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Klöckner & Co - Global Industrial and A&D Conference 2012
The document discusses Klöckner & Co SE's financial results for the second quarter of 2012, including a 5.7% increase in turnover driven by acquisitions and organic growth. It also provides an update on the company's restructuring efforts to adapt to declining demand in Europe, which includes expanding measures and closing additional sites. The summary also outlines Klöckner & Co SE's overall financial position, with a strong balance sheet and stable net working capital.
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Klöckner & Co - Global Industrial and A&D Conference 2012
- 1. Klöckner & CoSE A Leading Multi Metal Distributor Jefferies 2012 Global Industrial and A&D Conference CEO/CFO Gisbert Rühl August 9, 2012
- 2. Disclaimer This presentation containsforward-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
- 3. Overview Q2 andupdate on restructuring01 Financials Q2 2012 Outlook Appendix 02 03 04 Agenda 3
- 4. 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
- 5. • Steel demandcurrently 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 reaction01
- 6. Europe/Macsteel • Europe: expensereductions • 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 countries01 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 500 €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
- 7. 5 10 15 20 25 Despite difficult marketenvironment fundamental values exist01 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 471580 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
- 8. Overview Q2 andupdate on restructuring01 Financials Q2 2012 Outlook Appendix 02 03 04 Agenda 8
- 9. Financials Q2 201202 EBITDA Sales Grossprofit Turnover 1,763 Tto +5.7% Q2 2011 Q2 2012 1,863 Tto €1,885m €1,964m +4.2% Q2 2012Q2 2011 €62m -18.5% Q2 2012Q2 2011 €50m* €337m €340m +0.7% Q2 2012Q2 2011 9 *adjusted EBITDA Restructuring costs
- 10. Financials H1 201202 EBITDA Sales Grossprofit 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 2012H1 2011 H1 2012H1 2011 H1 2012H1 2011 *adjusted EBITDA Restructuring costs
- 11. EBITDA (€m) /EBITDA-margin (%) Gross profit and EBITDA02 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
- 12. 236 232 228 297 520 634602 722 727 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Segment performance Q2 201202 Turnover (Tto) Sales (€m) EBITDA (€m) Turnover (Tto) Sales (€m) EBITDA (€m) EuropeAmericas -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%* 19
- 13. Net income andEPS02 • 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
- 14. NWC and netdebt almost stable sequentially02 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
- 15. Strong balance sheet02 *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
- 16. Balanced maturity profiledespite repayment of Convertible in July 201202 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
- 17. Overview Q2 andupdate on restructuring01 Financials Q2 2012 Outlook Appendix 02 03 04 Agenda 17
- 18. 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 18
- 19. Overview Q2 andupdate on restructuring01 Financials Q2 2012 Outlook Appendix 02 03 04 Agenda 19
- 20. Appendix04 20 Financial calendar 2012/2013 November7, 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: thilo.theilen@kloeckner.com Internet: www.kloeckner.de
- 21. Quarterly results andFY results 2007-201204 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
- 22. Strong Growth: 24acquisitions since the IPO04 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
- 23. Comments Balance sheet asof June 30, 201204 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
- 24. Profit & lossQ2 2012 vs. Q2 201104 (€m) Q2 2012 Q2 2011 ∆ 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
- 25. Segment performance Q2201204 25 (€m) Europe Americas HQ/Consol. Total Turnover (Tto) Q2 2012 1.097 766 1.863 Q2 2011 1.192 571 1.763 ∆ % -7,9 34,2 5,7 Sales Q2 2012 1.237 727 1.964 Q2 2011 1.365 520 1.885 ∆ % -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 ∆ % 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
- 26. Acquisitions shift exposuretowards more promising regions and products04 24% Long productsQuality steel/Stainless steel 8% Aluminium 7% Tubes 6% 42% Flat productsOthers 13% Sales by product 28% USA France/Belgium 16% Switzerland 13% UK 6% 28% Germany/EEC Spain 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
- 27. Current shareholder structure04 27 Geographicalbreakdown 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%
- 28. 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 28