarged purchasing power helps to counterweight the strong supplier
consolidation - Additional (typical) synergies in administration, finance, IT, etc.
The acquisition of Temtco supports significantly the leading position of Primary and Namasco in the plate distribution segment
- Securing continuing specialty plate supply through Temtco’s supplier relations- Leveraging Temtco’s customer base for sale of Namasco´s/Primary’s
commodity plate and vice versa- Broad geographic coverage with five locations
Leading position in plate segment
Synergies
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Expansion of strong market position in core markets
Organic growth and expansion into new markets
Further expansion in Eastern Europe and into new markets
Closing of acquisition of Metalsnab in Bulgaria in January 2008
Additional acquisitions and opening of new branches in Eastern Europe
Evaluation of market entry in other countries (e.g. Turkey, Russia)
Selective expansion of product range
Extension of processing services through investment in new facilities
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STAR program
Improving performance of distribution network
Ongoing SAP roll-out and unified article codes across European countries
Distribution network
Extension of European sourcing
Improvement of the European stock management
Expected contribution to operating income 2005 – 2010: €140 million
Purchasing
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Results 2007
Acquisitions Organic growth STAR program Expansion
Above target: around 7%
(€382 million)
Target surpassed
with contribution to operating income of €43 million
New locations in Eastern
Europe
Target of twelve
Acquisitions with
€567 million additional
sales achieved
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Agenda
Highlights 2007
Strategy
Market and Outlook 2008
Comments on the Agenda (Items 7, 10 and 11)
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Ongoing profitable growth
Highlights 2008 until today
Excellent results, supported by price increases
Further expansion through the acquisitions of Temtco in the US and Multitubes in the UK
Acquisition of remaining outside shareholdings in Swiss Company Debrunner Koenig Holding AG and as a consequence full integration into the Group
Contract signed for sale of the automotive-related Canadian Namasco Ltd.
Sale of Koenig Verbindungstechnik (Switzerland) initiated
Business optimization program “STAR” fully on track
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80%
100%
120%
140%
160%
180%
200%
220%
J F M A M J J A S O N D J F M A M
Flachstahl Nordeuropa Flachstahl Nordamerika
Langprodukte Europa Langprodukte Nordamerika
Strong price increase since beginning of 2008
Source: Steel Business Briefing, January 2007 = 100%
2007 2008Steel-flat Products Northern Europe
Steel-long Products Europe
Steel-flat Products North America
Steel-long Products North America
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Steel market development favors steel distribution in particular
Strong price increases despite a softer economic growth due to a favorable supply and demand ratio
- Structural change due to the fact that steel prices are now driven primarily by raw material costs
- Higher discipline on the producer side due to consolidation- High capacity utilization- Low stock levels and low import volumes
Further price increases already announced for the upcoming months
Strong steel market development expected to continue
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Key figures Q1 2008
(€m) Q1 2008 Q1 2007 Δ
%
Volume in to‘000 1,720 1,629 +5.6
Sales 1,660 1,550 +7.1
EBITDA 109 92 +18.3
EBIT 93 78 +18.6
Net income (attributable to shareholders of Klöckner & Co AG) 51 40 +26.3
Earnings per share in € 1.09 0.86 +26.7
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Outlook 2008
Overall weaker development
Contrary, positive development of the steel market
Positive supply and demand development for steel distribution
Steel prices to increase further
General conditions
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Targets 2008
Acquisitions Organic growth STAR program Expansion
Positive outlook for 2008
Additional sales on the level of 2007
At least in line with the
average growth of the relevant
markets
Additional €30 million earnings
contribution
Development of new locations in Eastern Europe
Entry into new markets
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Outlook 2008
Forecast Klöckner & Co
At least 10% sales increase, driven primarily by acquisitions
EBITDA above market expectation of around €470 million
Significant increase of Group result (Earnings after taxes)
Dividend continuity: 30% payout of Group earnings allocable to share-holders of Klöckner & Co after deduction of special effects
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Agenda
Highlights 2007
Strategy
Market and Outlook 2008
Comments on the Agenda (Items 7, 10 and 11)
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Item 7: Conversion of Klöckner & Co AG into a European company (Societas Europaea, SE)
This legal form reflects our international reach and corporateculture
No change regarding
- Information, control, voting and dividend rights of the shareholders
- Stock Exchange trading of the Klöckner & Co share
No tax or accounting implications
Change of corporate seat currently not intended
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Item 7: Conversion of Klöckner & Co AG into a European company (Societas Europaea, SE)
Up-to-date and flexible corporate governance
Setting up of an SE-works council
Legal form of an SE facilitates the creation of a European organization and may facilitate larger acquisitions in Europe
No extension of the terms of the management and supervisoryboard members
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Item 10:Authorization to issue options and/or convertibele bonds
Successful issuance 2007
- Volume of €325 million
- Coupon of 1.5% p.a.
Again maximum nominal amount of €350 million possible
Option or conversion rights relating to up to 4,650,000 shares(i.e. plus 10% of the current share capital)
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To grant subscription and/or conversion rights
Capital increase only of and to the extent conversion/ subscription rights are exercised and not met otherwise
- Cash compensation- Treasury shares acquired earlier (cf. Agenda item 9)
Subscription or conversion price: 135% of the share price
- Relevant point in time: issuance of the bonds
Item 11: Creation of conditional capital 2008
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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
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Financial calendar 2008
23 June Dividend Payment
14 August Q2 Interim Report
14/15 October Capital Market Days
14 November Q3 Interim Report
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Contact details
Claudia Nickolaus, Head of Investor Relations
Phone: +49 203 307 2050
Fax: +49 203 307 5025
E-mail: [email protected]
Investor Relations
Corporate CommunicationsPeter Ringsleben, Head of Communications Claudia Uhlendorf, Public Relations
Phone: +49 203 307 2800 +49 203 307 2289
Fax: +49 203 307 5060 +49 203 307 5103
E-mail: [email protected] [email protected]
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Disclaimer
This document contains forward-looking statements that reflect the current assumptions and views of the management of Klöckner & Co AG. They are identified by such words as “expect,” “assume,” “believe,” “intend,” “estimate,” “project,” “plan,” “will,” “seek,” “outlook” or similar expressions. Generally, they contain information related to expected or projected economic conditions, sales or other corporate key figures. You should consider forward-looking statements with care and should not view them as a guarantee that they will prove to be correct. Future economic parameters and the actual results of Klöckner & Co AG and its associated companies are subject to risks and uncertainties, and may therefore differ materially from the forward-looking statements. A variety of these factors lies outside the company’s control and cannot be precisely projected. This concerns, for example, future economic conditions and the actions of competitors and other market participants. Klöckner & Co does not intend to update any forward-looking statements and does not assume any obligation for doing so.
In addition to the financial figures prepared in accordance with IFRS, Klöckner & Co AG presents non- GAAP figures, such as EBITDA, EBIT, net working capital and net cash indebtedness, which are not part of the accounting regulations. These figures do not serve as a substitute for the financial figures prepared in accordance with IFRS, but should be regarded as a supplement to them. Non-GAAP figures are covered neither by IFRS nor by any other generally acceptable accounting regulations. Other companies may define these concepts differently.