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Klöckner & Co - Roadshow Presentation April, 2008

This document provides an overview and agenda for a presentation on Klöckner & Co AG, a leading multi-metal distributor. The agenda includes discussing the current market, growth initiatives, and financial outlook. Key points include Klöckner & Co's global reach and product/customer diversity, expectations of rising steel prices in Europe and North America in 2008, and growth through acquisitions to expand geographic coverage and product portfolio. The most recent acquisition of Temtco Steel in the US is highlighted as supporting Klöckner & Co's leading plate distribution position in North America.

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Klöckner & Co AG A Leading Multi Metal Distributor April, 2008 Gisbert Rühl CFO
2 Agenda 1. Overview and market Appendix 2. Current market development and expectations for 2008 3. Profitable growth initiatives 4. Financials and outlook
3 Klöckner & Co at a glance CustomerKlöckner & Co Klöckner & Co highlights Products: Services: Producer Construction: Structural Steelwork Building and civil engineering Machinery/ Mechanical Engineering Others: Automotive Metal products/ goods, installation Durable goods etc. 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 FY 2007 - Sales: €6,274 million - EBITDA: €371 million
4 Distributor in the sweet spot Local customersGlobal suppliers Suppliers Sourcing Products and services Logistics/ Distribution Customers Global Sourcing in competitive sizes Strategic partnerships Frame contracts Leverage one supplier against the other No speculative trading One-stop-shop with wide product range of high- quality products Value added processing services Quality assurance Efficient inventory management Local presence Tailor-made logistics including on-time delivery within 24 hours > 200,000 customers No customer with more than 1% of sales Average order size of €2,000 Wide range of industries and markets Service more important than price Purchase volume p.a. of 6 million tons Diversified set of worldwide approx. 70 suppliers Examples: Klöckner & Co’s value chain
5 CDN B D F E CH A CZ PL LT RO NL CN USA GB IRL Global reach with broad product and customer diversification More than 260 distribution locations CDN 4 USA 30 D/A 23 F/B 75 CH 35 E 54 GB 26 IRL 1 NL 5 Eastern Europe 13 BU
6 Global reach with broad product and customer diversification Other GB Construction Machinery/ Manufacturing Auto- motive 42% 25% 6% 27% 23% 21% 14% 10% 5% 9% 1% 13% Germany/ Austria France/ BelgiumSpain Nether- lands Eastern Europe USA Switzerland Canada 4% Steel-flat Products Steel-long Products 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* *As of December 2007 *As of December 2007*As of December 2007
7 North America (2006) Structure: 50-60% through distribution, service centers Size in value: ~€100bn Companies: ~1,300 only independent distributors Europe (2006) Structure: 67% through distribution, service centers Size in value: ~€70–90bn Companies: ~3,000 few mill-tied, most independent Strong position in Europe; Acquisition of Primary significantly improved position in NA Source: Purchasing Magazine (May 2007)Source: EuroMetal, company reports, own estimates ArcelorMittal (Distribution approx. 5%) ThyssenKrupp Corus Other independents Other mill-tied distributors Klöckner & Co Olympic Steel Namasco (Klöckner & Co) Ryerson Other Reliance Steel Samuel, Son & Co ThyssenKrupp Materials NA Russel Metals Worthington Steel Metals USA Carpenter Technology PNA Group McJunkin O'Neal Steel Mac- Steel AM Castle72.5% Namasco with Primary approx. 1.4% 11% 8% 7% 4%~ 45- 55% ~ 15- 25% 4.5% 2.5% 2.1% 1.8% 0.9% 0.9% 0.8% 1.4% 1.3% 1.2% 1.3% 1.8% 1.4% 1.0% 4.7%
8 Agenda 1. Overview and market Appendix 2. Current market development and expectations for 2008 3. Profitable growth initiatives 4. Financials and outlook
9 Market expectations for H1 2008 in Europe Overall healthy underlying demand and normal stock levels Ongoing price increases since the beginning of 2008; further significant price increases announced for Q2 and already partly for Q3 due to high cost increases, specially for iron ore and cooking coal prices: Prices for flat products, coils and plates are at 12-month highs: - After being almost stable in H2 2007, prices for flat products in Northern Europe started to increase in February - Prices for flat products in Southern Europe jumped significantly in Q1 and are expected to rise above Northern European levels for Q2 Prices for long products increase since the beginning of 2008 Promising start in 2008
10 Market expectations for H1 2008 in North America After a significant output cutback in November and December 2007 and low imports, stock levels decreased to a ten-year low Absence of pressure from imports will keep stocks on a low level Slight improvement of underlying demand, especially for non-residential construction Scrap prices stabilized after a dramatic increase in January Prices surged since January; further price increases expected: Strong strip product price increases since January 2008 Prices for long products increased also significantly Further price increases for flat and long products announced for Q2 Promising start in 2008
11 Market expectations for FY 2008 Overall healthy demand development due to lower but still positive growth forecasts for 2008 in Europe and also North America Average price levels for steel products expected to be higher than in 2007 due to rising raw material costs; rising prices for H1 2008 confirmed; price increases for Q3 partly announced Continuing lower imports from China because of rising raw material prices, high taxes and shipping costs, environmental and energy constraints as well as possible anti-dumping actions Markets in Europe and especially North America will remain more insulated Again positive development in 2008 expected
12 Agenda 1. Overview and market Appendix 2. Current market development and expectations for 2008 3. Profitable growth initiatives 4. Financials and outlook
13 Profitable growth Grow more than the market Continuous business optimization 1 Acquisitions driving market consolidation Organic growth and expansion into new markets 2 3 STAR Program: - Purchasing - 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
14 Country Acquired Company Sales (FY) Apr 2008 Temtco €226 million Jan 2008 Multitube €5 million 2008 Ytd 2 acquisitions €231 million Sep 2007 Lehner & Tonossi €9 million Sep 2007 Interpipe €14 million Sep 2007 ScanSteel €7 million Aug 2007 Metalsnab €36 million Jun 2007 Westok €26 million May 2007 Premier Steel €23 million Apr 2007 Zweygart €11 million Apr 2007 Max Carl €15 million Apr 2007 Edelstahlservice €17 million Apr 2007 Primary Steel €360 million Apr 2007 Teuling €14 million Jan 2007 Tournier €35 million 2007 12 acquisitions €567 million 2006 4 acquisitions €108 million Continued acquisitions 12 4 2 2005 2006 2007 Acquisitions Sales €141 million €108 million €567 million 1
15 Since January 2008 acquisition of nearly all minority shares in the Swiss subsidiary In January, acquisition of a 20.1% shares taking us to 98.1% Meanwhile further increase to almost 100% Disposal process of the Canadian subsidiary Namasco Ltd. started in December 2007 Acquisition of Temtco Steel announced on April 4, 2008 Temtco has a leading position in the US specialty plate market M&A highlights 20081
16 Sales 2007: $310 million (€226 million), 180 employees Leading market position in the US specialty plate market Processed sales account for more than 60% of total volume Broad geographic coverage with five locations Geographical scope Temtco is a leading specialty plate distributor Namasco General Line Primary Steel Processing/ Distribution Facility Primary Steel Sales Office Chicago, IL Namasco Flat Rolled Tacoma, WA Apache Junction, AZ Louisville, MS York, PA Temtco Steel Key Facts
17 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 (top 3 account for more than 80% of market) Additional (typical) synergies in admin, finance, IT, etc. The acquisition of Temtco supports significantly the leading position in plate distribution of Primary and Namasco Securing continuing specialty plate supply through Temtco’s supplier relations Leveraging Temtco’s customer base for sale of Namasco/Primary’s commodity plate and vice versa Broad geographic coverage Leading position in plate segment Synergies
18 High share of processing and broad industry split, significantly improved position in NA Machinery and Equipment Welding Repair Transportation Energy Construction Sheet Metal Work Metal Service Centers Armor Vehicle Processed sales Stock sales Others Share of processing (2007 by ton) 62% 38% 37% 2% 3% 4% 6% 7% 12% 12% 17% Segments served
19 Temtco: 4th acquisition in the US in the last 12 months Temtco has high quality product portfolio – high strength quenched & tempered steel, wear resistant steels and security steels More than 60% of sales are processed products Temtco has excellent customer base – more than 500 customers in application sectors such as energy, machinery and mechanical engineering, mining and transport High market reputation in the US US strategy is focused on distribution and processing of carbon steel with long products and flat products, special plates - but no longer flat steel service centers
20 Strong acquisition criteria Further acquisitions in core markets and Eastern Europe: ● Leverage existing structure in core markets with small- and mid-size bolt-on acquisitions ● Large scale acquisitions when appropriate ● Acquisitions in Eastern Europe to increase footprint Focus on targets in 3 directions: ● Expansion of geographic reach ● Extension of customer base ● Extension of product portfolio Focus on targets at attractive valuations: ● EV/EBITDA multiple between 4x and 5x for smaller acquisitions ● EV/EBITDA multiple between 5x and 6x for mid-size and large scale acquisitions Focus on targets with significant synergy and scale effects: ● Stronger purchasing power ● Streamlining operations and processes, integrating IT ● Integration of STAR Accretive growth
21 Expanded businesses in Eastern Europe: Acquisition of Metalsnab in Bulgaria Organic growth through greenfield approach, e.g. Southern Poland, Romania and Czech Republic Also evaluation of additional acquisitions in Eastern Europe in 2008/09 Evaluation of market entry in other countries (e.g. Turkey and BRIC) Organic growth and expansion into new markets2 Expansion of strong market positions in core markets: Concentration of product range and expansion of higher margin products Increase of value-added services through investments in new processing capacity Further acquisitions and opening of new branches in Eastern Europe Leveraging existing distribution network Sustainable profitable growth Strategy Benefits Status quo Next steps
22 Next steps STAR: Status quo Q4/FY 2007 and next steps3 Status quo Nomination of Ulrich Becker as new Management Board member responsible for purchasing and Europe segment with effect of April 1, 2008 Ongoing extension of European sourcing Additional frame contracts with main suppliers Extended global sourcing from third party countries Implementation of new organization in Germany completed Implementation of new tools supporting purchasing and stock management Implementation of unified article code Establishment of European sourcing started Purchasing Improved performance as a result of restructured distribution network Roll-out of the optimization tool “Prodacapo” (activity based costing) in Spain, UK, France and Eastern European Countries Finalize implementation of SAP throughout the European organization (France, Switzerland) and interface SAP with “Prodacapo” Continuous improvement of distribution network with support of the optimization-tool “Prodacapo” and SAP solution Distribution network
23 Phase II (2008 onwards) STAR: Phase I finalized in 2008, further potential in phase II3 Phase I (2005 - 2008) Overall targets: Central purchasing on country level, especially in Germany Improvement of distribution network Improvement of inventory management 2006: ~ €20 million 2007: ~ €40 million 2008: ~ €20 million ~ €80 million Upside potential Overall targets: European sourcing Ongoing improvement of distribution network Upside potential 2008 ~ €10 million 2009: ~ €30 million 2010: ~ €20 million ~ €60 million
24 Achievements 2007 and targets 2008 Acquisitions: 12 Organic growth: 6.9% = €382 million STAR program: Additional €43 million EBITDA Expansion: Acquisitions and new branches in Eastern Europe: ● Acquisition of Metalsnab, one of the leading distributors in Bulgaria ● Opening of new warehouse in Southern Poland Target achievements 2007 1 2 3 4 Acquisitions: to achieve at least additional sales at the 2007 level Organic growth: In line with overall GDP growths in relevant markets STAR program: Additional €30 million EBITDA Expansion: ● Further acquisitions and new branches in Eastern Europe ● Entries in new markets under evaluation (e.g. Turkey and BRIC) 1 2 3 4 Targets 2008
25 Agenda 1. Overview and market Appendix 2. Current market development and expectations for 2008 3. Profitable growth initiatives 4. Financials and outlook
26 Summary income statement Q4/FY 2007 (€m) Q4 2007 Q4 2006 Δ% FY 2007 FY 2006 Δ% Volume (Ttons) 1,585 1,453 9.1 6,478 6,127 5.7 Sales 1,492 1,398 6.7 6,274 5,532 13.4 Gross profit % margin 300 20.1 294 21.0 2.2 -4.3 1,221 19.5 1,208 21.8 1.1 -10.6 EBITDA % margin 83 5.6 70 4.9 18.8 14.3 371 5.9 395 7.1 -6.1 -16.9 EBIT Financial result 65 -17 55 -12 18.2 - 307 -97 337 -64 -9.0 - Income before taxes 48 43 - 210 273 - Income taxes -6 16 - -54 -39 - Minority interests 4 5 - 23 28 - Net income* 37 54 - 133 206 - EPS basic (€) 0.80 1.16 -31.0 2.87 4.44 -35.4 EPS diluted (€) 0.80 1.16 - 2.87 4.44 - * Attributable to shareholders of Klöckner & Co AG
27 Strong underlying EBITDA improvement driven by STAR Underlying EBITDA FY 2007 (€m) Q4 2007 Q4 2006 Δ FY 2007 FY 2006 Δ EBITDA as reported ● One-offs (mainly sale of real estate) 83 6 70 -2 +13 +8 371 40 395 42 -24 -2 Operating EBITDA ● Windfall effects ● carbon and others ● stainless ● Exchange rate effects ● Special expense effects 77 4 3 3 -6 67 5 -5 2 3 +10 -1 +8 +1 -9 331 4 16 9 12 353 -30 -20 1 8 -22 +34 +36 +8 +4 Underlying EBITDA 81 72 +9 372 312 +60 ● Acquisitions (LTM*) -6 -1 -5 -24 -6 -18 Underlying EBITDA excluding Acquisitions 75 71 +4 349 306 +43 * LTM: Last twelve months
28 Sales for FY 2007* in Europe including about - €24.5 million from Westok (UK) - €3.9 million from Interpipe (UK) - €14.3 million together from Max Carl and Zweygart (D) - €11.8 million from Edelstahlservice (D) - €12.7 million from Teuling (NL) - €36.3 million from Tournier (F) - €6.5 million from Gauss (CH) - €9.1 million from Aesga (E) Sales for FY 2007* in North America including about - €12.9 million from Premier Steel - €237.9 million from Primary Steel - €0.9 million from ScanSteel Steel - €39.3 million from Action Steel Segment performance FY 2007 Comments(€m) Europe North America HQ/ Consol. Total Volume (Ttons) 2007 4,612 1,866 - 6,478 2006 4,496 1,631 - 6,127 Δ % 2.6 14.4 - 5.7 Sales 2007 5,197 1,077 - 6,274 2006 4,670 862 - 5,532 Δ % 11.3 24.3 - 13.4 EBITDA 2007 326 65 -20 371 % margin 6.3 6.0 - 5.9 2006 366 79 -50 395 % margin 7.8 9.1 - 7.1 Δ % EBITDA -10.9 -18.2 - -6.1 * Sales of acquired companies for the first twelve months of their consolidation
29 Balance sheet as of Dec. 31, 2007 (€m) December 31, 2007 December 31, 2006 Long-term assets 735 579 Inventories 956 841 Trade receivables 930 933 Cash & Cash equivalents 154 130 Other assets 191 69 Total assets 2,966 2,552 Equity 845 799 Total long-term liabilities 1,152 744 - thereof financial liabilities 813 416 Total short-term liabilities 969 1,009 - thereof trade payables 610 639 Total equity and liabilities 2,966 2,552 Net working capital 1,323 1,135 Net financial debt 746 365 Comments Financial debt as of Dec. 31, 2007: • Syndicated loan: €199 million • ABS: €295 million • Bilateral credits: €133 million • Convertible: €266 million • Increased net financial debt mainly due to acquisitions Equity: • Convertible equity share €63 million • Decreased equity ratio from 31.3% to 28.5% due to increased total assets Net Working Capital: • Increase driven by sales, higher price levels and acquisitions
30 Statement of cash flow Comments(€m) FY 2007 FY 2006 Operating CF 328 354 Changes in net working capital -105 -195 Others -114 -27 Cash flow from operating activities 109 132 Inflow from disposals of fixed assets/others 38 102 Outflow from investments in fixed assets -416 -92 Cash flow from investing activities -378 10 Proceeds from capital increase 62 98 Changes in financial liabilities 357 -136 Net interest payments -77 -46 Dividends -47 -6 Cash flow from financing activities 295 -90 Total cash flow 25 52 CF from operating activities impacted by net working capital requirements Investing cash flow mainly impacted by cash outflow for the various acquisitions and increased stake in Swiss Holding Convertible bond: equity component: €63 million liability component: €262 million Net interest payments including one-off early redemption fee for the HYB
31 General financial targets/limits and guidance General target/limit Actual FY 2007 Underlying sales growth > 10% p.a. 13.4% Underlying EBITDA margin* > 6% 5.9% Leverage (Net financial debt/EBITDA LTM) < 3.0x 2.0x Gearing (Net financial debt/Equity) < 150% 88% Challenging financial targets throughout the cycle * According to new definition
32 Outlook 2008 Q1 EBITDA is expected to be higher than last year supported by a favorable demand and price development Despite an overall softer economic development, we are optimistic regarding the further development for the steel distribution business in 2008 Even if the risks arising from the worldwide economic development are difficult to judge for H2, the current development indicates a favorable result for 2008 supported by €30 million additional EBITDA from STAR program Positive contribution of additional approx. €15 million EBITDA from acquisitions made in 2007 on an annualized basis Promising start in 2008
33 Agenda 1. Overview and market Appendix 2. Current market development and expectations for 2008 3. Profitable growth initiatives 4. Financials and outlook
34 Appendix Table of contents Quarterly results and FY results 2006/2005 Steel cycle and EBITDA/cash flow relationship Debt facilities Current shareholder structure Financial calendar 2008 and contact details
35 May 15: Q1 Interim Report June 20: Annual General Meeting August 14: Q2 Interim Report October 14/15: Capital Market Days November 14: Q3 Interim Report Financial calendar 2008 and contact details Financial calendar 2008 Claudia Nickolaus, Head of IR Phone: +49 203 307 2050 Fax: +49 203 307 5025 E-mail: claudia.nickolaus@kloeckner.de Internet: www.kloeckner.de Contact details Investor Relations
36 (€m) Q4 2007 Q3 2007 Q2 2007 Q1 2007 Q4 2006 Q3 2006 Q2 2006 Q1 2006 FY 2007 FY 2006 FY 2005* Volume (Ttons) 1,585 1,601 1,663 1,629 1,453 1,467 1,605 1,601 6,478 6,127 5,868 Sales 1,492 1,583 1,650 1,550 1,398 1,394 1,418 1,323 6,274 5,532 4,964 Gross profit 300 286 328 307 294 313 316 285 1,221 1,208 987 % margin 20.1 18.0 19.8 19.8 21.0 22.5 22.3 21.5 19.5 21.8 19.9 EBITDA 83 93 103 92 70 143 104 79 371 395 197 % margin 5.6 5.9 6.2 5.9 4.9 10.3 7.3 6.0 5.9 7.1 4.0 EBIT 65 76 87 78 55 128 89 64 307 337 135 Financial result -17 -17 -52 -10 -12 -24 -14 -14 -97 -64 -54 Income before taxes 48 59 35 68 43 105 75 50 210 273 81 Income taxes -6 -14 -12 -22 16 -20 -22 -13 -54 -39 -29 Minority interests 4 8 4 6 5 8 9 6 23 28 16 Net income 37 37 19 40 54 76 45 31 133 206 36 EPS basic (€) 0.80 0.79 0.41 0.86 1.16 1.64 0.97 - 2.87 4.44 - EPS diluted (in €) 0.80 0.78 - - 1.16 - - - 2.87 4.44 - Quarterly results and FY results 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).
37 Debt facilities (€m) Old debt structure Change in debt structure New debt structure 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
38 Steel cycle and EBITDA/cash flow relationship Comments Klöckner & Co buys and sells products at spot prices generally Sales increase as a function of the steel price inflation environment Cost of material are based on an average cost method for inventory and therefore lag the steel price increase This time lag creates accounting windfall profits (windfall losses in a decreasing steel price environment) inflating (deflating) EBITDA Assuming stable inventory volume cash flow is impacted by higher NWC needs The windfall profits (losses) are mirrored by inventory book value increases (decreases) Theoretical relationship* Windfall profits Windfall losses (€m) Margin Margin 1 2 3 4 4 5 6 6 *Assuming stable inventory volumes Steel price Sales Cost of material EBITDA Cash flow
39 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 Spain Switzerland Source: Survey Thomson Financial (as of Febr. 08) 20% 4% 4% 24% 41% 7%
40 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
41 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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Klöckner & Co - Roadshow Presentation April, 2008

  • 1.
    Klöckner & CoAG A Leading Multi Metal Distributor April, 2008 Gisbert Rühl CFO
  • 2.
    2 Agenda 1. Overview andmarket Appendix 2. Current market development and expectations for 2008 3. Profitable growth initiatives 4. Financials and outlook
  • 3.
    3 Klöckner & Coat a glance CustomerKlöckner & Co Klöckner & Co highlights Products: Services: Producer Construction: Structural Steelwork Building and civil engineering Machinery/ Mechanical Engineering Others: Automotive Metal products/ goods, installation Durable goods etc. 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 FY 2007 - Sales: €6,274 million - EBITDA: €371 million
  • 4.
    4 Distributor in thesweet spot Local customersGlobal suppliers Suppliers Sourcing Products and services Logistics/ Distribution Customers Global Sourcing in competitive sizes Strategic partnerships Frame contracts Leverage one supplier against the other No speculative trading One-stop-shop with wide product range of high- quality products Value added processing services Quality assurance Efficient inventory management Local presence Tailor-made logistics including on-time delivery within 24 hours > 200,000 customers No customer with more than 1% of sales Average order size of €2,000 Wide range of industries and markets Service more important than price Purchase volume p.a. of 6 million tons Diversified set of worldwide approx. 70 suppliers Examples: Klöckner & Co’s value chain
  • 5.
    5 CDN B D F E CH A CZ PL LT RO NL CN USA GB IRL Globalreach with broad product and customer diversification More than 260 distribution locations CDN 4 USA 30 D/A 23 F/B 75 CH 35 E 54 GB 26 IRL 1 NL 5 Eastern Europe 13 BU
  • 6.
    6 Global reach withbroad product and customer diversification Other GB Construction Machinery/ Manufacturing Auto- motive 42% 25% 6% 27% 23% 21% 14% 10% 5% 9% 1% 13% Germany/ Austria France/ BelgiumSpain Nether- lands Eastern Europe USA Switzerland Canada 4% Steel-flat Products Steel-long Products 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* *As of December 2007 *As of December 2007*As of December 2007
  • 7.
    7 North America (2006) Structure:50-60% through distribution, service centers Size in value: ~€100bn Companies: ~1,300 only independent distributors Europe (2006) Structure: 67% through distribution, service centers Size in value: ~€70–90bn Companies: ~3,000 few mill-tied, most independent Strong position in Europe; Acquisition of Primary significantly improved position in NA Source: Purchasing Magazine (May 2007)Source: EuroMetal, company reports, own estimates ArcelorMittal (Distribution approx. 5%) ThyssenKrupp Corus Other independents Other mill-tied distributors Klöckner & Co Olympic Steel Namasco (Klöckner & Co) Ryerson Other Reliance Steel Samuel, Son & Co ThyssenKrupp Materials NA Russel Metals Worthington Steel Metals USA Carpenter Technology PNA Group McJunkin O'Neal Steel Mac- Steel AM Castle72.5% Namasco with Primary approx. 1.4% 11% 8% 7% 4%~ 45- 55% ~ 15- 25% 4.5% 2.5% 2.1% 1.8% 0.9% 0.9% 0.8% 1.4% 1.3% 1.2% 1.3% 1.8% 1.4% 1.0% 4.7%
  • 8.
    8 Agenda 1. Overview andmarket Appendix 2. Current market development and expectations for 2008 3. Profitable growth initiatives 4. Financials and outlook
  • 9.
    9 Market expectations forH1 2008 in Europe Overall healthy underlying demand and normal stock levels Ongoing price increases since the beginning of 2008; further significant price increases announced for Q2 and already partly for Q3 due to high cost increases, specially for iron ore and cooking coal prices: Prices for flat products, coils and plates are at 12-month highs: - After being almost stable in H2 2007, prices for flat products in Northern Europe started to increase in February - Prices for flat products in Southern Europe jumped significantly in Q1 and are expected to rise above Northern European levels for Q2 Prices for long products increase since the beginning of 2008 Promising start in 2008
  • 10.
    10 Market expectations forH1 2008 in North America After a significant output cutback in November and December 2007 and low imports, stock levels decreased to a ten-year low Absence of pressure from imports will keep stocks on a low level Slight improvement of underlying demand, especially for non-residential construction Scrap prices stabilized after a dramatic increase in January Prices surged since January; further price increases expected: Strong strip product price increases since January 2008 Prices for long products increased also significantly Further price increases for flat and long products announced for Q2 Promising start in 2008
  • 11.
    11 Market expectations forFY 2008 Overall healthy demand development due to lower but still positive growth forecasts for 2008 in Europe and also North America Average price levels for steel products expected to be higher than in 2007 due to rising raw material costs; rising prices for H1 2008 confirmed; price increases for Q3 partly announced Continuing lower imports from China because of rising raw material prices, high taxes and shipping costs, environmental and energy constraints as well as possible anti-dumping actions Markets in Europe and especially North America will remain more insulated Again positive development in 2008 expected
  • 12.
    12 Agenda 1. Overview andmarket Appendix 2. Current market development and expectations for 2008 3. Profitable growth initiatives 4. Financials and outlook
  • 13.
    13 Profitable growth Grow morethan the market Continuous business optimization 1 Acquisitions driving market consolidation Organic growth and expansion into new markets 2 3 STAR Program: - Purchasing - 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
  • 14.
    14 Country Acquired CompanySales (FY) Apr 2008 Temtco €226 million Jan 2008 Multitube €5 million 2008 Ytd 2 acquisitions €231 million Sep 2007 Lehner & Tonossi €9 million Sep 2007 Interpipe €14 million Sep 2007 ScanSteel €7 million Aug 2007 Metalsnab €36 million Jun 2007 Westok €26 million May 2007 Premier Steel €23 million Apr 2007 Zweygart €11 million Apr 2007 Max Carl €15 million Apr 2007 Edelstahlservice €17 million Apr 2007 Primary Steel €360 million Apr 2007 Teuling €14 million Jan 2007 Tournier €35 million 2007 12 acquisitions €567 million 2006 4 acquisitions €108 million Continued acquisitions 12 4 2 2005 2006 2007 Acquisitions Sales €141 million €108 million €567 million 1
  • 15.
    15 Since January 2008acquisition of nearly all minority shares in the Swiss subsidiary In January, acquisition of a 20.1% shares taking us to 98.1% Meanwhile further increase to almost 100% Disposal process of the Canadian subsidiary Namasco Ltd. started in December 2007 Acquisition of Temtco Steel announced on April 4, 2008 Temtco has a leading position in the US specialty plate market M&A highlights 20081
  • 16.
    16 Sales 2007: $310million (€226 million), 180 employees Leading market position in the US specialty plate market Processed sales account for more than 60% of total volume Broad geographic coverage with five locations Geographical scope Temtco is a leading specialty plate distributor Namasco General Line Primary Steel Processing/ Distribution Facility Primary Steel Sales Office Chicago, IL Namasco Flat Rolled Tacoma, WA Apache Junction, AZ Louisville, MS York, PA Temtco Steel Key Facts
  • 17.
    17 Investment highlights Complementary salescoverage 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 (top 3 account for more than 80% of market) Additional (typical) synergies in admin, finance, IT, etc. The acquisition of Temtco supports significantly the leading position in plate distribution of Primary and Namasco Securing continuing specialty plate supply through Temtco’s supplier relations Leveraging Temtco’s customer base for sale of Namasco/Primary’s commodity plate and vice versa Broad geographic coverage Leading position in plate segment Synergies
  • 18.
    18 High share ofprocessing and broad industry split, significantly improved position in NA Machinery and Equipment Welding Repair Transportation Energy Construction Sheet Metal Work Metal Service Centers Armor Vehicle Processed sales Stock sales Others Share of processing (2007 by ton) 62% 38% 37% 2% 3% 4% 6% 7% 12% 12% 17% Segments served
  • 19.
    19 Temtco: 4th acquisition inthe US in the last 12 months Temtco has high quality product portfolio – high strength quenched & tempered steel, wear resistant steels and security steels More than 60% of sales are processed products Temtco has excellent customer base – more than 500 customers in application sectors such as energy, machinery and mechanical engineering, mining and transport High market reputation in the US US strategy is focused on distribution and processing of carbon steel with long products and flat products, special plates - but no longer flat steel service centers
  • 20.
    20 Strong acquisition criteria Furtheracquisitions in core markets and Eastern Europe: ● Leverage existing structure in core markets with small- and mid-size bolt-on acquisitions ● Large scale acquisitions when appropriate ● Acquisitions in Eastern Europe to increase footprint Focus on targets in 3 directions: ● Expansion of geographic reach ● Extension of customer base ● Extension of product portfolio Focus on targets at attractive valuations: ● EV/EBITDA multiple between 4x and 5x for smaller acquisitions ● EV/EBITDA multiple between 5x and 6x for mid-size and large scale acquisitions Focus on targets with significant synergy and scale effects: ● Stronger purchasing power ● Streamlining operations and processes, integrating IT ● Integration of STAR Accretive growth
  • 21.
    21 Expanded businesses inEastern Europe: Acquisition of Metalsnab in Bulgaria Organic growth through greenfield approach, e.g. Southern Poland, Romania and Czech Republic Also evaluation of additional acquisitions in Eastern Europe in 2008/09 Evaluation of market entry in other countries (e.g. Turkey and BRIC) Organic growth and expansion into new markets2 Expansion of strong market positions in core markets: Concentration of product range and expansion of higher margin products Increase of value-added services through investments in new processing capacity Further acquisitions and opening of new branches in Eastern Europe Leveraging existing distribution network Sustainable profitable growth Strategy Benefits Status quo Next steps
  • 22.
    22 Next steps STAR: Statusquo Q4/FY 2007 and next steps3 Status quo Nomination of Ulrich Becker as new Management Board member responsible for purchasing and Europe segment with effect of April 1, 2008 Ongoing extension of European sourcing Additional frame contracts with main suppliers Extended global sourcing from third party countries Implementation of new organization in Germany completed Implementation of new tools supporting purchasing and stock management Implementation of unified article code Establishment of European sourcing started Purchasing Improved performance as a result of restructured distribution network Roll-out of the optimization tool “Prodacapo” (activity based costing) in Spain, UK, France and Eastern European Countries Finalize implementation of SAP throughout the European organization (France, Switzerland) and interface SAP with “Prodacapo” Continuous improvement of distribution network with support of the optimization-tool “Prodacapo” and SAP solution Distribution network
  • 23.
    23 Phase II (2008onwards) STAR: Phase I finalized in 2008, further potential in phase II3 Phase I (2005 - 2008) Overall targets: Central purchasing on country level, especially in Germany Improvement of distribution network Improvement of inventory management 2006: ~ €20 million 2007: ~ €40 million 2008: ~ €20 million ~ €80 million Upside potential Overall targets: European sourcing Ongoing improvement of distribution network Upside potential 2008 ~ €10 million 2009: ~ €30 million 2010: ~ €20 million ~ €60 million
  • 24.
    24 Achievements 2007 andtargets 2008 Acquisitions: 12 Organic growth: 6.9% = €382 million STAR program: Additional €43 million EBITDA Expansion: Acquisitions and new branches in Eastern Europe: ● Acquisition of Metalsnab, one of the leading distributors in Bulgaria ● Opening of new warehouse in Southern Poland Target achievements 2007 1 2 3 4 Acquisitions: to achieve at least additional sales at the 2007 level Organic growth: In line with overall GDP growths in relevant markets STAR program: Additional €30 million EBITDA Expansion: ● Further acquisitions and new branches in Eastern Europe ● Entries in new markets under evaluation (e.g. Turkey and BRIC) 1 2 3 4 Targets 2008
  • 25.
    25 Agenda 1. Overview andmarket Appendix 2. Current market development and expectations for 2008 3. Profitable growth initiatives 4. Financials and outlook
  • 26.
    26 Summary income statementQ4/FY 2007 (€m) Q4 2007 Q4 2006 Δ% FY 2007 FY 2006 Δ% Volume (Ttons) 1,585 1,453 9.1 6,478 6,127 5.7 Sales 1,492 1,398 6.7 6,274 5,532 13.4 Gross profit % margin 300 20.1 294 21.0 2.2 -4.3 1,221 19.5 1,208 21.8 1.1 -10.6 EBITDA % margin 83 5.6 70 4.9 18.8 14.3 371 5.9 395 7.1 -6.1 -16.9 EBIT Financial result 65 -17 55 -12 18.2 - 307 -97 337 -64 -9.0 - Income before taxes 48 43 - 210 273 - Income taxes -6 16 - -54 -39 - Minority interests 4 5 - 23 28 - Net income* 37 54 - 133 206 - EPS basic (€) 0.80 1.16 -31.0 2.87 4.44 -35.4 EPS diluted (€) 0.80 1.16 - 2.87 4.44 - * Attributable to shareholders of Klöckner & Co AG
  • 27.
    27 Strong underlying EBITDAimprovement driven by STAR Underlying EBITDA FY 2007 (€m) Q4 2007 Q4 2006 Δ FY 2007 FY 2006 Δ EBITDA as reported ● One-offs (mainly sale of real estate) 83 6 70 -2 +13 +8 371 40 395 42 -24 -2 Operating EBITDA ● Windfall effects ● carbon and others ● stainless ● Exchange rate effects ● Special expense effects 77 4 3 3 -6 67 5 -5 2 3 +10 -1 +8 +1 -9 331 4 16 9 12 353 -30 -20 1 8 -22 +34 +36 +8 +4 Underlying EBITDA 81 72 +9 372 312 +60 ● Acquisitions (LTM*) -6 -1 -5 -24 -6 -18 Underlying EBITDA excluding Acquisitions 75 71 +4 349 306 +43 * LTM: Last twelve months
  • 28.
    28 Sales for FY2007* in Europe including about - €24.5 million from Westok (UK) - €3.9 million from Interpipe (UK) - €14.3 million together from Max Carl and Zweygart (D) - €11.8 million from Edelstahlservice (D) - €12.7 million from Teuling (NL) - €36.3 million from Tournier (F) - €6.5 million from Gauss (CH) - €9.1 million from Aesga (E) Sales for FY 2007* in North America including about - €12.9 million from Premier Steel - €237.9 million from Primary Steel - €0.9 million from ScanSteel Steel - €39.3 million from Action Steel Segment performance FY 2007 Comments(€m) Europe North America HQ/ Consol. Total Volume (Ttons) 2007 4,612 1,866 - 6,478 2006 4,496 1,631 - 6,127 Δ % 2.6 14.4 - 5.7 Sales 2007 5,197 1,077 - 6,274 2006 4,670 862 - 5,532 Δ % 11.3 24.3 - 13.4 EBITDA 2007 326 65 -20 371 % margin 6.3 6.0 - 5.9 2006 366 79 -50 395 % margin 7.8 9.1 - 7.1 Δ % EBITDA -10.9 -18.2 - -6.1 * Sales of acquired companies for the first twelve months of their consolidation
  • 29.
    29 Balance sheet asof Dec. 31, 2007 (€m) December 31, 2007 December 31, 2006 Long-term assets 735 579 Inventories 956 841 Trade receivables 930 933 Cash & Cash equivalents 154 130 Other assets 191 69 Total assets 2,966 2,552 Equity 845 799 Total long-term liabilities 1,152 744 - thereof financial liabilities 813 416 Total short-term liabilities 969 1,009 - thereof trade payables 610 639 Total equity and liabilities 2,966 2,552 Net working capital 1,323 1,135 Net financial debt 746 365 Comments Financial debt as of Dec. 31, 2007: • Syndicated loan: €199 million • ABS: €295 million • Bilateral credits: €133 million • Convertible: €266 million • Increased net financial debt mainly due to acquisitions Equity: • Convertible equity share €63 million • Decreased equity ratio from 31.3% to 28.5% due to increased total assets Net Working Capital: • Increase driven by sales, higher price levels and acquisitions
  • 30.
    30 Statement of cashflow Comments(€m) FY 2007 FY 2006 Operating CF 328 354 Changes in net working capital -105 -195 Others -114 -27 Cash flow from operating activities 109 132 Inflow from disposals of fixed assets/others 38 102 Outflow from investments in fixed assets -416 -92 Cash flow from investing activities -378 10 Proceeds from capital increase 62 98 Changes in financial liabilities 357 -136 Net interest payments -77 -46 Dividends -47 -6 Cash flow from financing activities 295 -90 Total cash flow 25 52 CF from operating activities impacted by net working capital requirements Investing cash flow mainly impacted by cash outflow for the various acquisitions and increased stake in Swiss Holding Convertible bond: equity component: €63 million liability component: €262 million Net interest payments including one-off early redemption fee for the HYB
  • 31.
    31 General financial targets/limitsand guidance General target/limit Actual FY 2007 Underlying sales growth > 10% p.a. 13.4% Underlying EBITDA margin* > 6% 5.9% Leverage (Net financial debt/EBITDA LTM) < 3.0x 2.0x Gearing (Net financial debt/Equity) < 150% 88% Challenging financial targets throughout the cycle * According to new definition
  • 32.
    32 Outlook 2008 Q1 EBITDAis expected to be higher than last year supported by a favorable demand and price development Despite an overall softer economic development, we are optimistic regarding the further development for the steel distribution business in 2008 Even if the risks arising from the worldwide economic development are difficult to judge for H2, the current development indicates a favorable result for 2008 supported by €30 million additional EBITDA from STAR program Positive contribution of additional approx. €15 million EBITDA from acquisitions made in 2007 on an annualized basis Promising start in 2008
  • 33.
    33 Agenda 1. Overview andmarket Appendix 2. Current market development and expectations for 2008 3. Profitable growth initiatives 4. Financials and outlook
  • 34.
    34 Appendix Table of contents Quarterlyresults and FY results 2006/2005 Steel cycle and EBITDA/cash flow relationship Debt facilities Current shareholder structure Financial calendar 2008 and contact details
  • 35.
    35 May 15: Q1Interim Report June 20: Annual General Meeting August 14: Q2 Interim Report October 14/15: Capital Market Days November 14: Q3 Interim Report Financial calendar 2008 and contact details Financial calendar 2008 Claudia Nickolaus, Head of IR Phone: +49 203 307 2050 Fax: +49 203 307 5025 E-mail: claudia.nickolaus@kloeckner.de Internet: www.kloeckner.de Contact details Investor Relations
  • 36.
    36 (€m) Q4 2007 Q3 2007 Q2 2007 Q1 2007 Q4 2006 Q3 2006 Q2 2006 Q1 2006 FY 2007 FY 2006 FY 2005* Volume (Ttons)1,585 1,601 1,663 1,629 1,453 1,467 1,605 1,601 6,478 6,127 5,868 Sales 1,492 1,583 1,650 1,550 1,398 1,394 1,418 1,323 6,274 5,532 4,964 Gross profit 300 286 328 307 294 313 316 285 1,221 1,208 987 % margin 20.1 18.0 19.8 19.8 21.0 22.5 22.3 21.5 19.5 21.8 19.9 EBITDA 83 93 103 92 70 143 104 79 371 395 197 % margin 5.6 5.9 6.2 5.9 4.9 10.3 7.3 6.0 5.9 7.1 4.0 EBIT 65 76 87 78 55 128 89 64 307 337 135 Financial result -17 -17 -52 -10 -12 -24 -14 -14 -97 -64 -54 Income before taxes 48 59 35 68 43 105 75 50 210 273 81 Income taxes -6 -14 -12 -22 16 -20 -22 -13 -54 -39 -29 Minority interests 4 8 4 6 5 8 9 6 23 28 16 Net income 37 37 19 40 54 76 45 31 133 206 36 EPS basic (€) 0.80 0.79 0.41 0.86 1.16 1.64 0.97 - 2.87 4.44 - EPS diluted (in €) 0.80 0.78 - - 1.16 - - - 2.87 4.44 - Quarterly results and FY results 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).
  • 37.
    37 Debt facilities (€m) Old debt structure Changein debt structure New debt structure 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
  • 38.
    38 Steel cycle andEBITDA/cash flow relationship Comments Klöckner & Co buys and sells products at spot prices generally Sales increase as a function of the steel price inflation environment Cost of material are based on an average cost method for inventory and therefore lag the steel price increase This time lag creates accounting windfall profits (windfall losses in a decreasing steel price environment) inflating (deflating) EBITDA Assuming stable inventory volume cash flow is impacted by higher NWC needs The windfall profits (losses) are mirrored by inventory book value increases (decreases) Theoretical relationship* Windfall profits Windfall losses (€m) Margin Margin 1 2 3 4 4 5 6 6 *Assuming stable inventory volumes Steel price Sales Cost of material EBITDA Cash flow
  • 39.
    39 Geographical breakdown ofidentified 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 Spain Switzerland Source: Survey Thomson Financial (as of Febr. 08) 20% 4% 4% 24% 41% 7%
  • 40.
    40 Our symbol the ears attentiveto 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
  • 41.
    41 Disclaimer This presentation containsforward-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.