Klöckner & Co AG. A Leading Multi Metal Distributor

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Klöckner & Co AG

A Leading Multi Metal Distributor

UBS Global Basic Materials Conference

June 11 -

12, 2008 in London

Gisbert Rühl

CFO

(2)

Agenda

1.

Overview and market

Appendix

2.

Current market development and expectations for 2008

3.

Profitable growth initiatives

(3)

Klöckner & Co at a glance

Customer

Klöckner & Co

Klöckner & Co highlights

Products: Services:

Producer

Construction: z Structural Steelwork

z Building and civil

engineering Machinery/ Mechanical Engineering Others: z Durable goods z Metal products z Installation z etc.

z Leading producer-independent steel and metal distributor in the European and North American markets combined

z Network with more than 260 distribution

locations in Europe and North America

z More than 10,000 employees z Key financials FY 2007

-

Sales: €6,274 million

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Distributor in the sweet spot

Suppliers Sourcing Products

and services Logistics/ Distribution Customers z Global Sourcing in competitive sizes z Strategic partnerships z Frame contracts z Leverage one supplier against the other z No speculative trading z One-stop-shop

with wide product range of high-quality products z Value added processing services z Quality assurance z Efficient inventory management z Local presence z Tailor-made logistics including on-time delivery within 24 hours z > 210,000 customers z No customer with more than 1% of sales z Average order size of €2,000 z Wide range of industries and markets z Service more important than price z Purchase volume p.a. of 6 million tons z Diversified set of worldwide approx. 70 suppliers z Examples:

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B D F E CH A CZ PL LT RO NL CN USA GB IRL

More than 260 distribution locations in Europe and NA

USA 30 D/A 23 F/B 75 CH 35 GB 26 IRL 1 NL 5 BU

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North America (2006)

Structure: 50-60% through distribution, service centers Size in value: ~€100bn

Europe (2006)

Structure: 67% through distribution, service centers Size in value: ~€70–90bn

Strong position in Europe and growing position in NA

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 RusselMetals Worthington Steel Metals USA Carpenter Technology PNA Group McJunkin O'Neal Steel Mac-Steel AM Castle 72.5% Namasco with Primary and Temtco approx. 1.5% 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%

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Broad industry, product and customer diversification

Other GB Construction Machinery/ Manufacturing Auto-motive 42% 25% 6% 27% 23% 21% 14% 10% 5% 9% 1% 13% Germany/ Austria France/ Belgium Spain Nether-lands Eastern Europe USA Switzerland Canada 4% Steel-flat Products Steel-long Products Tubes Special and Quality Steel Aluminum Other Products 29% 30% 10% 10% 7% 14%

Sales split by industry* Sales split by markets* Sales split by product*

*As of December2007 *As of December2007 *As of December2007

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Agenda

1.

Overview and market

Appendix

2.

Current market development and expectations for 2008

3.

Profitable growth initiatives

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Ongoing

profitable growth

Highlights Q1 2008 and until today

z Excellent results, supported by price increases

z Further expansion through the acquisition of Temtco in the US and also Multitubes

in the UK

z Acquisition of remaining outside shareholdings in Swiss Company Debrunner Koenig Holding

AG and as a consequence full integration into the Group

z Sale of the automotive-related Canadian Namasco Ltd. z Business optimization program “STAR” fully on track

z All preparatory steps to transform Klöckner & Co AG into a European company (SE – Societas Europaea) completed

z Ulrich Becker joined the Management Board on April 1, 2008, responsible for Europe

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Financial highlights Q1 2008

(€m)

2008

Q1

2007

Q1

Δ

%

Volume (Ttons)

1,720

1,629

5.6

Sales

1,660

1,550

7.1

EBITDA

109

92

18.3

EBIT

93

78

18.6

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Steel market development in Q2 2008

z

Strong price increases despite a softer economic growth due to a favorable

supply and demand relation especially in the US but also in Europe

zStructural change due to the fact that steel prices are now driven primarily by raw

material costs

zHigher discipline on the producer side due to consolidation zHigh capacity utilization

zLow stock levels and low import volumes

z

Further price increases already announced for the upcoming months

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80% 90% 100% 110% 120% 130% 140% Jan 06 Feb 06 Mar 06 Apr 06 May 06 Jun 06 Jul 06 Aug 06 Sep 06 Oct 06 Nov 06 Dec 06 Jan 07 Feb 07 Mar 07 Apr 07 May 07 Jun 07 Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07 Jan 08 Feb 08 Mar 08 Apr 08 May 08

Flat Products / HRC / N.Europe domestic Flat Products / CRC / N.Europe domestic Ex-Works /t Flat Products / HDG / N.Europe domestic Ex-Works /t

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90% 110% 130% 150% 170% 190% 210% Jan 06 Feb 06 Mar 06 Apr 06 May 06 Jun 06 Jul 06 Aug 06 Sep 06 Oct 06 Nov 06 Dec 06 Jan 07 Feb 07 Mar 07 Apr 07 May 07 Jun 07 Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07 Jan 08 Feb 08 Mar 08 Apr 08 May 08

Flat Products / HRC / N.America domestic FOB US Midwest mill $/t Flat Products / CRC / N.America domestic FOB US Midwest mill $/t Flat Products / HDG / N.America domestic FOB US Midwest mill $/t Flat Products / Plate (A36) / N.America domestic FOB US Midwest mill $/t

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70% 80% 90% 100% 110% 120% 130% 140% 150% 160% 170% Jan 06 Feb 06 Mar 06 Apr 06 May 06 Jun 06 Jul 06 Aug 06 Sep 06 Oct 06 Nov 06 Dec 06 Jan 07 Feb 07 Mar 07 Apr 07 May 07 Jun 07 Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07 Jan 08 Feb 08 Mar 08 Apr 08 May 08

Long Products / Medium sections / Europe domestic delivered /t Long Products / Merchant Bar / Europe domestic delivered /t Long Products / Rebar / Europe domestic delivered /t

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Long products

prices

North America (SBB, Jan 2007 = 100)

80% 90% 100% 110% 120% 130% 140% 150% 160% 170% 180% Jan 06 Feb 06 Mar 06 Apr 06 May 06 Jun 06 Jul 06 Aug 06 Sep 06 Oct 06 Nov 06 Dec 06 Jan 07 Feb 07 Mar 07 Apr 07 May 07 Jun 07 Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07 Jan 08 Feb 08 Mar 08 Apr 08 May 08

Long Products / Rebar / N.America domestic FOB US Midwest mill $/t

Long Products / Merchant Bar / N.America domestic FOB US Midwest mill $/t

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Agenda

1.

Overview and market

Appendix

2.

Current market development and expectations for 2008

3.

Profitable growth initiatives

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Profitable growth

Grow more than

the market

Continuous

business

optimization

1

Acquisitions

driving

market consolidation

and

Organic growth

and

expansion

into new

markets

2

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

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Country Acquired Company Sales (FY)

Mar 2008 Temtco €226 million Jan 2008 Multitubes €5 million 2008 Ytd 2 acquisitions €231 million Sep 2007 Lehner & Tonossi €9 million Sep 2007 Interpipe €14 million Sep 2007 ScanSteel €7 million Aug 2007 Metalsnab €36 million Jun 2007 Westok €26 million May 2007 Premier Steel €23 million Apr 2007 Zweygart €11 million Apr 2007 Max Carl €15 million Apr 2007 Edelstahlservice €17 million Apr 2007 Primary Steel €360 million

Apr 2007 Teuling €14 million Jan 2007 Tournier €35 million 2007 12 acquisitions €567 million 12 4 2 2005 2006 2007 €141 million €108 million €567 million

Continued expansion through acquisitions

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Acquisition of Temtco, a leading plate distributor

40% of the 2007-level of acquisition-related sales already achieved

Tacoma, WA

Chicago, IL

Apache Junction, AZ

Louisville, MS York, PA

z High quality product portfolio: High

strength quenched & tempered steel, wear-resistant steels and security steels

z Sales 2007: $310 million (€226 million)

with 180 employees

z More than 60% of sales are processed

products

z Excellent customer base in application

sectors such as energy, machinery and mechanical engineering, mining and transport

Comments North America/USA – 03/08: Temtco

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Investment highlights

z Complementary sales coverage combined with an additional product

range offers synergy potential

ƒ Namasco’s and Primary’s market coverage hugely expanded

ƒ Enlarged purchasing power helps to counterweight the strong supplier

consolidation (top 3 account for more than 80% of market)

ƒ Additional (typical) synergies in admin, finance, IT, etc.

z The acquisition of Temtco supports significantly the leading position of

Primary and Namasco in the plate distribution segment

ƒ Securing continuing specialty plate supply through Temtco’s supplier

relations

ƒ Leveraging Temtco’s customer base for sale of Namasco/Primary’s

commodity plate and vice versa

ƒ Broad geographic coverage with five locations Leading

position in plate segment

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Strong acquisition criteria

Further acquisitions in core markets and Eastern Europe:

● Leverage existing structure in core markets with

small-and mid-size bolt-on acquisitions

● Large scale acquisitions when appropriate

● Acquisitions in Eastern Europe to increase footprint

Focus on targets in 3 directions:

● Expansion of geographic reach

● Extension of customer base ● Extension of product portfolio

Focus on targets at attractive valuations:

● EV/EBITDA multiple between 4x and 6x

Focus on targets with significant synergy and scale effects:

● Stronger purchasing power

● Streamlining operations and processes, integrating IT ● Integration of STAR

Accretive growth

1

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Organic growth and expansion into new markets

z

Closing of acquisition of Metalsnab in Bulgaria in January 2008

z

Additional acquisitions and opening of new branches

z

Evaluation of market entry in other countries (e.g. Turkey, Russia)

z

Concentrate product range and expand higher margin products

z

Increase value-added services

Further expansion in Eastern Europe and into new markets

Expansion of strong market position in core markets

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STAR: Status Quo

z

Extension of European sourcing

z

Improvement of the European stock management

z

Ongoing SAP roll-out across European countries

z

Improving performance of distribution network

STAR program fully on track

Purchasing

Distribution network

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Phase II (2008 onwards)

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

2

Phase I (2005 -

2008)

Overall targets

:

z

Central purchasing on country level,

especially in Germany

z

Improvement of distribution network

z

Improvement of inventory management

2006: ~ €20 million 2007: ~ €40 million 2008: ~ €20 million ~ €80 million

Upside potential

Overall targets

:

z

European sourcing

z

Ongoing improvement of distribution

network

9

Upside potential

2008 ~ €10 million 2009: ~ €30 million 2010: ~ €20 million ~ €60 million

9

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Agenda

1.

Overview and market

Appendix

2.

Current market development and expectations for 2008

3.

Profitable growth initiatives

(26)

Summary income statement Q1 2008

(€m) 2008Q1 2007Q1 Δ% Volume (Ttons) 1,720 1,629 5.6 Sales 1,660 1,550 7.1 Gross profit % margin 340 20.5 307 19.8 10.8 3.5 EBITDA % margin 109 6.6 92 5.9 18.3 11.9 EBIT Financial result 93 -17 78 -10 18.6 63.7

Income before taxes 76 68 11.7

Income taxes -24 -22 10.3

Minority interests 2 6 -74.9

Net income* 51 40 26.3

EPS basic (€) 1.09 0.86 26.7

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Again strong underlying EBITDA

Underlying EBITDA Q1 2008

(€m) 2008Q1 EBITDA as reported ● One-offs 109,0 0,2 Operating EBITDA ● Windfall effects

● Exchange rate effects ● Special expense effects

109,2 -8,0 4,1 -6,5 Underlying EBITDA 98,8 ● Acquisitions (LTM*) -13,5

Underlying EBITDA excluding Acquisitions 85,3

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zIncludes sales of M€40 for Q1 2008* in Europe and sales of M€101.4 for Q1 2008* in North America

Segment performance Q1 2008

Comments (€m) Europe North America HQ/ Consol. Total Volume (Ttons) Q1 2008 1,211 509 - 1,720 Q1 2007 1,230 399 - 1,629 Δ % -1.5 27.5 - 5.6 Sales Q1 2008 1,358 301 - 1,660 Q1 2007 1,339 211 - 1,550 Δ % 1.5 42.7 - 7.1 EBITDA Q1 2008 84 26 -1 109 % margin 6.2 8.8 - 6.6 Q1 2007 85 14 -7 92

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Balance sheet as of March 31, 2008

(€m) 31, 2008March December 31, 2007

Long-term assets 753 735

Inventories 1,020 956

Trade receivables 1,083 930

Cash & Cash equivalents 108 154

Other assets 188 191

Total assets 3,152 2,966

Equity 771 845

Total long-term liabilities 1,255 1,152

- thereof financial liabilities 914 813

Total short-term liabilities 1,126 969

- thereof trade payables 740 610

Total equity and liabilities 3,152 2,966 Net working capital* 1,404 1,323 Net financial debt* 904 746

Comments

Financial debt as of March 31, 2008:

Syndicated loan: €311million

ABS: €301 million

Bilateral credits: €120 million

Convertible: €271 million Net Working Capital:

Seasonal effect; sales-,

acquisition- and price-driven

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Statement of cash flow

Comments

(€m) 2008Q1 2007Q1

Operating CF 107 92

Changes in net working capital -88 -164

Others -29 -16

Cash flow from operating activities -10 -88

Inflow from disposals of fixed assets/others 3 1

Outflow from investments in fixed assets -144 -18

Cash flow from investing activities -141 -17

Changes in financial liabilities 111 51

Net interest payments -5 -3

Cash flow from financing activities 106 48

Total cash flow -45 -58

zOperating CF more than

fully covered the

investments in net working capital

zInvesting CF mainly

impacted by increased stake in Swiss Holding

zCF from financing activities

reflects the increased utilization of debt instruments

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General financial targets/limits and guidance

General

target/limit

Q1 2008

Actual

Top line sales growth

> 10% p.a.

7.1%

Underlying EBITDA margin*

> 6%

5.94%

Leverage (Net financial debt/EBITDA LTM)

< 3.0x

2.3x

Gearing (Net financial debt/Equity)

< 150%

117%

Challenging financial targets throughout the cycle

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Outlook 2008

z

Based on good Q1 results, Q2 and H1 EBITDA are expected to be higher than last

year supported by an on-going favorable market environment for the steel

distribution

z

Positive development expected to continue. Thus, we expect the 2008 results to

exceed the 2007 results supported by

z

€30 million additional EBITDA from STAR program

z

Positive contribution of additional €25-30 million EBITDA from acquisitions

made in 2007

z

Positive contribution of €15-20 million EBITDA from acquisitions made in

2008

z

High likelihood of further stock gains in the course of 2008

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Agenda

1.

Overview and market

Appendix

2.

Current market development and expectations for 2008

3.

Profitable growth initiatives

(34)

Appendix

Table of contents

Quarterly results and FY results 2007/2006/2005

Steel cycle and EBITDA/cash flow relationship

Debt facilities

Current shareholder structure

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June 20:

Annual General Meeting

August 14:

Q2 Interim Report

October 14/15:

Capital Market Days

November 14:

Q3 Interim Report

Financial calendar 2008 and contact details

Financial calendar 2008

Claudia Nickolaus, Head of IR

Phone:

+49 203 307 2050

Fax:

+49 203 307 5025

E-mail:

claudia.nickolaus@kloeckner.de

Internet:

www.kloeckner.de

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(€m) Q1 2008 Q4 2007 Q3 2007 Q2 2007 Q1 2007 Q4 2006 Q3 2006 Q2 2006 Q1 2006 FY 2007 FY 2006 FY 2005* Volume (Ttons) 1,720 1,585 1,601 1,663 1,629 1,453 1,467 1,605 1,601 6,478 6,127 5,868 Sales 1,660 1,492 1,583 1,650 1,550 1,398 1,394 1,418 1,323 6,274 5,532 4,964 Gross profit 340 300 286 328 307 294 313 316 285 1,221 1,208 987 % margin 20.5 20.1 18.0 19.8 19.8 21.0 22.5 22.3 21.5 19.5 21.8 19.9 EBITDA 109 83 93 103 92 70 143 104 79 371 395 197 % margin 6.6 5.6 5.9 6.2 5.9 4.9 10.3 7.3 6.0 5.9 7.1 4.0 EBIT 93 65 76 87 78 55 128 89 64 307 337 135 Financial result -17 -17 -17 -52 -10 -12 -24 -14 -14 -97 -64 -54 Income before taxes 76 48 59 35 68 43 105 75 50 210 273 81 Income taxes -24 -6 -14 -12 -22 16 -20 -22 -13 -54 -39 -29 Minority interests 2 4 8 4 6 5 8 9 6 23 28 16 Net income 51 37 37 19 40 54 76 45 31 133 206 36 EPS basic (€) 1.09 0.80 0.79 0.41 0.86 1.16 1.64 0.97 - 2.87 4.44

(37)

Debt facilities

(€m)

structure

Old debt

debt structure

Change in

New debt

structure

ABS Europe

380

+40

420

ABS USA

60

+30

90

Total

440

+70

510

Syndicated loan

-

+600

600

Bilateral credit agreements

480

-100

380

Total senior bank facilities

480

+500

980

Convertible bond

-

+325

325

High yield bond

170

-170

(38)

Steel cycle and EBITDA/cash flow relationship

Comments

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

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

p Cost of material are based on an

average cost method for inventory and therefore lag the steel price increase

q This time lag creates accounting windfall profits (windfall losses in a decreasing steel price environment) inflating

(deflating) EBITDA

r Assuming stable inventory volume cash flow is impacted by higher NWC needs

s 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

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Geographical breakdown of identified institutional investors

Current shareholder structure

Comments z Identified institutional

investors account for 74%

z US based investors still

dominate but share

decreased in favor of UK (up from 14% as of Sept. 2007) z Top 10 individual shareholdings represent around 48% z Rest of World < 1% (geographical breakdown)

z Retail share increased from

11% to almost 14% Rest of Europe US United Kingdom Germany Spain Switzerland 20% 4% 4% 24% 41% 7%

(40)

Our symbol

the ears

attentive to customer needs

the eyes

looking forward to new developments

the nose

sniffing out opportunities

to improve performance

the ball

symbolic of our role to fetch

and carry for our customers

the legs

(41)

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:

zDownturns in the business cycle of the industries in which we compete;

zIncreases in the prices of our raw materials, especially if we are unable to pass these costs

along to customers;

zFluctuation 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.

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