A Leading Multi Metal Distributor

30 

Loading....

Loading....

Loading....

Loading....

Loading....

Full text

(1)

Roadshow

September 2007

Klöckner & Co

A Leading Multi Metal

Distributor

Gisbert Rühl

CFO

(2)

Agenda

1. Overview, market and strategy

2. Financials and outlook

(3)

Klöckner & Co at a glance

Customer

Distributor

Klöckner & 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

(4)

Distributor in the sweet spot

Local customers Global suppliers

Suppliers Sourcing and servicesProducts DistributionLogistics/ 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 tons  Diversified set of worldwide ca. 70 suppliers  Examples:

(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 (August 2007)

28 Locations USA 5 Locations CDN 48 Locations E 31 Locations CH 76 Locations F 25 Locations D 11 Locations Eastern Europe 7 Locations NL 1 Location IRL 24 Locations GB

(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/ Belgium Spain 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%

(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: ~€70–90bn

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 Klöckner & Co Olympic Steel Namasco

(Klöckner & 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 Castle 72.5% 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)

Industry trends supporting Klöckner

s strategy

Positive impact on distribution industry Globalization and consolidation Stable global

demand growth Far quicker destockingHigh capacity utilisation of steel mills

Large costs savings

Higher and more flexible capacity utilization

Much better supply discipline and higher pricing power creating an improved balance between supply and demand

On-going consolidation favoring large scale distributors

Higher prices with much shorter downturns support more stable

(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)

€36 million Metalsnab Aug 2007 €108 million 4 acquisitions 2006 €537 million 9 acquisitions 2007 ytd. €35 million Tournier Jan 2007 €14 million Teuling April 2007 €360 million Primary Steel April 2007 €17 million Edelstahlservice April 2007 €15 million Max Carl April 2007 €11 million Zweygart April 2007 €23 million Premier Steel May 2007 €26 million Westok June 2007 €141 million Sales 2005 Acquired Company Country 2 acquisitions

Acquisitions driving market consolidation

1

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 small- and mid-size bolt-on acquisitions

 Large scale acquisitions when appropriate

Benefits Strategy

Focus on targets at attractive valuations in 3 directions

 Expansion in new regions

 Extension of product portfolio

(11)

Growth above GDP in core markets partly as a result of the outstanding development of the construction and machinery/mechanical engineering industries and steel prices

Eastern European facilities established in Poland, Czech Republic, Romania and Baltic States

Acquisition of Metalsnab in Bulgaria

Evaluation of market entry in Slovakia, Turkey an Russia

Organic growth and expansion into new markets

2

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

 Evaluating of market entry in other

countries like Slovakia, Turkey and Russia

Leveraging existing distribution network

Sustainable profitable growth

Strategy Benefits

(12)

Next steps

STAR: Status quo H1 2007 and next steps

3

Status quo

 Establish European sourcing (STAR Phase II)

 Increase sourcing from world-class suppliers with structural cost advantages

 Implement unified article codes

 Additional frame contracts with main suppliers

 Extended global sourcing for third party countries

 Implementation of new organization in Germany almost completed

 Implementation of a software supporting stock management

Purchasing

 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, UK and Eastern European Countries

 Continuous improvement of distribution network throughout the Group with support of the

optimization-tool “Prodacapo”

-

Ongoing roll-out throughout European countries

-

Restructuring of warehouse structure in Spain

 Finalize implementation of SAP throughout the European organization (France, Switzerland) and interface SAP with “Prodacapo”

(13)

Phase II (2008 onwards)

STAR: Phase I finalized in 2008, further potential in phase II

3

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)

Agenda

1. Overview, market and strategy

2. Financials and outlook

(15)

Summary income statement Q2/H1 2007

-126 103 -75 35

Income before taxes

--35 -33 --22 -12 Income taxes -15 10 -9 4 Minority interests 1.28 59 166 -63 195 6.1 635 19.8 3.199 H1 2007 0.41 19 87 -52 103 6.2 328 19.8 1,650 Q2 2007 -1.63 -0.97 EPS -76 -45 Net income +5.6 -9.6 601 21.9 +3.7 -10.9 316 22.3 Gross profit % margin 89 -14 104 7.3 1,418 Q2 2006 +7.7 -154 -28 -2.2 -EBIT Financial result +6.4 -8.9 183 6.7 -1.1 -15.0 EBITDA % margin +16.7 2,741 +16.4 Sales Ä% H1 2006 Ä% (€m)

(16)

Segment performance H1 2007

Comments

 Sales for H1 2007 in Europe including about

-

€9 million from Aesga (E)

-

€4 million from Gauss (CH)

-

€21 million from Tournier (F)

-

€5 million from Teuling (NL)

-

€3 million from Edelstahl-service (D)

-

€1.5 million together from Max Carl and Zweygart (D)

-

€8 million from Westok (UK)

 Sales for H1 2007 in North America including about

-

€26 million from Action Steel

-

€54 million from Primary

-

€2.5 million from Premier

3,199 -486 2,713 Sales H1 2007 +6.4 183 195 +16.7 2,741 Total --25 -16 -HQ / Consol. -16.4 39 33 +8.5 448 North America +5.6 169 178 +18.4 2,292 Europe Ä % EBITDA H1 2006 EBITDA H1 2007 Ä % Sales H1 2006 (€m)

(17)

Balance sheet H1 2007

996 1,531 3,234 -776 1,243 936 1,277 714 3,234 85 74 1,212 1,095 768 June 30, 2007 933 Trade receivables 841 Inventories 579 Long-term assets 130 Cash & Cash equivalents

69 Other assets

639 - thereof trade payables

-Other liabilities

1,009 Total short-term liabilities

744 Total long-term liabilities

799 Equity

2,552 Total assets

416 - thereof financial liabilities

December 31, 2006

(€m)

2,552 Total equity and liabilities

365

Net financial debt 1,135

Net working capital

Comments

Financial debt as of June 30, 2007:

Syndicated loan: €517million

ABS: €339 million

Bank borrowings: €190 million

Increased net financial debt due to acquisitions and higher NWC

Equity:

Decrease driven by increase of stake in Swiss Holding and dividend distribution

Further, equity ratio decreased due to higher assets from 31% to 22%

Net Working Capital:

Increase driven by sales, higher price levels and acquisitions

(18)

Statement of cash flow

Comments

101

-Proceeds from capital increase

-3 -25

Others

-10 -140

Cash flow from operating activities

34 15

Inflow from disposals of fixed assets/others

-16 -366

Outflow from investments in fixed assets

18 -351

Cash flow from investing activities

-186 -303

Changes in net working capital

61 531

Changes in financial liabilities

179 188

Operating CF

145 -56

Total cash flow

137 435

Cash flow from financing activities

-6 -45

Dividends

-19 -51

Net interest payments

H1 2006 H1 2007 (€m) Strong business development reflected in positive cash flow

deriving from operational activities and increased NWC requirements

Investing cash flow in H1 2007 mainly impacted by cash outflow due to the various acquisitions and increased stake in our Swiss Holding

(19)

General financial targets and limits

139%

< 150%

Gearing (Net financial debt/Equity)

2.4x

< 3.0x

Leverage (Net financial debt/EBITDA LTM)

6.1%

> 6%

Underlying EBITDA margin

16.7%

> 10% p.a

Underlying sales growth

Actual

H1 2007

General

target/limit

(20)

New holding facility and convertible

bond increase scope for further acquisitions

325

+325

-Convertible bond

1,785

+695

1,090

Total facilities

--170

170

High yield bond

980

+500

480

Total senior bank facilities

380

-100

480

Bilateral credit agreements

600

+600

-Syndicated loan

480

+40

440

Total

60

-60

ABS USA

420

+40

380

ABS Europe

New debt

structure

Change in

debt structure

Old debt

structure

(

m)

(21)

Outlook / guidance 2007

At least 15% top line growth mainly driven by acquisitions

EBITDA approximately on reported 2006 level

Dividend continuity: 30% payout ratio after deduction of extraordinary income

Positive prospects for the steel industry

Economic growth in relevant markets of about 1.8% to 5% in 2007

Stable and increasing demand especially in the construction and machinery

industries

Price development stable or better

Basic assumptions for 2007

Outlook / guidance

(22)

Q3 Interim Report

November 14:

Analysts

and Investors

Meeting

September 19:

Financial calendar 2007 and contact details

Financial calendar 2007

www.kloeckner.de

Internet:

claudia.nickolaus@kloeckner.de

E-mail:

+49 203 307 5025

Fax:

+49 203 307 2050

Phone:

Claudia Nickolaus, Head of IR

(23)

Agenda

1. Overview, market and strategy

2. Financials and outlook

(24)

Appendix

Table of contents

Quarterly/FY results 2006/2005

Steel cycle and EBITDA/cash flow relationship

Convertible bonds

terms and conditions

(25)

81 273 50 75 105 43 68 35

Income before taxes

-29 -39 -13 -22 -20 16 -22 -12 Income taxes 16 28 6 9 8 5 6 4 Minority interests 0.41 19 -52 87 6.2 103 19.8 328 1,650 Q2 2007 -4.44 -0.97 1.64 1.16 0.86 Earnings per share in €

36 206 31 45 76 54 40 Net income -54 -64 -14 -14 -24 -12 -10 Financial result 135 337 64 89 128 55 78 EBIT 4.0 7.1 6.0 7.3 10.3 4.9 5.9 % margin 197 395 79 104 143 70 92 EBITDA 19.9 21.8 21.5 22.3 22.5 21.0 19.8 % margin 987 1,208 285 316 313 294 307 Gross profit 4,964 5,532 1,323 1,418 1,394 1,398 1,550 Sales FY 2005* FY 2006 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 (€m)

Quarterly results and FY results 2006/2005

* 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).

(26)

Steel cycle and EBITDA/cash flow relationship

Comments

 Klöckner & Co buys and sells products at spot prices generally

 Sales increase as a function of the steel price inflation environment

 Cost of material are based on an

average cost method for inventory and therefore lag the steel price increase  This time lag creates accounting windfall

profits (windfall losses in a decreasing steel price environment) inflating

(deflating) EBITDA

 Assuming stable inventory volume cash flow is impacted by higher NWC needs  The windfall profits (losses) are mirrored

by inventory book value increases (decreases)

Theoretical relationship*

Windfall profits Windfall losses (€m) Margin Margin 1 2 3 4 4 5 6 6

Steel price Sales Cost of material EBITDA Cash flow

(27)

Convertible bonds

terms and conditions

Size:

325 million

Shares underlying: approx. 4 million

Denomination:

50,000

Maturity date: July 27, 2012 (5 years)

Coupon: 1.50% p.a.

Reference price:

59.81

Conversion price:

80.75 (35% above reference price)

Conversion ratio: 619.1950 shares per bond

Conversion right: September 6, 2007 until July 18, 2012

Early redemption at the option of the issuer: from August 15, 2010 onwards only

possible if share price exceeds approx.

105 (= 130% of the conversion price)

(28)

IPO on 28 June 2006 followed by free float increase

Current shareholder structure

 Mainly large European institutional investors

 Increasing share of US investors

 Growing share of retail investors April 2007 sell-down 100% January 2007 sell-down 84.5% October 2006 sell-down 55% Post-IPO 35% 15.5 % 45% 65% Free float

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.)

LGB/Manage-ment

(29)

Our symbol

the ears

attentive to customer needs

the eyes

looking forward to new developments

the nose

sniffling 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

(30)

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.

Figure

Updating...

References

  1. www.kloeckner.de