Klöckner & Co SE A Leading Multi Metal Distributor Gisbert Rühl CEO Q3 2014 Results Analysts’ and Investors’ Conference Marcus A. Ketter CFO November 6, 2014 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 Klöckner & Co SE A Leading Multi Metal Distributor Gisbert Rühl CEO Highlights and update on strategy 01 • • • • • • • • Highlights Q3 Steel distribution market remained stable in Europe* but improved significantly in the US (+5.0%**) KCO sales went up roughly in line with shipments by 4.7% yoy to €1.7bn Gross profit improved by 9.9% to €325m, gross margin expansion by 0.9%p to 19.4% yoy EBITDA of €59m came in at the upper end of guidance range of €50 to 60m Positive quarterly net income of €15m achieved Leverage reduced from 3.5x to 2.8x EBITDA yoy EBITDA in Q4 expected to be in a range between €30 and €40m EBITDA guidance for the year as a whole narrowed to between €190m and €200m * Source: Eurometal; distribution shipments in Q3 in Europe yoy. ** Source: MSCI; distribution shipments/ SSC in Q3 in the US yoy. 4 01 Substantial yoy EBITDA-improvement mainly through self-help measures EBITDA-bridge (€m) Comments Q3 yoy 9 36 EBITDA Q3 2013 Self-help measures: €12m 5 7 -15 59 • 14 3 Volume Effect Price Effect GP Effect Riedo KCO 6.0 Effect KCO WIN Effect OPEX* EBITDA Q3 2014 * Including -€6m pension adjustment NL 2013 and -€4m Riedo. 9M yoy 108 EBITDA 9M 2013 Self-help measures: €39m 10 29 8 Volume Effect 19 Price Effect • -31 160 OPEX* EBITDA 9M 2014 17 GP Effect Riedo KCO 6.0 Effect KCO WIN Effect * Including -€13m pension adjustment NL 2013 and -€9m Riedo. 5 Self-help measures contributed €12m to EBITDA against prior year in Q3 and €39m ytd • EBITDA contribution achieved through KCO 6.0 amounted to €7m in Q3 and €29m ytd • KCO WIN impact of €5m in Q3 and €10m ytd EBITDA margin improved by 1.2%p to 3.5% in Q3 and by 1.0%p to 3.2% ytd Self help measures with an EBITDA-contribution of €39m in the first nine month of 2014 01 KCO 6.0 €51m 2011-2012  €61m 2013 €29m 2014   Total annual EBITDA-impact of ~€150m from 2014 onwards €38m already realized KCO WIN 2014 €10m  €16m Total annual EBITDA-impact of ~€50m from 2015 onwards €34m 2015 already realized 6 01 Comprehensive transformation initiated Klöckner & Co 2020 Stabilization Growth and optimization Differentiation Enabling activities Restructuring Finished by implementation of KCO 6.0 External & internal growth External growth with focus on higher value-added business Internal growth with focus on US market Operations Improvements through KCO WIN Sourcing Realization of higher scale-effects through expansion of partnerships with specific suppliers Products and services Broad product range and accelerated expansion of higher valueadded processing and services Digitalization Digitalization of supply chain Management & pers. development Increased effort in management capabilities and measurability of people management Controlling & IT systems Deployment of most modern controlling and IT systems 7 01 Mid-term EBITDA margin target of >5% until 2017 Stabilization Growth and optimization Differentiation > 2.0% >5% 0.8% 0.2% 2.0% 2013 EBITDA margin before restructuring and one-offs 0.6% KCO 6.0 (remaining effects) Riedo acquisition KCO WIN 8 Sourcing, products and services, digitalization 2017 EBITDA margin Klöckner & Co SE A Leading Multi Metal Distributor Marcus A. Ketter CFO Financials 02 Shipments and sales Shipments (Tto) Sales (€m) 1,847 1,764 1,585 1,646 1,690 1,633 1,617 1,720 1,690 1,633 1,625 1,698 1,680 1,600 1,492 1,455 +4.5% +4.7% -1.8% Q3 2012 • • Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 1,675 1,572 Q1 2014 Q2 2014 -0.3% Q3 2014 Q3 2012 • • Increase yoy driven by Riedo Shipments decreased qoq following the usual seasonal pattern 10 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 yoy increase includes Riedo and market effects Sales decline qoq less pronounced than shipments due to higher prices 02 Gross profit and EBITDA margin improvement is keeping momentum Gross profit* (€m) / Gross margin* (%) 325 EBITDA* (€m) / EBITDA margin* (%) 325 59 56 306 302 45 43 305 303 39 302 40 296 29 19.3 9M 288 3.2 9M 22 18 18.7 FY 2.4 FY 17.5 FY 1.8 FY Q3 2012 • Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2012 Q3 2014 • Gross margin up in Q3 by 0.9%p from 18.5% to 19.4% yoy • * Before restructuring costs. 11 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 EBITDA continues to benefit from KCO 6.0 measures and now additionally from KCO WIN EBITDA margin improved in Q3 from 2.3% to 3.5% yoy 02 Segment performance (shipments and sales) Shipments (Tto) Comments 4.5% 1,690 1,617 • +6.0% Europe Americas 957 903 +2.6% 714 Q3 2013 • 1,675 1,600 +3.4% 1,041 1,006 594 Q3 2013 Europe up by 6.0% mainly due to Riedo acquisition (+5.7%p) • Americas up by 2.6% due to favorable market development Q3 2014 4.7% Americas • 733 Sales (€m) Europe Shipments +6.8% Sales • • In Europe up by 3.4% due to Riedo Americas segment up by 6.8% also impacted by stronger USD 634 Q3 2014 12 02 Segment performance (gross profit and EBITDA) Gross profit (€m) Comments +9.9% 325 296 Americas 216 197 +10.7% 99 Q3 2013 110 Q3 2014 26 Americas 17 -7 HQ/Consol. • Gross margin up by 1.1%p to 20.7% • Americas • Gross margin up by 0.6%p to 17.3% • EBITDA margin up by 1.6%p to 4.5% +60.8% 36 Europe • EBITDA margin up by 0.6%p to 3.2% EBITDA (€m) Europe Focus on higher margin business visible in both segments • +9.5% Europe • 59 +25.9% 33 +66.5% 29 -3 +52.9% Q3 2013 Q3 2014 13 02 Cash flow and net debt development Comments Cash flow reconciliation in Q3 2014 (€m) -3 • -6 31 -23 • -14 59 58 44 36 EBITDA Change Interest Q3 2014 in NWC Taxes Other • Cash Capex Free flow from cash flow operating Q3 2014 activities Seasonal NWC release reflected in free cash flow of €44m “Other” include changes in provisions, in other operating assets/liabilities as well as non-cash items Capex at run-rate level Development of net financial debt in Q3 2014 (€m) June 30, 2014 CF from operating activities Capex (net) Other 557 -14 579 58 September 30, 2014 -22 14 • Net debt decreased from €579m to €557m mainly due to positive operating cash flow driven by NWC release • “Other” include -€12m f/x 02 Balance sheet remains strong Assets 3,595 Inventories Trade receivables Liquidity Other assets 1,166 Equity & liabilities 3,764 1,296 687 Dec 31, 2013 Equity 1,445 40% 883 595 1,147 3,595 3,764 1,463 39% 930 Financial liabilities 911 Pensions 236 286 Trade payables 637 700 Other liabilities 366 385 381 1,204 Dec 31, 2013 Sep 30, 2014 Sep 30, 2014 Comments • • • • • Equity ratio further solid at 39% Net debt of €557m compared to €325m on Dec. 31, 2013 Gearing* at 39% Leverage** 2.8x NWC increased from €1,463m to €1,479m qoq f/x related 15 * Gearing = Net debt/Equity attributable to shareholders of Klöckner & Co SE less goodwill from business combinations subsequent to May 23, 2013. ** Leverage = Net debt/EBITDA before restructuring expenses last twelve months. Klöckner & Co SE A Leading Multi Metal Distributor Gisbert Rühl CEO Outlook 03 Segment specific business outlook Europe +2% US Steel demand Construction industry Machinery and mechanical engineering Automotive industry 17 +5-6% 03 • Q4 2014 • • • • Outlook Shipments to be lower qoq due to seasonality and weaker business environment in Europe Declining prices in the US with negative impact on earnings in the Americas Segment EBITDA expected in a range between €30 and €40m FY 2014 • • • • Sales and shipments to be slightly up - also through Riedo acquisition EBITDA guidance narrowed to between €190m and €200m Reduction of IDA expense by some €25m to €155m anticipated Resumption of dividend payments planned for fiscal year 2014 18 Agenda 01 Highlights and update on strategy 02 Financials 03 Outlook 04 Appendix 19 04 Quarterly results and FY results 2011-2014 (€m) Q3 2014 Q2 2014 Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013 Shipments (Tto) 1,690 1,720 1,633 1,492 1,617 1,690 1,646 1,585 1,764 6,445 7,068 6,661 Sales 1,675 1,680 1,572 1,455 1,600 1,698 1,625 1,633 1,847 6,378 7,388 7,095 Gross profit 325 325 302 284 296 305 303 298 306 1,188 1,288 1,315 % margin 19.4 19.3 19.2 19.5 18.5 18.0 18.6 18.3 16.6 18.6 17.4 18.5 EBITDA 59 56 45 16 36 43 29 -35 18 124 60 217 % margin 3.5 3.3 2.9 1.1 2.3 2.5 1.8 -2.2 1.0 2.0 0.8 3.1 EBIT 36 33 23 -36 10 17 2 -89 -9 -6 -105 111 -14 -16 -17 -17 -19 -19 -19 -14 -22 -73 -80 -84 Income before taxes 22 17 6 -52 -8 -2 -16 -103 -31 -79 -185 27 Income taxes -7 -7 -3 -7 -3 -2 1 -19 3 -12 -18 -17 Net income 15 10 3 -59 -11 -4 -16 -123 -29 -90 -203 10 0 0 0 -5 0 0 0 -1 -1 -6 -3 -1 15 10 3 -54 -11 -4 -16 -122 -28 -85 -200 12 EPS basic (€) 0.15 0.10 0.03 -0.54 -0.11 -0.04 -0.16 -1.22 -0.28 -0.85 -2.00 0.14 EPS diluted (€) 0.15 0.10 0.03 -0.54 -0.11 -0.04 -0.16 -1.22 -0.28 -0.85 -2.00 0.14 Financial result Minority interests Net income KlöCo * Restated due to initial application IAS 19 revised 2011. 20 Q4 2012* Q3 2012* FY 2013 FY 2012* FY 2011 04 Recovery continued in both segments Shipments (Tto) Sales (€m) 1,018 930 941 903 987 956 957 1,149 839 Europe 908 EBITDA* before restructuring (€m) 1,041 1,017 1,061 1,006 935 1,015 34 1,072 1,041 28 16 +6.0% +3.4% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2012 2012 2013 2013 2013 2013 2014 2014 2014 Shipments (Tto) Americas Q3 2012 Q4 2012 Q3 2014 14 Q1 2013 733 592 608 637 608 594 Q2 2013 Q3 Q4 2013 2013 Q1 2014 520 634 557 28 29 Q2 2014 Q3 2014 24 21 677 20 20 16 13 12 653 +6.8% +2.6% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2012 2012 2013 2013 2013 2013 2014 2014 2014 Restructuring costs (€m) Q2 2014 26 EBITDA before restructuring (€m) 714 677 Europe Americas 33 698 733 716 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2012 2012 2013 2013 2013 2013 2014 2014 2014 Sales (€m) 749 746 12 26 32 Q4 2011 Q1 2012 Q2 2012 Q3 2012 10 3 17 -1 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2012 2012 2013 2013 2013 2013 2014 2014 2014 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q4 2012 Q3 2013 Q4 2013 57 1 2 13 11 21 * 2012: as restated for the initial application of IAS19 revised 2011. ** Including pension release: Q2 2013 €7m, in Q3 2013 €6m and Q4 2013 €1m and sale of French La Courneuve site €13m. 04 • • • Improvement of maturity profile Syndicated loan extension option of one year till May 2017 successfully executed ABS Europe extended by one year till May 2017 S&P rating improved from B+, Outlook „negative“ to B+, Outlook „stable“ Drawn amount (IFRS) €m Facility Q3 2014* 141 62 ABS 579 267 191 Syndicated Loan 360 162 161 Promissory Note 185 188 238 1,702 758 652 0 0 98 186 180 171 1) Committed lines FY 2013* 578 Bilateral Facilities 1,213 1200 Committed 360 1000 800 258 600 Total Senior Debt 466 Convertible 2009 Convertible 2010 2) 938 921 Cash 381 595 Net Debt 557 325 Total Debt 1,888 400 186 579 52 157 200 0 *Including interest accrued. 1) Including finance lease. 2) Drawn amount excludes equity component. 22 14 2014 228 133 2015 24 2016 16 2017 38 Thereafter Bilaterals Promissory Notes ABS US ABL Syndicated Loan Convertibles 04 Sales by markets, products and industries As of December 31, 2013 23 04 Current shareholder structure Comments Geographical breakdown of identified institutional investors • • • • As of October 2014 24 Identified institutional investors account for 59% German investors incl. retail dominate Top 10 shareholdings represent around 33% Retail shareholders represent 27% 04 Appendix Financial calendar 2015 March 5, 2015 Annual Financial Statements 2014 May 7, 2015 Q1 interim report 2015 May 12, 2015 Annual General Meeting 2015, Düsseldorf August 6, 2015 Q2 interim report 2015 November 5, 2015 Q3 interim report 2015 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 25 Our Symbol the ears attentive to customer needs the eyes looking forward to new developments the nose sniffing out opportunities to improve performance the legs always moving fast to keep up with the demands of the customers the ball symbolic of our role to fetch and carry for our customers