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Klöckner & Co SE A Leading Multi Metal Distributor Q1 2014 Results Press Telephone Conference CEO Gisbert Rühl May 8, 2014

Klöckner & Co SE - Q1 2014 Results - Presentation Press Telephone Conference

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Page 1: Klöckner & Co SE - Q1 2014 Results - Presentation Press Telephone Conference

Klöckner & Co SE

A Leading Multi Metal Distributor

Q1 2014 Results

Press Telephone Conference

CEO

Gisbert Rühl

May 8, 2014

Page 2: Klöckner & Co SE - Q1 2014 Results - Presentation Press Telephone Conference

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 SE - Q1 2014 Results - Presentation Press Telephone Conference

Highlights and update on strategy 01

Financials Q1 2014

Outlook

Appendix

02

03

04

Agenda

3

Page 4: Klöckner & Co SE - Q1 2014 Results - Presentation Press Telephone Conference

Self-help measures made an impact: back to positive results 01

4

• Steel distribution markets improved in Europe notably, mainly due to the mild winter but also

in the US by 2.5% despite adverse weather conditions

• Turnover roughly stable at 1.6m To yoy despite restructuring measures (-2.9%p) and further

reduction of commodity business

• Sales impacted by lower price level and weaker USD down by 3.2% yoy to €1.6bn

• Gross profit remained nearly stable despite lower sales; accordingly gross profit margin

improved by 0.6%p to 19.2% yoy

• EBITDA of €45m in the middle of guidance range of €40-50m

• Positive quarterly net income of €3m

• Leverage reduced from 4.1x to 2.4x EBITDA yoy

• Finalized restructuring program KCO 6.0 taking full effect for the first time in Q1 2014

• Implementation of KCO WIN measures on track

• Successful introduction of new Klöckner webshop in the Netherlands

• Acquisition of Riedo closed

• Q2 guidance: Further improvement in turnover and EBITDA (€50-60m)

Page 5: Klöckner & Co SE - Q1 2014 Results - Presentation Press Telephone Conference

Substantial yoy EBITDA-improvement mainly through KCO 6.0 measures 01

-23

KCO 6.0 EBITDA-impact

• In Q1 measures contributed €14m to

EBITDA against prior year

• Cost cuts achieved through KCO 6.0

amounted to €17m in Q1

• EBITDA-margin improved by 1.1%p

to 2.9%

Comments

Q1

5

Market related GP effect: €2m

Net KCO 6.0 effect:

€14m

17

329

EBITDA

Q1 2013

Volume

Effect

-1

Price

Effect

-3

KCO 6.0

GP Effect

KCO 6.0

Cost Effect

0

OPEX EBITDA

Q1 2014

45

Page 6: Klöckner & Co SE - Q1 2014 Results - Presentation Press Telephone Conference

Comprehensive transformation initiated 01

6

Enabling

activities

Differentiation

Growth and

optimization

Broad & higher value-

add product range

Higher value-add

processing

Optimized

supply chain

Operations

External & internal

growth

Management & pers.

development

Controlling &

IT systems

Advanced tools &

systems

Stabilization Restructuring

Klöckner & Co 2020

Finished

Restructuring

Short-term

Improvement

Mid-term

Growth &

Optimization

Long-term

Business model

changes

Ongoing

Ongoing

KCO 6.0

KCO WIN

Supply chain

transformation

B2B

2013 2014 2015 2016

Page 7: Klöckner & Co SE - Q1 2014 Results - Presentation Press Telephone Conference

2013

2014

€51m

already realized

€61m

€41m

Total annual EBITDA-impact of ~€150m

from 2014 onwards

2011-2012

€14m

Restructuring program KCO 6.0 fully implemented 01

7

Measures

• Total headcount reduction of ~2,300 (~1/5 of total workforce)

• Total site closures 71(~1/4 of total sites)

• Total cost reduction of €174m (€148m realized)

• Total annual EBITDA-impact of ~€150m (€126m realized)

• Reduction of NWC by €133m (€130m realized)

Page 8: Klöckner & Co SE - Q1 2014 Results - Presentation Press Telephone Conference

Follow-up program KCO WIN on track 01

Measures

8

2014

2015 €30m

Total annual EBITDA-impact of ~€50m from 2015 onwards

€20m

Effective

salesforce

management

Improved

pricing

Effective

sourcing,

logistics and

warehouse

management

• Advanced customer segmentation

• Structured sales approach

• Clear target-setting on all levels with mid- and long-term development of accounts

• Sales performance tracking and regular performance reviews

• Target-oriented incentive schemes

• Continuous sales staff training

• Key elements laid out in pricing manual

• Price guidance based on net margins

• Metrics measures price realization and revenue leakages

• Systematic transaction reviews through escalation process

• Further bundling, special deals and increase of bonus yields

• Introduction of paperless warehouse processes

• More usage of state of the art warehouse technology

Page 9: Klöckner & Co SE - Q1 2014 Results - Presentation Press Telephone Conference

Clear acquisition strategy to support growth of higher value-add business 01

9

• External growth with focus on targets which fulfill the following

requirements:

• Companies which support our strategy of increasing higher value-

add business through corresponding processing facilities

preferably supported by state of the art systems and experienced

sales force

• Companies with higher value-add products as long as they can

be integrated in our network. Regional-wise the USA would be

preferred because of better growth perspective

• In the absence of significant scale effects caused by

overcapacities other targets would be only of interest if they are a

real bargain

• Internal growth will be realized especially in the more attractive

US-market

External

growth

Internal

growth

Page 10: Klöckner & Co SE - Q1 2014 Results - Presentation Press Telephone Conference

Significant margin enhancement potential through increasing higher value-add

business and its improvement of profitability 01

10

• Target is to increase share of high margin processing business from currently 15% to

25% by 2017

hig

h

low

Marg

in

low high

Service/Processing intensity

15%

43%

18%

Commodity

stockholding

Higher

value-add

products

Processing

15%

20% 0%

37%

45%

5%

1%

10%

10%

26%

42% Target 2017

Page 11: Klöckner & Co SE - Q1 2014 Results - Presentation Press Telephone Conference

The webshop and increasing access to the stocks of our suppliers are the first steps

to change the current business model 01

Conventional steel distribution supply

chain highly inefficient:

• Disconnected flow of information

• Multiple stocking, too many picks

• Unsteady delivery from mills

• Apply portals or EDI-technology to facilitate

efficient direct access to suppliers‘ floor

stocks also to avoid multiple stocking

• Gaining new customers

• Realization of significant savings per order

11

Webshop

Suppliers

Suppliers

stocks

KCO

central

stocks

KCO

branches Customers

EDI-

Portal

Page 12: Klöckner & Co SE - Q1 2014 Results - Presentation Press Telephone Conference

Webshop, EDI-Portal and further applications will merge into an B2B-Exchange to

integrate multiple suppliers and to enable seamless information flow 01

12

Webshop

Suppliers

Suppliers

stocks

KCO

central

stocks

KCO

branches Customers

B2B-Exchange

At least 50% of sales via online transaction targeted within the next 5 years

• Increasing direct access to floor

stocks of suppliers

• Apply B2B-Exchange to integrate

processes with suppliers

• Integration of additional services

such as construction support and

material calculation

Page 13: Klöckner & Co SE - Q1 2014 Results - Presentation Press Telephone Conference

Consistent implementation of all measures provides significant improvement potential

in terms of profitability, growth, competitve advantage and capabilities 01

13

Makes sure that profitability is improving further

Supports our growth target

Creates competitive advantage

Provides necessary capabilities Enabling

activities

Differentiation

Growth and

optimization

Broad & higher value-

add product range

Higher value-add

processing

Optimized

supply chain

Operations

External & internal

growth

Management & pers.

development

Controlling &

IT systems

Advanced tools &

systems

Stabilization Restructuring

Klöckner & Co 2020

Page 14: Klöckner & Co SE - Q1 2014 Results - Presentation Press Telephone Conference

Highlights and update on strategy 01

Financials Q1 2014

Outlook

Appendix

02

03

04

Agenda

14

Page 15: Klöckner & Co SE - Q1 2014 Results - Presentation Press Telephone Conference

Profit & loss Q1 2014 02

15

(€m) Q1 2014 Q1 2013 Variance

Sales 1,572 1,625 -53

Gross profit 302 303 -1

Gross-margin (in %) 19.2 18.6 +0.6%p

Personnel costs -141 -151 +10

Other operating expenses (net) -116 -123 +7

EBITDA 45 29 +16

EBITDA-margin (in %) 2.9 1.8 +1.1%p

Depreciation & Amortization -22 -26 +4

EBIT 23 2 +21

Financial result -17 -19 +2

EBT 6 -16 +22

Taxes -3 1 -4

Net income 3 -16 +19

Minorities 0 0 0

Net income attributable to KCO shareholders 3 -16 +19

Page 16: Klöckner & Co SE - Q1 2014 Results - Presentation Press Telephone Conference

EBITDA* (€m) / EBITDA-margin* (%)

Gross profit and EBITDA-margin improvement is gaining momentum 02

Gross profit* (€m) / Gross-margin* (%)

• Gross-margin up by 0.6p yoy • EBITDA continues to benefit from KCO 6.0

measures

• EBITDA-margin improved from 1.8% to 2.9% yoy

* Before restructuring costs

16

18.7 FY

17.5 FY

344 344

306 302 303 305 296 288

302

Q1 2012

Q2 2012

Q3 2012

Q4 2012

Q1 2013

Q2 2013

Q3 2013

Q4 2013

Q1 2014

47

50

18

22

29

43

39 40

45

Q1 2012

Q2 2012

Q3 2012

Q4 2012

Q1 2013

Q2 2013

Q3 2013

Q4 2013

Q1 2014

19.2 Q1

2.4 FY

1.8 FY

2.9 Q1

Page 17: Klöckner & Co SE - Q1 2014 Results - Presentation Press Telephone Conference

• Equity ratio further solid at 39%

• Net debt of €407m

• Gearing* at 29%

• Leverage** 2.4x

• NWC increased from €1,216m to €1,330m qoq

Strong balance sheet 02

* Gearing = Net debt/Equity attributable to shareholders of

Klöckner & Co SE less goodwill from business

combinations subsequent to May 23, 2013.

Comments

17

Assets

687 882

Other assets

Liquidity

Trade receivables

Inventories

Mar 31, 2014

3,707

1,078

527

1,220

Dec 31, 2013

3,595

1,147

595

1,166

637 772

366Other liabilities

Financial liabilities

Equity

Mar 31, 2014

3,707

319

248

926

1,442

Dec 31, 2013

3,595

Trade payables

Pensions 236

911

1,445

Equity & liabilities

40% 39%

** Leverage = Net debt/EBITDA before restructuring

last twelve months.

Page 18: Klöckner & Co SE - Q1 2014 Results - Presentation Press Telephone Conference

Highlights and update on strategy 01

Financials Q1 2014

Outlook

Appendix

02

03

04

Agenda

18

Page 19: Klöckner & Co SE - Q1 2014 Results - Presentation Press Telephone Conference

General and segment specific business outlook 03

GDP

Construction industry

Automotive industry

Apparent steel demand

Machinery and mechanical

engineering

Europe USA

+2% +2-3%

+~2% +3-4%

19

Page 20: Klöckner & Co SE - Q1 2014 Results - Presentation Press Telephone Conference

Outlook

• Q2 2014

• Turnover to be sequentially up in Q2

• EBITDA in Q2 expected to come in between €50-60m

• FY 2014

• Turnover and sales to be slightly up; decline through restructuring measures expected to be

overcompensated by volume growth in remaining sites

• EBITDA to be significantly up compared to last year`s figure before restructuring driven by

€41m KCO 6.0, €20m KCO WIN and €10m Riedo contribution

• Reduction of IDA cost by some €25m to €155m anticipated

• Positive net income expected

• Return to dividend payment intended for fiscal year 2014

03

20

Page 21: Klöckner & Co SE - Q1 2014 Results - Presentation Press Telephone Conference

Highlights and update on strategy 01

Financials Q1 2014

Outlook

Appendix

02

03

04

Agenda

21

Page 22: Klöckner & Co SE - Q1 2014 Results - Presentation Press Telephone Conference

Appendix 04

22

Financial calendar 2014

May 23, 2014 Annual General Meeting 2014, Düsseldorf

August 7, 2014 Q2 interim report 2014

October 1, 2014 Media Day, Berlin

November 6, 2014 Q3 interim report 2014

Contact details Investor Relations

Christian Pokropp, Head of Investor Relations & Corporate Communications

Phone: +49 203 307 2050

Fax: +49 203 307 5025

E-mail: [email protected]

Internet: www.kloeckner.com

Page 23: Klöckner & Co SE - Q1 2014 Results - Presentation Press Telephone Conference

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