klöckner & co - q3 2009 results
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November 13, 2009November 13, 2009
KlKlööckner & Co SEckner & Co SE
Gisbert RGisbert Rüühl hl CEO/CFOCEO/CFO
A Leading Multi Metal Distributor
Q3 2009 ResultsAnalysts‘ and Investors‘ Conference Call
A Leading Multi Metal Distributor
Q3 2009 ResultsAnalysts‘ and Investors‘ Conference Call
2
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.
This presentation is not an offer for sale or a solicitation of an offer to purchase any securities of Klöckner & Co SE or any of its affiliates ("Klöckner & Co").
Securities of Klöckner & Co, including, but not limited to, rights, shares and bonds, may not be offered or sold in the United States or to or for the account or benefit of U.S. persons (as such term is defined in Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act")) unless registered under the Securities Act or pursuant to an exemption from such registration.
3
Agenda
1. Market
2. Crisis management and strategy update
Appendix
4. Outlook
3. Financials Q3 2009
4
Results improving although volumes are still low, but through the trough
Highlights Q3 2009 and until today
First quarter since beginning of the crisis with positive EBITDA of €11mVolumes on same levels as in Q1 and Q2Gross margin increased from 16.8% in Q2 to 22.3% in Q3Cost cutting ahead of plan with almost fully achieved €100m net cost savings target for 2009Successful placement of a rights issue with net proceeds of €193mNet debt position converted into net cash position with €139m due to further release of NWC and rights issueBack on acquisition track to strengthen Klöckner & Co’s position in flat steel: Becker Stahl-Service Group’s SSC with around €600m sales and constantly higher EBITDA-margin than Group target
* Adjusted for inventory devaluations
5
Prices in general improved during Q3 but came again under pressure in last weeks in EU/ NAChinese prices picked up after weakening in OctoberProducers ramped up idled capacities too fastSteel inventories remaining on low levels especially in the US
Steel inventories in the US near all time lows and back to H1 2008 levels in terms of months of sales
Source: SBB
Steel prices volatile
Source: Metals Service Center Institute
Prices after recovery again under pressure
5,500
6,500
7,500
8,500
9,500
10,500
11,500
12,500
13,500
Jan
08
Mar
08
May
08
Jul 0
8
Sep
08
Nov
08
Jan
09
Mar
09
May
09
Jul 0
9
Sep
09
Inve
ntor
ies
(Tto
)1.5
2.0
2.5
3.0
3.5
4.0
Mon
ths
of s
hipm
ents
Inventories Months
200
300
400
500
600
700
800
900
1,000
1,100
1,200
Jan
06
Apr
06
Jul 0
6
Oct
07
Jan
07
Apr
07
Jul 0
7
Oct
07
Jan
08
Apr
08
July
08
Oct
08
Jan
09
Apr
09
Jul 0
9
Oct
09
Ste
el p
rices
(€/t)
HRC-Europe HRC-US
Medium sections-Europe Beams-US
6
Agenda
1. Market
2. Crisis management and strategy update
Appendix
4. Outlook
3. Financials Q3 2009
7
Effective crisis management
Crisis management Managing growth again
Cost cutting
NWC- / debt-reduction
Safeguard financing
Waves 1 and 2
Wave 3
Efficiency program Continuous improvement
Acquisition strategy
Organic growth
Growth capital
( )
8
€35-40m fixed cost savings in 2009, annualized fixed cost savings of €50-60m
Cost cutting ahead of plan
€100m net savings target 2009
Personnel50%
Shipping20%
Operatingsupplies/ tools
15%Repair/
maintenance10%
Other5%
Reduction of >1,500 jobs or >15% of total workforce
9
1.211.32 1.25
1.010.89
0.75 0.74
Q1/2008 Q2/2008 Q3/2008 Q4/2008 Q1/2009 Q2/2009 Q3/2009
-0.14
0.12
0.32
0.570.69
1.07
0.90
Q1/2008 Q2/2008 Q3/2008 Q4/2008 Q1/2009 Q2/2009 Q3/2009
Fast adaptation of NWC- / Net-debt to current situation
Destocking
Net debt Monthly shipment levels / NWC€bn
Stock levels of KCO in million to
-44%
-113%Ja
n 08
Feb 08
Mar 08
Apr 08
May 08
Jun 0
8Ju
l 08
Aug 08
Sep 08
Oct 08
Nov 08
Dec 08
Jan 0
9Feb
09Mar
09Apr
09May
09Ju
n 09
Jul 0
9Aug
09Sep
t 09
Receivable days Payable days
Receivable / payable days
230280330380430480530
Oct08
Nov08
Dec08
Jan09
Feb09
Mar09
Apr09
May09
Jun09
Jul09
Aug09
Sept09
6508501050125014501650
Turnover (Tto) NWC (T€)
10
Financial structure
Bank debt Securitizeddebt
Capital markets debt
AcquisitionsNWC
43%
26%
31%
€325mConvertible Bond 2007
€400mBilateral Facilities
€505mABS
€300mSyndicated
Loan
€98m Convertible Bond 2009
Funds for future growth
€193mRightsIssue
€912mEquity
pre Rights Issue
>€600m predominantly for growth through acquisitions incl. expected outflow for acquisition of Becker Stahl-Service Groupin 2010
€1,105m €616m
Strong financial power for growth through acquisitions
Equity
BSS
11
After managing the crisis back on track with Wave 3
Crisis management Managing growth again
Cost cutting
NWC- / debt-reduction
Safeguard financing
Waves 1 and 2
Wave 3
Efficiency program Continuous improvement
Acquisition strategy
Organic growth
Growth capital
( )
12
Acquisitions1 Acquired sales1,2
¹ As of announcement ² Figures refer to the latest fiscal years, prior to the acquisitions of the companies3 Subject to due diligence and the approval by the antitrust authority
Successful acquisition-led growth re-established
€108m4 acquisitions2006
€567m12 acquisitions2007
€35mTournierJan 2007
€14mTeulingApr 2007
€360mPrimary SteelApr 2007
€17mEdelstahlserviceApr 2007
€15mMax CarlApr 2007
€11mZweygartApr 2007
€23mPremier SteelMay 2007
€26mWestokJun 2007
€36mMetalsnabAug 2007
€7mScanSteelSep 2007
€14mInterpipeSep 2007
€9mLehner & TonossiSep 2007
€231m2 acquisitions2008
€5mMultitubesJan 2008
€226mTemtcoMar 2008
~€600mBecker Stahl Service GroupEarly 20103
Sales (FY)2CompanyAcquired1Country
~€600m
€141m
€567m
€108m
2
4
12
2
2005 2006 2007 2008 2009 2010
1
€231m
Acqu
isiti
on s
trate
gy s
uspe
nded
13
Overview Becker Stahl-Service Group (BSS)
OverviewFacility BSS is the largest single site SSC in Europe
• Privately owned business • ~€600 million sales in 2008/2009*• Consistently higher EBITDA margin than Group target• 460 employees• Located in Bönen (Ruhr area)
BSS has a unique market position based on size and flexibility
• Covers all applications up to 4 mm thickness supplying to automotive OEM, Tier 1, white goods and other manufacturing
• Cost leadership with significant scale advantage vs. all EU SSC including mill tied locations
• Only SSC that has flexibility to deliver on short notice almost all specifications
• Modern location with exceptional logistical concept –recently completed expansion “Werk Nord” is most likely the world leading SCC site
• BSS enjoys an excellent market reputation for flexibility, reliability and quality
*preliminary figures business year ending in September subject to due diligence
14
Recently completed expansion most modern site
Total property of 74.900 m2
Covered site area: 14.500 m2
Total invest of ~ €30 millionCut to length and slitting lineFully automatic coil storage and handlingExpansion > 4mm possible
More details on technical
capabilities
Automatic coil storage and handling
15
#1 independent SSC in GER and #1 single site in EU
3.3%OKS (Stemcor)
5.6%Salzgitter(1)
8.2%ArcelorMittal SSC
11.5% Becker Stahl-Service (BSS)
31.7%Others
3.8%DM-Stahl(3)
4.7%Knauf Interfer(2)
5.4%Tata Corus
5.0%Stahlo / Starcon
6.8%EMW Eisen- und Metallwerke
14.0%ThyssenKrupp SSC
Market share of Top 10 SSC in Germany
(1) Hövelmann & Lueg(2) Max Baumann Stahlservice, W. Patz, Delta Stahl(3) Inkl. Bandstahl-Service HagenSource: Handbuch Stahl 2008 / 09
>100,000FranceJeumontThyssenKrupp SA>100,000AustriaMauthausenAtlas-Blech-Center GmbH>100,000GermanyGeraStarcon>100,000GermanyMudersbachWalter Platz GmbH
>100,000SwitzerlandSennwaldKoenig Feinstahl AG>100,000PolandPolskaVoestalpine, Polska>100,000UKNewportThyssenKrupp SC UK>100,000GermanyRadebeulThyssenKrupp Stahl-SC
>100,000SloveniaNakloMerkurnaUKNASS GroupnaPolandPUDS Group
na ItalyItalian GroupnaSpainSpanish Group/Transid
>100,000GermanyFellbachStahl-Metall-Service GmbH>100,000FranceFossesThyssenKrupp SA>100,000GermanyStuttgartHerzog Coilex>100,000GermanyMannheimThyssenKrupp Stahl-SC>100,000GermanyLeverkusenThyssenKrupp Stahl-SC>100,000GermanyBreyellThyssenKrupp Stahl-SC>100,000GermanyBochumThyssenKrupp Stahl-SC>100,000SpainLayde>100,000FranceCorbellUnitol>100,000NIMoerdijkNamascor>100,000NLMaastrichtCorus Service Centre>100,000GermanyNeussCorus Degels>100,000GermanyGelsenkirchenCorus Gelsenkirchen>250,000Czech Republ.KollnMi-King>250,000SpainVictoriaROS CASARES>250,000GermanyDillenburgStahlo>250,000GermanySchwerteHoevelmann & Lueg GmbH>250,000GermanyNeunkirchenEMW50,000-500,000Italy, EEC7 Sites, split naCLN>500,000NLValkenswaardMCB International BV>500,000AustriaLinzVoestalpine, Linz
>1,000,000GermanyUnna-BönenBecker Stahl-Service Gmbh
Production t/aLocationSiteCompany/Group
16
Constant high profitability even in tough environment
Normalized EBITDA margin
Note: Becker Group closes on 30/09 every year. 2009e based on first nine month plus budget last three months.
Customers Split
Others (White Goods,
Metal Goods, etc.)
Distributors ~60%
~20%
~20%
Automotive
Constant high EBITDA marginEBITDA-margin above Group’s target margin
Source: Eurometal 2008 * Subject to due diligence
EBITDA margin*
FY 05 FY 06 FY 07 FY 08 FY 09
17
BSS will be the core of KCO EU Flats SSC Division
Internal sheets supply to KSM and other distribution workhouses would reduce NWC, expand product portfolios and significantly improve competitivenessBSS know how and processes would be rolled out to existing SSC in UK, F, ES and CHSynergies from capacity adjustments expected
Klöckner & Co SE
ASD(UK)
DKH(CH)
KSM(D)
KDI(F)
CDL(ES)
BSS(D)
Armstrong KFS Targe Cortichapa
Tournier
… … … … …
Flats SSC
18
Internal supply from BSS would increase effectiveness
Current Material Flowin Value Chain
New Material Flowin Value Chain
Supp
lier
KC
OC
usto
mer
Mill-SSCIndependentSSC
C1 C2 C3
C4 C6
Warehouse3
Various Steel Mills
C5C5
Warehouse2
Steel Mill
C1 C2 C3
C4 C6C5
Warehouse2
C7 C8
Steel Mill
Warehouse3
Steel MillSteel Mill
Warehouse1Warehouse1
19
Overall attractive set of synergies
Overall EU purchasing power in flats would significantly increaseCombined normal purchasing volume would increase from about 500 Tto to more than 1.500 Tto
Existing SSC production capacity with equipment could be shifted permanently to BSS supply
Total EU capacity based on 2 shifts per day about 100 TtoDetailed analysis to be carried out – divestments to be considered
Sourcing from BSS with short lead times would allow for reduced inventoriesAssuming a doubling of inventory turns and direct supply would result in significant NWC reduction
20
Attractive valuation within target range of 4x-5x EBITDA
Perfect fit to our acquisition criteria
*Deal is subject to due diligence and competitive authority approvals and expected to be closed beginning of 2010
Achieve a leading EU-position in sheets in one single step with largest most modern single site Steel Service Center operation (SSC)*Leverage to Group’s flat procurementLeverage to Group’s SSC activities and know howRealize synergies in purchasingCustomer diversification outside constructionStabilize Group earnings volatilityConstant EBITDA-margin above Group target (6%)EPS-accretive from year one
16
Achieve profitable growth
Strengthen purchasing power vs. suppliers for core group products
Strengthen country specific market positions
Expand footprint outside construction industry
Focus on geographical core markets in EU, NA and EEC to leverage existing network
Western Europe
NAFTA
Steel ProducerSteel Distributor
Steel DistributorTop 6 -20
Top 5
65%17%
18%Others
Top 5
31%
69%
Steel ProducerOthers
Top 5
39%
61%
OthersOthersTop 6 -20
Top 5
18%
32%50%
Klöckner & Co: Acquisition strategy2
Source: Company data, Eurometal, broker research
Consolidation among steel producers is well ahead of highly fragmented distribution sector M&A strategy
Profitability above group average
Strong synergy potential in purchasing, admin and warehousing with low integration risk
EV/EBITDA multiple between 4x and 6x EBITDA
EPS-accretive from year one
Target selection criteria
Track record of 18 successful acquisitions since IPO shows ability to integrate companies and extract synergies
Rights issu
e roadshow September 2009
21
Agenda
1. Market
2. Crisis management and strategy update
Appendix
4. Outlook
3. Financials Q3 2009
22
Summary income statement Q3/9M 2009
-106.0-105.5-106.7-108.2-92.4
-105.5
-101.7-18.9
-97.3-94.8
-46.61.4
-47.4-23.4
Δ%
-4.16-4.16-197
151
-249
-204-46
-151-5.1
44715.0
2,9883,154
9M 2009
10.5511.28
525-1
-108634
686-51
73513.7
1,19322.3
5,3554,823
9M 2008
-34.61,3481,033Volume (Ttons)
-136.97.56-0.42EPS basic (€)
-139.3378-21Income before taxes-147.4-30-2Income taxes-145.240Minority interests
-0.42
-23
-7-14
111.2
20822.3
934
Q3 2009
-139.47.01EPS diluted (€)
-137.6352Net income*
-62.5-32.8
39122.0
Gross profit% margin
395-18
41323.3
1,773
Q3 2008
-129.7-11.3
EBITFinancial result
-120.6-136.9
EBITDA% margin
-44.2Sales
Δ%(€m)
* Attributable to shareholders of Klöckner & Co SE
23
Organic volume development in North America -27.2%
Comments
Segment performance Q3 2009
23.3-13.225.4% margin
934-159775Q3 2009
1,348-351997Q3 2008
-47.3--58.4-44.3Δ %
1,033-249784Q3 2009
-97.3--80.1-98.9Δ % EBITDA
413951353Q3 2008
1.2-6.40.5% margin
11-3104Q3 2009
1,773-3821,391Q3 2008
EBITDA
Sales-21.5
Europe
-23.4--28.9Δ %
Volume (Ttons)
TotalHQ/Consol.
North America(€m)
24
Balance sheet as of Sept. 30, 2009
-139
702
2,914
427
738618
1,0711,1052,914
176863556573746
Sept. 30, 2009
799Trade receivables1,001Inventories
811Long-term assets
297Cash & Cash equivalents*
176Other assets
392• thereof trade payables826Total short-term liabilities
1,177Total long-term liabilities1,081Equity
3,084Total assets
813• thereof financial liabilities
Dec. 31, 2008**(€m)
3,084Total equity and liabilities
571Net financial debt
1,407Net working capital
* Including restricted cash of €7m; ** restated due to initial application of IFRIC 14
Shareholders’ equity:Increased from 35% to 38%Would be at 50% if cash would be used for net debt reduction
Financial debt:Gearing reduced from 53% to -13%
Net Working Capital:Decrease is price- and volume-driven
Comments
25
Statement of cash flow
Operating CF negatively impacted by volume drop, offset by change in NWC Investing CF mainly balanced because of postponement of acquisitions and investment cut
Comments
-36-1Others
32541Cash flow from operating activities
3877Inflow from disposals of fixed assets/others
-296-13Outflow from investments in fixed assets/ others
91-6Cash flow from investing activities
-384703Changes in net working capital
--
22
26195
-161
Equity component of convertible bondRights issueChanges in financial liabilities
452-161Operating CF
84570Total cash flow
-3935Cash flow from financing activities
-22-38
-250
Net interest paymentsDividends
9M 2008
9M 2009(€m)
26
Agenda
1. Market
2. Crisis management and strategy update
Appendix
4. Outlook
3. Financials Q3 2009
27
We stick to our targets
Roadshow Presentation April
2006
Underlying sales growth
Underlying EBITDA margin
Gearing (Net financial debt/Equity)
> 10% p.a.
> 6%
< 75%
Starting 2010
Starting 2011
Revised
28
Outlook 2009
Current negative pricing expectations directly influence customers buying behaviorUncertainty for Q4 earnings mainly due to price related revaluation effectsEBITDA in H2 maximum break even given seasonality and price environment despite positive EBITDA for Q3 and OctoberOverachievement of cost cutting target of €100m net in 2009Stocks and NWC not expected to materially change in Q4Accretive acquisition initiated and expected to be closed beginning of 2010Gradual volume improvement expected into 2010 although no signs of real demand recovery recognized yet
Efficiency measures ahead of plan, value enhancing acquisition initiated
29
Agenda
1. Market
2. Crisis management and strategy update
Appendix
4. Outlook
3. Financials Q3 2009
30
+49 203 307 2050Phone:
Internet:
E-mail:
Fax:
Dr. Thilo Theilen, Head of Investor Relations & Corporate Communications
thilo.theilen@kloeckner.de
www.kloeckner.de
+49 203 307 5025
Contact details Investor Relations
Q3 interim report 2010November 10, 2010:
Q2/H1 interim report 2010August 11, 2010:
Annual General MeetingMay 26, 2010:
Q1 interim report 2010 May 12, 2010:
Annual Statement 2009 March 9, 2010:
Financial calendar 2010
Financial calendar 2010 and contact details
31
-0.42-0.42
-230
-2
-21
-14
-71.211
22.3208934
1,033
Q32009
-0.85-1.04
-48-116
-63
-15
-48-3.2-31
16.8161959
1,053
Q2 2009
-2.43-2.70-126
-238
-165
-16
-149-12.0-132
7.178
1,0951,068
Q1 2009
8.118.56398-14-79
463
-70
5338.9600
20.21,3666,7505,974
FY2008
4.444.4420628
-39
273
-64
3377.1395
21.81,2085,5326,127
FY2006
2.482.63122
3-55
180
-17
19711.0212
24.0462
1,9221,755
Q22008
-2.871.097.56-2.72EPS basic (€)
1.06
51-2
-24
76
-17
936.6109
20.5340
1,6601,720
Q12008
5,8686,4781,3481,151Volume (Ttons)
81210378-171Income before taxes
-29-54-3029Income taxes
1623-4-15Minority interests
-2.44
-126
-18
-152-9.6-13412.4173
1,394
Q4 2008
-2.877.01EPS diluted (€)
36133352Net income
-54-97-18Financial result
135307395EBIT
4.05.923.3% margin
197371413EBITDA
19.919.522.0% margin
9871,221391Gross profit
4,9646,2741,773Sales
FY2005*
FY2007
Q32008(€m)
Quarterly results and FY results 2005-2009
* 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).
32
* Net debt / equity
€1,105m
min €500m
max 150%
Q3
Minimum Equity Covenants Maximum Gearing*
Existing covenants on Syndicated Loan and European ABS
Non performance related covenants leave us with lots of headroom
Q3:
Equity ratio currently at 38% Gearing currently at -13%
€0 0%
33
€42m
€230m
€98m
€325m
€14m
€341m
2009 2010 2011 2012 2013 2014
ABS Syndicated loan Convertible 2007¹ Convertible 2009¹ Drawn amount Facility Committed FY 2008 Q3 2009
Bilateral Facilities 417 65 66
ABS 505 213 56
Syndicated Loan 300 298 230
Total Senior Debt 1,222 576 352
Convertible 2007¹ 325 280 288
Convertible 2009¹ 98 0 75
Finance leases 9 12 9
Total Debt 1,654 867 724
Cash 297 863
Net financial position 571 -139
Debt and liquidity overview
Current maturity profile of drawn amountsOverview of cash & indebtedness (€m)
Additional flexibility through renegotiated covenants, which are now free of performance measures
Improved Liquidity and total Net Cash Balance after rights issue in September
1 Drawn amount excludes equity component * Excluding bilateral facilities and finance leases
34
Current shareholder structure
Source: Survey Thomson Financial (as of September 2009)
Identified institutional investors account for 56%
UK based investors dominate (Franklin remains Klöckner’sbiggest investor with 9.32% of the total shares outstanding)
Top 10 shareholdings represent around 28%
Retail shareholders represent 24%
100% free float
CommentsGeographical breakdown of identified institutional investors
Germany25%
United Kingdom34%
US
14%
14%
Rest of Europe
3%
Switzerland
France 8%2%
Rest of the World
35
Our symbol
the earsattentive to customer needs
the eyeslooking forward to new developments
the nosesniffing out opportunitiesto improve performance
the ballsymbolic of our role to fetchand carry for our customers
the legsalways moving fast to keep up withthe demands of the customers
top related