Klöckner & Co - Roadshow Presentation August, 2007

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  • 1. August 2007 Gisbert Rhl CFO Klckner & Co A Leading Multi Metal Distributor

2. 2 Agenda 1. Overview, market and strategy 2. Financials and outlook Appendix 3. 3 Klckner & Co at a glance CustomerDistributor Klckner & 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 Distribution network with approx. 250 warehouses in Europe and North America About 10,000 employees Key financials FY 2006 - Sales: 5,532 million - EBITDA: 395 million 4. 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 tones Diversified set of worldwide ca. 70 suppliers Examples: Klckner & Cos value chain 5. 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 About 250 locations (June 2007) 28 LocationsUSA 5 LocationsCDN 48 LocationsE 31 LocationsCH 76 LocationsF 25 LocationsD 4 LocationsEastern Europe 7 LocationsNL 1 LocationIRL 24 LocationsGB 6. 6 Global reach with broad product and customer diversification Customer diversification (2006) Other GB Construction Machinery/ Manufacturing Auto- motive 40% 20% 5% 35% 23% 21% 15% 10% 9% 6% 1% 10% Germany/ Austria France/ BelgiumSpain Nether- lands Eastern Europe USA (incl. Primary 17%) Switzerland Canada 5% Steel-flat Products Steel-long Products Tubes Special and Quality Steel Aluminum Other Products 28% 31% 9% 10% 8% 14% Sales split by industry Sales split by markets Sales split by product 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: ~7090bn 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 Klckner & Co Olympic Steel Namasco (Klckner & 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 Industry trends supporting Klckners strategy Impact on distribution industry Globalization and consolidation Higher raw- material costs Stable global demand growth Flattened global steel cost curve in favour of developed-market steel producers Far quicker destocking High capacity utilisation of steel mills Large costs savings Higher and more flexible capacity utilization Much better supply discipline and higher pricing power creates better balance between supply and demand On-going consolidation favouring large scale distributors Higher prices with much shorter downturns support more stable earnings and cash flows for distributors 9. 9 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 10. 10 108 million4 acquisitions2006 501 millionTotal:2007 35 millionTournierApril 2007 14 millionTeulingApril 2007 360 millionPrimary SteelApril 2007 17 millionEdelstahlserviceApril 2007 15 millionMax CarlApril 2007 11 millionZweygartApril 2007 23 millionPremier SteelMay 2007 26 millionWestokJune 2007 141 million Sales 2005 Acquired CompanyCountry 2 acquisitions Acquisitions driving market consolidation1 Acquisitions Next steps Significant synergies Streamlining operations, processes and sales force Integration of STAR Economies of scale Stronger purchasing power 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 Benefits 11. 11 Growth above GDP in core markets partly as a result of the outstanding development of the construction and machinery industries and steel prices Eastern European facilities established in Poland, Czech Republic, Romania and Baltic States Organic growth and expansion into new markets2 Status quo Next steps Expansion of strong market positions in core markets: Selective extension of product range Increase value added services through investments in new processing capacity Opening of new branches in Eastern Europe Leveraging existing distribution network Sustainable profitable growth Strategy Benefits 12. 12 Next steps STAR: Status quo Q1 2007 and next steps3 Status quo Establish European sourcing (STAR Phase II) Increase sourcing from world-class suppliers with structural cost advantages Implement unified article code Additional Frame contracts with main suppliers Extended global sourcing for third party countries Implementation of new organization in Germany (January 1, 2007) started Improved performance as a result of restructured distribution network (warehouses): - Q1 2007: Concentration of warehouse structure in the Iowa-region in US - Q1 2007: Restructuring of service center business in Switzerland Start of roll-out of the optimization-tool Prodacapo (activity based costing) in Spain Continuous improvement of distribution network throughout the Group with support of the optimization-tool Prodacapo - Ongoing roll-out throughout European countries Finalize implementation of SAP throughout the European organization (France, Switzerland) and interface SAP with Prodacapo Purchasing Distribution 13. 13 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 14. 14 Agenda 1. Overview, market and strategy 2. Financials and outlook Appendix 15. 15 --0.86Earnings per share in -3140Net income -66Minority interests --13-22Income taxes -5068Income before taxes --14-10Financial result + 21.46578EBIT -5.65.8% margin adjusted + 23.07491EBITDA adjusted -6.05.9% margin + 16.17992EBITDA -21.619.8% margin + 7.6285307Gross profit +17.11,3231,550Sales % Q1 2006 Q1 2007 (m) Strong sales increase mainly driven by further steel price increases and acquisitions Significant increase of EBITDA driven by favourable steel price level and STAR program Rise in adjusted EBITDA (w/o one-offs) even higher because of strong operational performance Comments Summary income statement Q1 2007 16. 16 1,550 - 211 1,339 Sales Q1 2007 +16.17992+17.11,323Total --17-7-- HQ / Consol. - 25.91914-5.5224 North America +10.27785+21.71,099Europe % EBITDA Q1 2006 EBITDA Q1 2007 % Sales Q1 2006 (m) Segment performance Q1 2007 Sales for Q1 2007 in Europe including about 5 million from Aesga (E), about 2 million from Gauss (CH), about 8 million from Targe (F) and 11 million from Tournier (F) Sales for Q1 2007 in North America including about 13 million from Action Steel Comments 17. 17 Balance sheet Q1 2007 Financial debt as of March 31, 07: Nominal value of HYB: 170 million ABS: 175 million Bilateral credit facilities: 173 million Increased net financial debt mainly due to higher NWC Equity: Increase driven by strong results Equity ratio of about 30% almost stable (as of December 31, 2006: 31%) Net Working Capital: Increase in line with the additional sales Rating: Moodys increased rating to Ba2 with stable outlook Comments 477 1,299 2,841 - 838 1,244 435 756 841 2,841 65 72 1,136 1,002 566 March 31, 2007 933Trade receivables 841Inventories 579Long-term assets 130Cash & Cash equivalents 69Other assets 639- thereof trade payables -Other liabilities 1,009Total short-term liabilities 744Total long-term liabilities 799Equity 2,552Total assets 416- thereof financial liabilities December 31, 2006 (m) 2,552Total equity and liabilities 365Net financial debt 1,135Net working capital 18. 18 Statement of cash flow Strong business development reflected in positive cash flow deriving from operational activities and increased NWC requirements Investing cash flow in Q1 2007 mainly impacted by cash outflow due to the acquisition of Tournier Comments -2-16Others 40-88Cash flow from operating activities 271Inflow from disposals of fixed assets/others -9-18Outflow from investments in fixed asse