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Klöckner & Co SE A Leading Multi Metal Distributor Q2 2012 Results Analysts’ and Investors’ Conference Call CEO/CFO Gisbert Rühl August 8, 2012

Klöckner & Co - Q2 2012 Results

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Page 1: Klöckner & Co - Q2 2012 Results

Klöckner & Co SE A Leading Multi Metal Distributor

Q2 2012 Results

Analysts’ and Investors’ Conference Call

CEO/CFO

Gisbert Rühl

August 8, 2012

Page 2: Klöckner & Co - Q2 2012 Results

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.

2

Page 3: Klöckner & Co - Q2 2012 Results

Overview Q2 and update on restructuring 01

Financials Q2 2012

Outlook

Appendix

02

03

04

Agenda

3

Page 4: Klöckner & Co - Q2 2012 Results

Overview Q2 2012

• Turnover increased by 5.7% yoy driven by acquisitions and organic growth in USA and sequentially flat (+0.4% vs Q1)

• European turnover down -7.9% yoy also due to exiting low margin business whereas Americas up 34.2% yoy (organically up 10.0%)

• Sales increased by 4.2% yoy and by 0.9% sequentially

• EBITDA at €50m met guidance of €50-60m before restructuring despite worsening market environment (rep. EBITDA €33m incl. €17m for restructuring expenses mainly in Spain)

• Achievement of last years’ EBITDA in current fiscal year mainly due to worsening situation in Europe rather unlikely

• Scope of restructuring measures significantly expanded, initial measures almost concluded

• Expansion into US-automotive sector by building a Steel-Service-Center on the site of ThyssenKrupp plant in Alabama

• External CFO appointed to start latest Jan 1, 2013

4

01

Page 5: Klöckner & Co - Q2 2012 Results

• Steel demand currently around 25% below peak and not expected to recover shortly

• Overcapacity persisting also on distribution level until shakeout wave

• Early anticipation with assumed demand -5% in January created headroom for restructuring ahead of others

• Restructuring to adopt to current level of activity to avoid losses and position ourselves for a potential recovery

• Facing a phase with meager profitability, but balance sheet’s good shape should not be at risk

5

Europe USA

• Further market growth, albeit currently with reduced pace

• Successful integration of Macsteel enables us to outgrow the market

• Nevertheless, margins currently affected by price erosion in carbon also due to high USD and import situation

• Despite recent slowdown in economic development further market recovery most likely in the US

• We further outgrow the market by increasing contractual business to create a solid base for future uptick

• Key market for future growth also with organic measures due to the superior structural attractiveness of the US steel distribution and service center market

Restruc-turing

Growth

Global market assessment and our reaction 01

Page 6: Klöckner & Co - Q2 2012 Results

Europe/Macsteel • Europe: expense reductions • US: realizing synergies w/

Macsteel

• Cuts in administration costs and sales overheads

• Reduction of low-margin commodity business

• Expanding higher value-added activities

€70m

520 out of 700 already

€13m

General measures

Intensified measures in specific countries 01

From Q2 2012 on Step 1

September 2011

Spain + EEC France • Additional structural measures in

Spain • Withdrawal from EEC

• Realignment of France organization including structural measures

• Spain: • Closure of 11 sites • New network structure

and logistics concept

• EEC: • Full exit of EEC

• Closure of ~10 sites • Unified sales department in

each region • Logistics optimization • New network structure

€20m

600

€17m for Spain in Q2 + €15-20m for France in Q3

Focusing on structural changes

+

6

*Excluding potential disposal effects of EEC and Spanish properties

Step 2

Scope

Measures

EBITDA impact

Employee reduction

One-offs* booked in EBITDA

Page 7: Klöckner & Co - Q2 2012 Results

5

10

15

20

25

Despite difficult market environment fundamental values exist 01

7

Yield (CB 2007 until 9/8/2011, CB 2014 from 9/9/2011 on)

1,407

1,652 1,720

1,407

1,006

779

702 637

868

1,072 1,090

1,017

1,163

1,713 1,692

1,534 1,656 1,685

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

NWC Market cap Net debt

~700 current

1,507

1,692

747

571

345

704

1,041

1,187

1,456

965 1,107

1,397

1,573

2,055

929 990 1,087

799

573 471 580 582

322 118 -139

904

1,072

690

-150 150

233 137 227

600

571

~400

Yield in %

500

1,000

1,500

2,000

NWC – net debt vs. market capitalization and CB yields (€m)

~340

€m

245

Page 8: Klöckner & Co - Q2 2012 Results

Overview Q2 and update on restructuring 01

Financials Q2 2012

Outlook

Appendix

02

03

04

Agenda

8

Page 9: Klöckner & Co - Q2 2012 Results

Financials Q2 2012 02

EBITDA

Sales

Gross profit

Turnover

1,763 Tto

+5.7%

Q2 2011 Q2 2012

1,863 Tto €1,885m €1,964m

+4.2%

Q2 2012 Q2 2011

€62m

-18.5%

Q2 2012 Q2 2011 €50m*

€337m €340m

+0.7%

Q2 2012 Q2 2011

9

*adjusted EBITDA Restructuring costs

Page 10: Klöckner & Co - Q2 2012 Results

Financials H1 2012 02

EBITDA

Sales

Gross profit

Turnover

3,260 Tto

+14.1% 3,720 Tto

€3,472m

€3,909m +12.6%

€166m €98m*

-41.0% €691m €683m

-1.0%

10

H1 2011 H1 2012 H1 2012 H1 2011

H1 2012 H1 2011 H1 2012 H1 2011

*adjusted EBITDA Restructuring costs

Page 11: Klöckner & Co - Q2 2012 Results

EBITDA (€m) / EBITDA-margin (%)

Gross profit and EBITDA 02

Gross profit (€m) / Gross-margin (%)

• Gross profit-margin on the level of Q1 adjusted for restructuring costs, despite competitive environment in Europe

• EBITDA in Q2 decreased qoq also due to restructuring of €17m

• EBITDA adjusted for restructuring €50m

11

Before restructuring costs

344

17.5

331

294 275

353 337 318 307

344

340

23.4

21.0 20.6

22.3

17.9 16.8 17.6 17.7 17.3

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

50

2.6

100

61 48

104

62

37

14

45

33

7.1

4.3 3.6

6.6

3.3

1.9

0.8

2.3

1.7

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

-4%p

Page 12: Klöckner & Co - Q2 2012 Results

236 232 228 297

520

634 602

722 727

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

Segment performance Q2 2012 02

Turnover (Tto) Sales (€m) EBITDA (€m)

Turnover (Tto) Sales (€m) EBITDA (€m)

Eur

ope

Am

eric

as

-9.4%

* Without acquisitions in 2011 ** Restructuring costs of €3m in Q1 and €17m in Q2

12

+39.7%/+16.1%*

1,162 1,084 1,029

1,164 1,192 1,067

990 1,105 1,097

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

1,180 1,169 1,104 1,290

1,365 1,251

1,137 1,223

1,237

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

93

60

45

81

50

24

12 20**

36**

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

286 284 289 334

571 698 646

752 766

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

13

5 7

30

23

15 13

29

21

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

-7.9%

+34.2%/+10.0%*

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Page 13: Klöckner & Co - Q2 2012 Results

Net income and EPS 02

• Net income adjusted for restructuring and impairments still slightly positive with €3m

• Net income includes €17m restructuring already within EBITDA, €30m impairments partly offset by €6m income from adjustment of Frefer put liability and €10m ppa effects

• Taxes negatively impacted due to non-recognition of tax assets on losses incurred in Q2

Comments

13

EPS basic (€)*

Net income (€m)

* adjusted for capital increase ** Before restructuring expenses and impairments

0.69

0.21 0.25

0.65

0.07

-0.11 -0.27

-0.10

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

47

15 17

44

5

-12 -27 -10

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

(€m) H1 2012 Q2 2012

Stock write-downs – 4 – 4

Personnel expenses – 10 – 7

Other restructuring expenses – 6 – 6

EBITDA impact – 20 – 17 Impairments Eastern Europe and Spain – 9 – 9

Restructuring expenses total – 29 – 26

• Goodwill impairment in Brazil of €21m due to ongoing weaker macro environment

3**

Q2

0.03**

Q2 2012

-0.38

-38

2012 Q2

Page 14: Klöckner & Co - Q2 2012 Results

NWC and net debt almost stable sequentially 02

Cash flow reconciliation in Q2 2012 (€m)

14

60,0

EBITDA Change in

NWC Taxes Other

CF from operating activities Capex Free CF

Development of net financial debt in Q2 2012 (€m)

* exchange rate effects, interest

Q1

CF from operating activities Capex Other* Q2

33

5 -7

-1

30

-8

22

- 573

+30 -8

-31

- 582

Page 15: Klöckner & Co - Q2 2012 Results

Strong balance sheet 02

*Gearing = Net debt/Equity attributable to shareholders of Klöckner & Co SE less goodwill from business combinations subsequent to May 28, 2010

**Total capital = net debt plus equity (w/o minorities)

Comments

• Equity ratio of 37%

• Net debt of €582m

• Gearing* at 36%

• Net debt to total capital** at 25%

• NWC increased by €151m to €1,685m ytd

• NWC/sales at new normal ~21%

50%

25.2%

29.7%

23.3%

2.1%

19.7%

Balance sheet total June 30, 2012: €4,938m

36.5%

30.2%

33.3%

Non - current assets 1,244

Inventories 1,465

Trade receivables 1,153

Other current assets 102

Liquidity 974

Equity 1,804

Non - current Liabilities 1,491

Current liabilities 1,643

100%

0%

15

Page 16: Klöckner & Co - Q2 2012 Results

Balanced maturity profile despite repayment of Convertible in July 2012 02

Facility (€m) Committed Drawn amount

June 30, 2012* December 31, 2011*

Bilateral Facilities1) 615 200 126

Other Bonds 14 14 20

ABS2) 519 193 175

Syndicated Loan 500 226 226

Promissory Note 343 345 349

Total Senior Debt 1,991 978 896

Convertible 20073) 4) 325 329 319

Convertible 20093) 98 86 86

Convertible 20103) 186 163 157

Total Debt 2,600 1,556 1,458

Cash 4) 974 987

Net Debt 582 471

€m June 30, 2012

Adjusted equity 1,635

Net debt 582

Gearing5) 36%

Maturity profile of committed facilities and drawn amounts (€m)

Committed facilities

Drawn amounts

6444)

124

1,035

296

501 3944)

95

447

266 382

2012 2013 2014 2015 Thereafter

16

*Including interest 1) Including finance lease 2) On April 25th, 2012 the European ABS was extendend until May 2014 and the volume reduced by €60 million to € 360 million 3) Drawn amount excludes equity component 4) Repayment of convertible bond of €325 million in July 2012 out of cash 5) Net debt/Equity attributable to shareholders of Klöckner & Co SE less goodwill from business combinations subsequent to May 28, 2010

Page 17: Klöckner & Co - Q2 2012 Results

Overview Q2 and update on restructuring 01

Financials Q2 2012

Outlook

Appendix

02

03

04

Agenda

17

Page 18: Klöckner & Co - Q2 2012 Results

Outlook

• Macro assumptions • In Europe, our base assumption continues to be business as it is for the remainder of the year • In the US, recent macro news point to a slowdown in H2

• Q3 2012

• Turnover in Q3 expected to be slightly down vs Q2 • EBITDA in Q3 expected to be €25-35m before restructuring costs

• FY 2012

• Turnover and sales still expected to increase year on year despite challenging market environment

• Achievement of prior year EBITDA not anymore realistic given H2 EBITDA bef. restructuring expected to be below the €98m in H1

03

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Page 19: Klöckner & Co - Q2 2012 Results

Overview Q2 and update on restructuring 01

Financials Q2 2012

Outlook

Appendix

02

03

04

Agenda

19

Page 20: Klöckner & Co - Q2 2012 Results

Appendix 04

20

Financial calendar 2012/2013

November 7, 2012 Q3 interim report 2012

March 6, 2013 Annual Financial Statements 2012

May 8, 2013 Q1 interim report 2013

May 24, 2013 Annual General Meeting 2013

August 7, 2013 Q2 interim report 2013

November 6, 2013 Q3 interim report 2013

Contact details Investor Relations Dr. Thilo Theilen, Head of Investor Relations & Corporate Communications

Phone: +49 203 307 2050

Fax: +49 203 307 5025

E-mail: [email protected]

Internet: www.kloeckner.de

Page 21: Klöckner & Co - Q2 2012 Results

Quarterly results and FY results 2007-2012 04

21

(€m) Q2 2012

Q1 2012

Q4 2011

Q3 2011

Q2 2011

Q1 2011

Q4 2010

Q3 2010

Q2 2010

FY 2011

FY 2010

FY 2009

FY 2008

FY 2007

Turnover (Tto) 1,863 1,857 1,636 1,765 1,763 1,498 1,318 1,368 1,448 6,661 5,314 4,119 5,974 6,478

Sales 1,964 1,945 1,739 1,885 1,885 1,587 1,332 1,401 1,416 7,095 5,198 3,860 6,750 6,274

Gross profit 340 344 307 318 337 353 275 294 331 1,315 1,136 645 1,366 1,221

% margin 17.3 17.7 17.6 16.8 17.9 22.3 20.6 21.0 23.4 18.5 21.9 16.7 20.2 19.5

EBITDA 33 45 14 37 62 104 48 61 100 217 238 -68 601 371

% margin 1.7 2.3 0.8 1.9 3.3 6.6 3.6 4.3 7.1 3.1 4.6 -1.8 8.9 5.9

EBIT -23 18 -18 8 36 86 24 39 78 111 152 -178 533 307

Financial result -18 -24 -21 -22 -21 -19 -19 -16 -17 -84 -67 -62 -70 -97

Income before taxes -41 -6 -39 -15 15 66 5 22 61 27 84 -240 463 210

Income taxes 3 -4 12 3 -9 -22 12 -7 -14 -17 -4 54 -79 -54

Net income -38 -10 -27 -12 5 44 17 15 47 10 80 -186 384 156

Minority interests 0 0 -1 -1 0 1 1 1 1 -1 3 3 -14 23

Net income KlöCo -38 -10 -27 -11 5 43 16 14 46 12 78 -188 398 133

EPS basic (€) -0.38 -0.10 -0.27 -0.11 0.07 0.65 0.25 0.21 0.69 0.14 1.17 -3.61 8.56 2.87

EPS diluted (€) -0.38 -0.10 -0.27 -0.11 0.07 0.60 0.25 0.21 0.69 0.14 1.17 -3.61 8.11 2.87

Page 22: Klöckner & Co - Q2 2012 Results

Strong Growth: 24 acquisitions since the IPO 04

22

Acquisitions1) Acquired sales1),2)

€141m

€567m

€108m

2 4

12

2

2005 2006 2007 2008 2009 2010

4

€231m

€712m

2011

2

€1.15bn

¹ Date of announcement 2 Sales in the year prior to acquisitions

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

Brazil May 2011 Frefer €150m

USA April 2011 Macsteel €1bn

2011 2 acquisitions €1,150m

Page 23: Klöckner & Co - Q2 2012 Results

Comments

Balance sheet as of June 30, 2012 04

23

(€m) June 30, 2012 December 31, 2011

Non-current assets 1,244 1,295

Inventories 1,465 1,362

Trade receivables 1,153 922

Cash & Cash equivalents 974 987

Other assets 102 140

Total assets 4,938 4,706

Equity 1,804 1,843

Total non-current liabilities 1,491 1,526

thereof financial liabilities 1,054 1,068

Total current liabilities 1,643 1,337

thereof trade payables 933 750

Total equity and liabilities 4,938 4,706

Net working capital 1,685 1,534

Net financial debt 582 471

Shareholders’ equity: • Stable at 37%

Financial debt: • Gearing at 36% • Gross debt of €1.6bn and

cash position of €1.0bn result in a net debt position of €582m

NWC: • Increase mainly due to

seasonal effects

Page 24: Klöckner & Co - Q2 2012 Results

Profit & loss Q2 2012 vs. Q2 2011 04

(€m) Q2 2012 Q2 2011 Δ in %*

Sales 1,964 1,885 +4.2

Gross profit 340 337 +0.7

Personnel costs -162 -146 -10.9

Other operating expenses -152 -141 -8.4

EBITDA 33 62 -46.2

Depreciation, Amortization, Impairments -56 -26 -117.0

EBIT -23 36 -165.6

Financial result -18 -21 +16.3

EBT -41 15 -379.0

Taxes 3 -9 +132.2

Net income -38 5 -800.9

Minorities 0 0

Net income attributable to KCO shareholders -38 5 -786.9

24

* earnings impact

04

Page 25: Klöckner & Co - Q2 2012 Results

Segment performance Q2 2012 04

25

(€m) Europe Americas HQ/Consol. Total

Turnover (Tto)

Q2 2012 1.097 766 1.863

Q2 2011 1.192 571 1.763

Δ % -7,9 34,2 5,7

Sales

Q2 2012 1.237 727 1.964

Q2 2011 1.365 520 1.885

Δ % -9,4 39,7 4,2

EBITDA

Q2 2012 19 21 -7 33

% margin 1,5 2,9 1,7

Q2 2011 50 23 -11 62

% margin 3,6 4,4 3,3

Δ % EBITDA -61,6 -8,2 -46,2

• Excl. MSCUSA and Frefer turnover increase in Americas was 10.0% and sales increase was 16.1% yoy

• Without acquisitions total turnover decreased by 4.0% and total sales by 4.8% yoy

Comments

Page 26: Klöckner & Co - Q2 2012 Results

Acquisitions shift exposure towards more promising regions and products 04

24% Long productsQuality steel/Stainless steel 8%

Aluminium 7%

Tubes 6%

42% Flat productsOthers 13%

Sales by product

28% USAFrance/Belgium 16%

Switzerland 13%

UK 6%

28% Germany/EECSpain 4%

Sales by markets

Netherlands 3%Brazil 1%

China <1%

26

Machinery and mechanical 24% engineering

Miscellaneous 11%

Local dealers 10%

Household appliances/Consumer goods 7%

37% Construction industry

Automotive industry 11%

Sales by industry

As of December 2011

04

Page 27: Klöckner & Co - Q2 2012 Results

Current shareholder structure 04

27

Geographical breakdown of identified institutional investors

Comments

• Identified institutional investors account for 47%

• German investors incl. retail dominate

• Top 10 shareholdings represent around 31%

• Retail shareholders represent 34% • 100% freefloat

As of June 2012

Other World 7%

US 30%

Other EU 17%

Switzerland 5%

France 9%

Germany 28%

UK 4%

Page 28: Klöckner & Co - Q2 2012 Results

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

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