Post on 27-May-2015
Klöckner & Co AG
- Full Year 2006 Results �Analysts� and Investors� Conference
Frankfurt29 March 2007
Dr. Thomas Ludwig Gisbert RühlCEO CFO
2
Agenda
1. Highlights FY 2006, Market and Strategy
Dr. Thomas Ludwig, CEO
Appendix
2. Financials Q4/FY 2006 and Outlook
Gisbert Rühl, CFO
3
Highlights FY 2006
� Successful IPO
� Excellent results, driven by strong performance in both segments
� Business optimisation program �STAR� fully on track
� Successful acquisitions; pipeline of new targets
� Divestments and sale of non core assets completed
� Proposed dividend of �0.80 per share
Most successful year in history
Highlights
4
Financial Highlights FY 2006
* Pro-forma consolidated figures for the FY 2005, without release of negative goodwill of �139 million and without transaction costs �39 million, without restructuring expenses of �17 million (incurred Q4) and without activity disposal of �1,9 million (incurred Q4)
EBITDA
+149.6135337EBIT
+100.5197395
+11.44,9645,532Sales
+4.45,8686,127Volume (Ttons)
Ä%
FY
2005*
FY
2006
(�m)
Highlights
Comments
� Strong growth driven by favorable development of construction and machinery/ mechanical engineering industry and acquisitions
� Strong earnings growth driven by volume/price development and STAR program
5
Profitable growth
Profitable growth through value-added distribution and services within multi metals to companies in Europe and North America
Grow more thanthe market
Continuous businessoptimization
1 Acquisitions driving market consolidation
2 Organic growth andexpansion into new markets
3 STAR Program:- Purchasing- Distribution network- Inventory management
Market and Strategy
6
Top Independent Distributors inEurope & North America1
1) 2005 USD/EUR exchange rate 0.8051; European Central Bank 2006 USD/EUR exchange rate 0.7964 � CAND/EUR exchange rate 0.7024
*) Figures 2006: Company figures / ReutersFor other companies 2005 figures (Purchasing Magazine)
Competitive landscape of independent metals distributors
1.161.291.371.471.771.89*
2.31*
4.57*4.70*
5.53*
0
1
2
3
4
5
6
Klö
ckn
er &
Co
Ry
erso
n
Rel
ian
ce S
teel
Wo
rth
ing
ton
Ste
el
Ru
ssel
Met
als
Sam
uel
So
n, &
Co
.
Kn
auf
Inte
rfer
O'N
eal
Ste
el
Met
als
US
A
Mac
Ste
el S
ervi
ce C
ente
rs
Sal
es (�
bn
)1
Market and Strategy
� Klöckner & Co is the leading independent distributor in the European and North American markets combined
� In Europe Klöckner & Co is by far the largest independent distributor
� In North America Klöckner & Co has leading market shares in selected regions
� In Europe, the largest distributors are tied to a steel producer while in North America the players are independent (excl. ThyssenKrupp)
Comments
7
Acquisitions driving market consolidation
Status Quo
1
Next steps
01/2007: Tournier�35 million sales; 41 employees
10/2006: Action Steel �55 million sales; 110 employees10/2006: Gauss �10 million sales; 40 employees07/2006: Aesga�18 million sales; 40 employees02/2006: Targe�25 million sales; 50 employees
10/2005: Alu Menziken Service�33 million sales; 70 employees07/2005: Reynolds�108 million sales; 150 employees
Further acquisitions in core markets at attractive valuations:
� Leverage existing structure with 10 to 12 smaller (local) bolt on acquisitions in 2007
� Medium and large scale acquisitions when appropriate
� Include attractive industries, e.g. oil and gas
Focus on targets in key markets at attractive valuations
Strategy
BenefitsSignificant synergy opportunities
� Streamlining operations, processes and sales force
� Integration of STAR
Economies of scale
� Stronger purchasing power� Attractive valuations
� Proven acquisition integration capability
Market and Strategy
8
Organic growth and expansion into new markets2
Status Quo
� Strong growth in core markets above GDP partly as a result of the outstanding development of the construction and machinery industries and steel prices
� Improved performance mainly in Germany and France due to organizational changes
� Eastern European facilities established in Poland, Czech Republic, Romania and Baltic States
� Extending activities of our Chinese representative office
Next steps
Expansion of strong market positions in core markets:
� �STAR-Program� supporting organic growth
� Selective extension of product range
� Increase value added services through investments in new processing capacity
� Extension of customer base
� Opening of new branches in Eastern Europe (Romania, Poland, Czech Republic and Baltic States)
Leveraging existing distribution network
Strategy
Benefits Sustainable profitable growth
Market and Strategy
9
Purchasing � Status Quo
Improved performance as a result of restructured distribution network:
� Close-down of warehouses in Northern Germany (3 0)
� Reduction number of warehouses in the Lyon area in France (8 4)
� Improvement warehouse structure in the Iowa-region in US (3 1)
� Restructuring of service center business in Switzerland (3 1)
3
Next steps
STAR: Status quo 2006 and next steps
Distribution � Status Quo Next steps
� Continuous improvement of distribution network throughout the Group with support of the optimization-tool �Prodacapo� (activity based costing)
� Ongoing roll-out throughout the European countries
� Finalize implementation of SAP throughout the European organization (France, Switzerland) and interface SAP with Prodacapo
� Implement unified article code
� Finalize central purchasing on country level, especially in Germany
� Establish European purchasing (STAR Phase II) and increase sourcing from world-class suppliers with structural cost advantages
� Frame contracts with main suppliers
� Global sourcing for third party countries
� Implementation of new organization in Germany (January 1, 2007)
Market and Strategy
10
3 STAR: Phase I finalized in 2008, further potential in Phase II
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
Phase II (2008 onwards)
Upside potential
Overall targets:
� European Sourcing
� Ongoing improvement of distribution network
Market and Strategy
11
Industry trends supporting Klöckner�s strategy
Steel industry trends
� Globalization and consolidation resulted in large costs savings, higher and more flexible capacity utilization, much better supply discipline and higher pricing power, which will prevent the margin destroying behaviour from the past
� Higher material costs especially of iron ore and decreasingly relevant fixed costs have flattened the global steel cost curve in favour of developed-market steel producers
� Stable global demand growth leads to far quicker destocking and eroded global overcapacity
� On-going consolidation favouring large scale distributors
� Higher prices with much shorter downturns support more stable earnings and cash flows for distributors
Market and Strategy
12
Achievements 2006 and Target Setting 2007
Achievements 2006
1. Acquisitions: Six companies in 2005 and 2006with about �275 million additional sales in 2006 (pro rata) representing above 5% external growth
2. Organic growth: About 6% in sales and about 3% in volume
3. STAR program: �20 million additional EBITDA
4. Divestments: Mainly AVZ Group and real estate totals about �100 million cash
Summary
Targets 2007
1. Acquisitions: 10 � 12 Tournier in January 2007
2. Organic growth: Min. 2.5% = �140 million
3. STAR program: Additional �40 million EBITDA
4. Expansion: New branches in Eastern Europe: - Romania- Poland- Czech Republic- Baltic States
2006: All targets were achieved 2007: Again a challenging year
13
Agenda
1. Highlights FY 2006, Market and Strategy
Dr. Thomas Ludwig, CEO
Appendix
2. Financials Q4/FY 2006 and Outlook
Gisbert Rühl, CFO
14
Strong quarterly development in 2006 compared to 2005
48494654 70108104
74
05 Q1 06 05 Q2 06 05 Q3 06 05 Q4 06
EBITDA¹
(�m)
Net debt deleveraging2
(�m)
Sales(�m)
670482 435
365
Q1 06 Q2 06 Q3 06 Q4 06
1,2171,1911,348
1,2071.3981,3941,4181,323
05 Q1 06 05 Q2 06 05 Q3 06 05 Q4 06
Fast and constants deleveraging
Sales increase driven by volume and price increases
1) Adjusted by one-off effects (asset disposals): Q1 2006: about 5M� and Q3 2006: about 35M�2) Q1 2006 incl. shareholder loan
Strong profitability growth in Q2 and Q3 also driven by stock profits
Financials
15
Summary Income Statement Q4/FY 2006
--4.44--1.16Earnings per Share in �
-36206-254Net income
-
-
-
81
-29
16
273
-39
28
-
-
-
17
-11
4
43
16
5
Income before taxes
Income taxes
Minority interests
+149.6
-
135
-54
337
-64
+77.4
-
31
-14
55
-12
EBIT
Financial result
+100.5
-
1974.0
3957.1
+42.9-
494.0
704.9
EBITDA% margin
+22. 5-
98619.9
1,20821.8
+11. 4-
26421,7
29421.0
Gross profit% margin
+ 11.44,9645,532+14.8 1,2171,398Sales
Ä%
FY
2005*
FY
2006Ä%
Q4
2005
Q4
2006
(�m)
* 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)
Financials
16
Segment Performance FY 2006
3955,532Total
-50-HQ/Consol.
79862North America
3664,670Europe
EBITDASales(�m)
� Both segments show excellent performance
� Sales in Europe including �164 million from Reynolds (F), �65 million from Alu MenzikenMetall Service (CH), �8 million from Aesga (E), �2 million from Gauss (CH), �20 million from Targe (F) and �8 million from Klöckner Romania
� Sales in North America including �15 million from Action Steel
Comments
Financials
17
Balance Sheet FY 2006
957
719
1, 135
365
Net Working Capital
Net financial debt
2,2562,552Total equity and liabilities
2,256
323
921
589
1,012
536
-
2,552
799
744
416
1,009
639
-
Total assets
Equity
Total long-term liabilities
- thereof financial liabilities
Total short-term liabilities
- thereof trade payables
Other liabilities
595
694
800
80
87
579
841
933
130
69
Long-term assets
Inventories
Trade receivables
Cash & Cash equivalents
Other assets
Dec. 31
2005
Dec. 31
2006
(�m)Comments
Financial debt as of December 31, 2006:
� Outstanding bonds: �170 million
� ABS: �156 million
� Bilateral credit facilities: �147 million
� Net financial debt reduced from �719 to �365million
Equity:
� Conversion shareholder loan: �165 million
� IPO: capital increase �98 million
� Strong results
� Equity ratio increased from 14% to 31%
Net Working Capital:
� Increase in line with the additional sales
Financials
18
365 M�
558 M�
50%
173%
0
200
400
600
FY 2005 FY 2006
�m
/ %
Net debt Gearing
Constant deleveraging
� Strong cash flow leads to constant deleveraging and opens up room for acquisitions
� Bond redeemed from �260 million to �170 million
� Standard & Poor�s increased rating to �BB� with stable outlook
Comments
Financials
Leverage* 2.8 0.9
Net debt FY 2005 excluding shareholder loans �161 million* Net indebtedness/EBITDA LTM
Net debt and Gearing
19
Statement of Cash Flow
FY
2005*
FY
2006
(�m)
* Pro-forma consolidated figures for the FY 2005
� Strong business development reflected in positive CF deriving from operational activities and increased NWC requirements
� Investing CF FY 2006 mainly includes:
- cash inflow from the sale of non core activity AVZ and real estate disposals
- cash outflows mainly due to acquisitions of Targe, Aesga, Action Steel and Gauss
Comments
38
-119
64
-33
-12
-62
15
98
-
-136
-46
-6
-90
52
Proceeds from capital increase
Net impact of change of financing
Changes in financial liabilities
Net interest payments
Dividends
Cash Flow from financing activities
Total Cash Flow
22
-66
-44
102
-92
10
Inflow from disposals of fixed assets/others
Outflow from investments in fixed assets
Cash Flow from investing activities
179
126
-184
121
354
-195
-27
132
From operational activities
Changes in net working capital
Others
Cash Flow from operating activities
Financials
20
Challenging financial targets throughout the cycle
Financials
Target Actual2006
Financial Targets
Underlying sales growth
Underlying EBITDA margin
Leverage (Net financial debt/EBITDA)
Gearing (Net financial debt/Equity)
> 10% p.a
> 6%
< 3.0x
< 150%
11%
7.1%
0.9x
50%
21
New holding facility increases scope for further acquisitions
Debt structure
ABS EuropeABS USA
Total
Syndicated LoanBilateral Credit Agreements
Total Senior Bank Facilities
High Yield Bond
Total Facilities
Current DebtStructure
Change inDebt Structure
New DebtStructure
38060
440
-480
480
170
1,090
+40-
+40
+450-100
+350
-
+390
42060
480
450380
830
170
1,480
(�m)
22
Outlook / Guidance 2007
Basic Assumptions for 2007
� Positive prospects for the steel industry
� Economic growth in relevant markets of about 1.8% -5% in 2007
� Stable and increasing demand especially in the construction and machinery industries
� Price development stable or better
� In H1 expected to rise
Outlook
Guidance
� At least10% top line growth driven by acquisitions and organic growth
� EBITDA at about 2006 level adjusted by one-offs � provided that the positive economic development continues
� Dividend continuity: 30% payout ratio after deduction of extraordinary income
23
Financial Calendar 2007 and Contact Details
Contact Details Investor Relations
Claudia Nickolaus, Head of IR
Phone: +49 (0) 203 307 2050Fax: +49 (0) 203 307 5025E-mail: claudia.nickolaus@kloeckner.deInternet: www.kloeckner.de
Financial Calendar 2007
May 14: Q1 Interim Report
June 20: General Shareholders� Meeting
August 15: Q2 Interim Report
September 19: Analysts� and Investors� Meeting
November 14: Q3 Interim Report
Contact
24
Agenda
1. Highlights FY 2006, Market and Strategy
Dr. Thomas Ludwig, CEO
Appendix
2. Financials Q4/FY 2006 and Outlook
Gisbert Rühl, CFO
25
Table of contents
Appendix
� Regional landscape
� Quarterly/FY Results 2006/2005
� IPO on 28 June 2006 followed by free float increase
26
Global reach with broad product and customer diversification
Germany/Austria 23%
France/Belgium 21%
Switzerland 15%
Spain 10%
UK 9%
Nether-lands 6%
Eastern Europe 1%
USA 10%Canada 5%
Steel-flat Products28%
Steel-long Products 31%Tubes 9%
Special Steel/Quality Steel 10% 0
Aluminum 8%
Other Products 14%
Construc-tion 40%
Machinery/Manufacturing 20%
Auto-motive 5%
Metal Products20%
Other 15%
USA
CAD
USA
CAN
G 25 LocationsF 76 Locations CH 31 LocationsE 48 LocationsUK 24 LocationsIE 1 LocationNL 7 LocationsEastern Europe 4 LocationsCAN 5 LocationsUSA 17 Locations Total 238 Locations
Locations (Dec. 31, 2006)
Country headquarters
Sales split by markets (2006)
Sales split by product (2006)
Sales split by industry (2006)
IE
Appendix
27
Quarterly/FY Results 2006
* 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).
Appendix
Q4 Q3 Q2 Q1 FY FY 2006 2006 2006 2006 2006 2005*
Sales 1,398 1,394 1,418 1,323 5,532 4,964
Gross profit 294 313 316 285 1,208 986
% margin 21.0 22.5 22.3 21.5 21.8 19.9
EBITDA 70 143 104 79 395 197
% margin 4.9 10.3 7.3 6.0 7.1 4.0
EBIT 55 128 89 64 337 135
Financial result -12 -24 -14 -14 -64 -54
Income before taxes 43 104 75 50 273 81
Income taxes 16 -20 -21 -13 -39 -29
Minority interests 5 8 9 6 28 16
Net income 54 76 45 31 206 36
Earnings per Share in � 1.16 1.64 0.97 - 4.44 -
(�m)
28
IPO on 28 June 2006 followed by free float increase
IPO Highlights
Issue price: �16 per share
Offer Size: �264 million; of which Klöckner received �104 million gross proceeds from the capital increase
Placement: 16.5 million shares (in total 46.5 million shares); thereof:
� 6.5 million new shares from a capital increase
� 10 million from the selling shareholder Lindsay Goldberg & Bessemer (via Multi Metal Investment S.à.r.l.)
Current shareholder structure
January 2007 sell-down� LGB/Management 15.5%� Free float 84.5%
October 2006 sell-down� LGB/Management 45.0%� Free float 55.0%
Post-IPO� LGB/Management 65.0%� Free float 35.0%
� Mainly large European Institutional Investors� Increasing share of US Investors� Growing share of Retail Investors
Appendix
29
Symbol
30
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
climateand 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.
Disclaimer